Buying a holiday home for investment purposes obviously isn’t something to undertake lightly, but if done right, you can reap the benefits. If you regularly holiday in a favourite location, you can certainly improve that experience with a home-from-home environment. With your own property, you have greater space, comfort and flexibility to do whatever you want.
Buying A Holiday For Investment: A Risky Decision?
If you’re looking to rent the property out, the stats are looking good right now. Research by the London School of Economics estimates that ‘owners of holiday rental properties in the UK received a gross income of around £950 million’. Roughly half of that money went on property-related expenses, such as employing staff, but that still leaves a sizeable profit.
Given the uncertainty of today’s stock markets, buying a holiday home for investment remains relatively low risk as long as you take advice and get the essentials right.
It is important to emphasise the distinction between a holiday home and a holiday let. Since April 2016, both types are subject to a 3% stamp duty surcharge, applicable if the property is not your only UK property holding and costs more than £40,000. Financially, the main difference is that HMRC views holiday lets as trade rather than investments. Subsequently, all mortgage interest costs remain deductible from any income at the time of writing.
To qualify as a holiday let, rather than a holiday home, you must meet a set of specified criteria. The property must be available to let for a minimum of 210 days each year and actually let for a minimum of 105 days. You can’t have any periods of long-term accommodation, classified as 31 days or more, which in total add up to over 155 days.
Points To Consider When Choosing Your Property
When buying a holiday home for investment, there are a couple of points we’d recommend bearing in mind.
Location is always important and that rings especially true of holiday homes where you want to be able to relax and it needs to meet the needs of your target market. Think about the practical needs of a families holidaying by the sea, or walkers in the countryside.
Furthermore, you will need to consider how much you or your clients want to be driving, and so how close you need to be to local shops, pubs, restaurants and attractions. Decoration and standard of furnishing is all important too – what appeals to you might not appeal to potential guests.
They type of property is also important. If you don’t want to spend a lot of time or money on upkeep you should think carefully about the size of garden, for example. Grass looks great but it needs cutting by someone! Patios or decking are far easier to manage from afar. If you are considering letting, you will ideally want a property with a minimum of 2 bedrooms in order to attract the lucrative family market. Go too large, however, and you’ll struggle to make back your money.
Buying Agent Partnership are experts in finding the perfect holiday home, whatever your requirements. Contact us on 0330 223 6339 to discuss how we can help you.
