Does anyone own a holiday cottage that they rent out as investment? Need advice.

[wilbur]

We are toying with a medium-term idea of buying a holiday cottage in the UK which we could use a few times a year and then rent out for the rest of the year to cover costs and hopefully make a small income.

Does anyone have any answers or thought about the following questions?

1. Do you use an agent to rent it out and if so, what percentage do they take? Is it worth it to reduce hassle?

1. Or, are there just listings websites where you put your property and do all the arranging yourself?

1. How do you manage the issue of people leaving deposits and how much do you ask for?

1. How do you declare the income to the tax man, is it straightforward?

1. Do you use a housekeeper-type person to do changeovers and cleaning? Does this work well?

Any other tips, or horror stories, need to hear it all in order to make a decision about whether this is worth working towards. Thanks for any help!

bump

I think your starting point must be that it will not make you money, and at best it will cover your costs. So the bottom line must be that you want to have the cottage for itself and not as an income generator - obviously it may be a good capital investment, but that's long-term.

If that's OK, then I can give you one example of things done right & one not so.

Property A: neat, extremely clean, efficiently done-up small house in easily-reached Cornish seaside town. Typically-popular sort of size: 2 bedrooms (one double, one twin), will accommodate a couple more in sofa-beds in living-room (= convenient but also flexible = wide appeal). Agency NOT used, nor website, so far as I know: lettings done through workplace notice board, friends-of-friends, etc. Deposits: yes. Tax bits: don't know, sorry. Housekeeper: ESSENTIAL - absolutely sparklingly clean - done-up in the first place with this as first principle. Other good things: masses & masses of information provided; comparatively very reasonable price.

Property B: big, rambly, eccentric house on Cornish hilltop. Lots of bedrooms, outhouses, books, character, mismatched furniture, hit-or-miss heating etc., peace/quiet/remoteness (= narrow appeal). Agency used: lack of face-to-face lettings system = tenants vary from the ecstatic to the horrified. Tax bits, not sure (but I do know letting Property B does not cover its costs - so it's possibly more an allocation of losses ...). Housekeeper: not nearly as good as Property A - but, due to remoteness of property, options are limited, so make do with what there is (housekeeping failings contribute to certain tenants' horror, naturally). Because of the size, pretty expensive.

To extract a moral: a small, neat, not necessarily very characterful, well renovated, easily maintained, easily reached property, with access to excellent housekeeping support, is going to be a better investment than anything wild & wonderful. Which might conflict with what one dreams of in a cottage ...

Sorry for length of post!

Hi,
We have had a holiday cottage for 5 years which we renovated when we bought it. We went for modern country cottage, so no mismatched furniture, a well stocked kitchen, new beds/bedding everything. I have a housekeeper to clean it - that is essential because no matter what you ask guests to do they inevitably forget to do some of it! You can take housekeeping deposits to cover this, but I think it's more hassle than it's worth.
Re tax, I just log revenue vs expenses and give it to accountant as part of my annual return.
Re bookings, I don't use an agent - they can take up to 60% of booking fee, BUT I do live near cottage so it's not the same as your situation.
I have my own website and use several other sites to market it and do pay a small fortune to VisitScotland to be included on their site/brochures. They quality grade the property and you can't get graded unless you join the likes of a tourist board or AA etc. That said I'm not convinced grading is really that important.
I'm not sure I'd agree with Wilbur as I think a cottage can make money, but Wilbur is absolutely right that it must be done well - clean, smaller, accessible is a better investment. And you do need to be prepared to keep investing in it. Remember all investment made after you start renting is deductable from income for tax purposes but anything you do to it upon purchase would count as capital expenditure and only be deductable on sale of property against potential capital gains tax.
We've just bought a second property to convert to a holiday cottage and are in process of completing two new build Eco-Friendly holiday cottages as well. So we do think it's worth it financially.

Oops - I meant Bink was right, not Wilbur!

www.ravenstonecottages.co.uk
It's in Dumfries and Galloway, Scotland

Thank you for those posts. Bink - I agree, my instinct is to go for something easy to keep clean and perfect in a good location (we are thinking Cotswolds so only 2 or so hrs from London).

Mitza - do you use your cottage too? About how often in the year do you have it for yourself? Dh is concerned that if we have something set up for a rental, ie not hugely personal to us, it won't feel "ours" when we do visit. I have just had a look at your website, looks lovely - did you do that yourself, or did someone design it for you?

wilbur, not sure how helpful this will be, but I work for cottages4you and not long ago had to speak to an owner to confirm a late booking. The house is a beautiful old terraced one in Hay and she told me that it's their own holiday home, furnished and equipped to their own taste and standards (and going by the photos it really is lovely) but that at Christmas the people who stayed there actually complained to c4u about things like - wait for it - the plates being square. (They are Villeroy & Boch!!!)

I suspect she might be a bit thin-skinned (!), but anyway she was personally devastated by this and has decided to stop renting because of it . (Not just the plates, but the whole lack of appreciation she'd experienced.) So you need to consider how you would feel if you also went for personal and your taste was then criticised...

One of the big advantages of DIY booking will be flexibility - c4u properties have fixed booking patterns and no late-booking discounts. We often get people ringing for a week that starts in the next couple of days and expecting a discount, and they are usually stunned that not giving one means a property goes unlet instead.

That's v interesting WendyW, thank you. I think we were planning to err on the side of universal good taste, but it's interesting that people can be so critical. I think we would like to do self-booking, but I worry about the hassle factor. A good website must help a lot, I imagine, plus a bit of advertising.

Wilbur,
We did actually use the cottage a bit at first to make sure everything worked etc but we do live nearby so it was never really designed with that in mind. We deliberately went for colours that weren't too outrageous but also not magnolia AND don't put anything in it that will upset you if it gets broken because these things do happen. Sadly people do not always tell you what they've broken. We've gone through a few cups, cafetieres (4 at last count) and the odd plate. Not bad really for 5 years.

Our website was designed by a friend of mine who lives in New Zealand - email me if you want his details. I supplied all the text and pix and he kept it really simple. He is actually a graphic designer who branched out into web design and has an eye for what works. Also the exchange rate between here and NZ is really good, so it was quite affordable! The link to the availability calendar is one I can manage myself. Check out www.homeawayconnect.com to set up your own calendar. There's also a facility to do a guestbook online. I set it up but it didn't really get much interest - perhaps it's more an American thing.

I do think if you do the bookings yourself you can also 'screen' who is coming to some extent. You just get a feeling about some people and it's quite easy to say that you've just had a confirmation for that particular week and what a pity etc.
Hope that helps.

My parents had a holiday home for years.

Didn't use an agent. Did it all themselves by post and phone. I think the deposit was about 20%.

They advertised on the tourist board website and in their brochure.

There was a woman in the village who cleaned and looked after the house for them and kept the keys. When she retired it did get much harder to find reliable help and I think some sort of agency might have been useful at that point but they persevered for a while before selling up. They visited about 4 times a year for holidays and/or to fix/decorate/replace things.

I don't know about tax but I seem to remember the council tax was big.

It was a modern bungalow built to their spec - open-plan, very easy to maintain. They furnished it with flat pack wooden furniture and cheap and cheerful china from BHS etc. Nothing expensive or hard to replace.

Very very sad when it went

Ah OrmIrian - I can understand you being sad, it must have been fun to have a 2nd home in your family. Part of my reason for wanting a holiday home is for us to have a place to go as a family where we can relax and build some happy memories - dh had this as his grandparents had a house in Wales which now belongs to his parents, so he has been holidaying there since he was born and we take the dcs there too, but it is a 5hr drive from where we live and too far to go just for a quick weekend break.

Yes, will have to look into Council Tax.

It was great. However part of the reason they got rid was that it was on the west coast of Scotland and we all live in Somerset so it was a nightmare drive especially with DCs.

But we had 2 hols there with our DCs and they were the best we ever had. I would dearly love to do the same thing. Maybe one day.

Wilbur,

I've rented cottages before from stilwells or stillwells.

They seem to be just a listing website as then we contacted the owners direct. It was cheaper than going through someone like welcome cottages.

We have a cottage which we started letting last May just off the Suffolk coast. We live a couple of hours away. It is a new conversion which is great as any problems at the moment I can just call the builder to go and fix. It also has a pool, games room and gym on site.

We use English Country Cottages at present. There seems to be a trade off between what percentage they take - a lot - but then what charges they can command - ie more than some of the local ones. It was let all last summer but then the winter was slow, I think partly due to cost. However, what you can do is out of peak let it out yourself as an owner booking side-stepping the agent. What we might do is to leave it with them for the timebeing, but start to do more ourselves over time. I am trying to work out whether people are still going with companies they trust like ECC and pay more or are now using the internet much more to find cheaper options.

We are doing all the tax stuff ourselves through self-assessment forms.

We use a cleaning company who are ok, and leave the property looking good, but their clean is surface only - ie not hoovering under sofas and this seems to be typical from talking to others. If I was doing it again I would have a list of things I would want them to commit to. Would be happy to share my thoughts.

Agree with the above statement that you are not going to make from it in rent but from appreciation value of the property.

Things to think of:-
Size - ours sleeps six. A similar property on the same site which sleeps four seems to have more bookings through the winter.
Location is everything.

Another thing to think of is: Will you take dogs? Say yes and you'll increase your cleaning/upkeep bills, possibly put off non-doggy people BUT could well attract the hunting fishing shooting crowd, not to mention those who always take pooch with them.
Say no and you will lose out on some bookings, but there's no Wet Dog smell and no probs with dog hair on the beds/sofas/chairs etc.

That's really interesting BeckyBoodle - thatnks for those thoughts. We def have to sit down and have a good think through options.

Mitza - yes we wondered about the dog thing as we have friends with dogs who might want to rent. Will have to ponder that as I worry about wear and tear (and poss smell) with dogs, although I know a lot of people are desparate to rent dog friendly places.

Before I respond to dogs, how are other people finding this year's rentals? We are finding it slow. I have had a couple of really late bookings - ie phone on Thurs to start Fri, and then the others aren't until Sept/Oct. I know someone who manages a rentals company and he reckoned this year was going to be challenging because of a) the economic situation b) last year's bad weather. I am keen to get an idea of what the market is doing - if that is in any way possible!

We do allow 1 dog in ours but request that it does not go upstairs and have had laminate flooring put down on the ground floor so that it is potentially easier to clean afterwards. In the past year we have only had two bookings with a dog, although one of them has - from the look of it - chewed the corner of a coffee table. Not badly but enough to notice. Other than that you wouldn't know a dog had been there and we are in quite a walking area, so thought that we would really be limiting ourselves if we didn't allow it. IT will be interesting to see how many dogs stay this year which will be our full first year of rentals.

Wilbur - for the cottage to be treated as a business (and therefore expenses tax deductible) there is a minimum number of weeks that the cottage must be available for let, and a minimum number of weeks that it is actually let.

When we looked at this as a possibility it meant that in reality we would need most of the school holidays to be booked, rather than being able to use it ourselves, in order to meet the minimum number of actual weeks rented. So for us, with school aged children it just would not have worked.

BB, as I said earlier I work for cottages4you (inc ECC) - our bookings are down compared with last year, apparently. (Hard for those on the shop floor to tell, but I asked, and was told that they are!)

Having said that, some properties are already booked solid in the summer (eg large ones anywhere but esp in the West Country) but there is still a surprising amount of availability in places.

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This is a good idea for tax reasons - because even if you make a loss on your investment, providing the holiday cottage is in the UK you can offset the tax loss against total income (i.e your earned income). Why not wait for house prices to slide a bit, as they are popularly supposed to be about to do ...

Direct to owner is def better for asking questions and for flexibility - C4U (or whoever) do take a big chunk (I am sometimes {shock] at how much they take).

However we are there 9am-9pm 6 days a week (9-7 on Saturdays), display photos as provided by owner - NB!!! - and will always try to ring an owner when you have a specific query. Some owners are miserable gits who do not want to be bothered with phone calls from customers and we are there to do field those for them. Many customers are very happy with C4U services and make a point of saying so when they ring to rebook.

Swings and roundabouts!

Before you look at seaside towns why not look at your accommodation at your own house? Do you have a room you could let for B&B or somewhere you could build or convert at home. We live in Hertfordshire and have a very busy self catering cottage attached to our own home (originally offices when we moved in). Councils in traditional 'non tourist' areas look very favourably on plans for tourist accommodation.

You don't need to be near the coast or in a tourist area. Contact your nearest tourist board and find out if there is a need and also do you have any large companies near you that might need a place for staff to stay. We have all sorts of people coming to stay here some are working, some going into London, some visiting relatives or coming for weddings.

Tax is done on your tax form, keep all receipts and details of incomings and outgoings. I have a separate bank account to make things easier.

I don't use an agent. The most important thing is to spend on a great website with excellent clear photos and make sure that Google will pick you up when someone searches for a place in your area. I do advertise on various websites but never pay more than about £50 for any of them.

HTH