Buying a vacation rental: seven steps to a wise investment
The idea of a UK holiday home never seems to lose its appeal. But over the past 18 months, they’ve become more popular than ever – for good reason.
Stays have exploded thanks to Covid, the tourist organization VisitBritain anticipating more than 50% more national holidays this year than in 2020.
Using a vacation home not only as a personal hole, but as a nice little income has also become incredibly popular.
Trending property: a thatched cottage in West Lulworth, Dorset
In June, there were 10,290 active Airbnb listings in Cornwall alone, as people flipped their properties to pocket extra money through so-called short rentals.
So if you want to join the vacation home craze, here are seven golden rules to follow.
1. Lock a location
You might have your favorite places: after all, you’ll be staying in the new home, besides letting it out.
But if you want to follow government statistics for 2021, the most popular places to spend a holiday in the UK this summer were the South West – far ahead at 24% – with the North West of England the Scotland, Yorkshire and East Anglia then.
Or if you want to rent out your property on a short-term basis, interior company Crafted Beds has calculated the average cost charged by Airbnb hosts in different cities, which are more popular than rural areas for stays of two or three nights.
The top comes from Newcastle averaging £ 122 per night, followed by Leeds, York and Exeter, all around £ 120.
2. Size matters
Your budget can determine this, but if you can, consider the likely visitor market in your area.
If the location is off the beaten path and quiet, a small property calls for romantic weekend bookings or longer periods for walkers.
If you are looking for a beach vacation home, it will likely attract families and groups of friends, so a larger property is the order of the day.
3. Find the funding
Independent financial service Moneyfacts says only 74 holiday mortgages were available as of August 2020; there are now 186. However, there are many options.
“A vacation rental mortgage is designed for those who borrow on a property rented weekly or on a shorter basis like Airbnb.
“It’s different from a rental mortgage designed for longer-term rental properties.
“And a mortgage for a vacation home is different again because it’s for the owner’s personal use,” says Mark Harris, managing director of mortgage broker SPF Private Clients.
4. Good references
James Greenwood of Stacks Property Search says: “The open plan works well for vacation rentals, but a separate utility space is worth a lot. Storage allows the owner to keep their own belongings during the rental. Parking is a strong selling point.
Her colleague at Stacks, Clare Coode – who lives in Cornwall – adds: “Think about how you look online: an Instagrammable property always helps.
“Location-appropriate fixtures like marine colors and paneled walls in seaside areas are good. ”
Whatever the beauty of the house, you will have to equip it well; Quality furniture and accessories that will stand up to wear and tear (and pets if you allow them) add to the bill.
Holiday rental specialist Schofields Insurance is offering £ 15,000 to modernize the interior of a two-bedroom cottage.
5. Hire an agent
Your vacation home is likely to be some distance from your primary residence, so it’s hard to be there for every change of tenant.
Agents charge 20 to 25 percent of the reservation fee. Sounds like a lot, but it covers cleaning, laundry and key collection.
In addition, the agent will advertise, respond to inquiries, take reservations and handle emergencies.
And agent fees are tax deductible.
6. Pay the tax
The rules suggest that the most effective property is a furnished vacation rental, rented for up to 31 consecutive days to a single client.
In addition, the furnished vacation rental must also be accessible to the public for at least 210 days of the tax year and rented to paying customers for at least 105 days.
7. Add insurance
It’s boring, but essential. Even if you rent out your vacation home for a few weeks, most insurers won’t cover short-term Airbnb rentals.
So you may need a separate blanket. GoCompare is the first service of its kind to ask insurance applicants if they want to host short-term tenants and in which case they have to pay for additional coverage.