Higher, but more variable income
Unlike standard rental properties, with holiday lets you can hike up the prices over peak periods such as summer, Christmas, school holidays and bank holidays, though you'll probably never be able to charge quite as much as the £5,700 per night these luxury Scottish digs expect to fetch during the May bank holidays. However, you're also likely to have periods in the off-season with far fewer visitors paying lower prices if you're in a traditional holiday area.
City centre apartments can have greater year-round appeal, and those a short commute from major cities such as London are more likely to be booked for weekend trips than more isolated destinations such as Cornwall.
Thanks to the explosion in popularity of sites like Airbnb, tourists are increasingly booking holiday lets as opposed to hotels and tourism generally is on the up in the UK. According to the Office for National Statistics Travel Trends report for 2014 (the latest available), visits to ฝากขายคอนโด the UK rose 5.3% in 2014, and were at the highest level since records began in 1961. Visit England research suggests the number of UK residents taking holidays domestically has also increased in recent years, and with growing fears about terrorism abroad, this is only likely to rise further.
Mortgages
The good news in terms of funding a holiday let is that you'll only need around the same deposit - roughly 25% - that you would with a buy to let property, though as with the rest of the mortgage market, the best rates are reserved for those with low loan-to-value products.
The bad news is there's a much smaller range of products to choose from. While there are more than 1,000 buy to let mortgage products on the market today, only a handful of lenders offer holiday let mortgages and requirements can be more stringent than those of buy to let mortgage providers. For example, Leeds Building Society, one of the main lenders in this market, requires the main applicant to have a minimum income of £40,000, whereas most buy to let lenders require just £25,000.
Other lenders in the holiday let market include Cumberland, Furness and Monmouthshire building societies. Market Harborough offers a second homes mortgage that allows letting for up to 24 weeks a year, which might suit those looking to use the property themselves for substantial periods throughout the year.
It's a good idea to consult a broker if you're looking for a holiday let mortgage as there are also some mainstream lenders that will consider holiday lets on a case-by-case basis.
Rules and regulations
Before getting too carried away by the hefty price tags holiday lets are commanding in hotspots like London and deciding to switch your standard rental into a holiday rental, be aware that there are a couple of things that could scupper your plan from the outset.
First, if your property is leasehold, check the conditions of your lease as some only allow letting on an assured shorthold tenancy basis. Second, most boroughs in London will insist you need planning permission to change the property's use if you wish to let it permanently as a holiday let, although these rules have been relaxed for short-term holiday letting. Outside London, this is an issue in some areas but not others - check with the relevant council to get their position.
To benefit from the tax breaks on offer to holiday lets, you need to meet HMRC criteria and it must be available for letting for a set number of days per year.
Extra costs...
With buy to let properties, even if you self-manage you may not hear from your tenants for months, but with holiday lets the demands on your time and wallet will be much greater. Managing a constant stream of bookings and keeping the property in the condition holidaymakers expect can be time-consuming.
Realistically, you'll only be able to self-manage if you're very local, otherwise you'll need to use a specialist agent and these can cost double what a letting agent service costs on a standard rental. On the upside, a reputable agency will probably pull in a lot more bookings than you would on your own, so it may pay for itself when that's factored in.
People expect things like Wi-Fi and in some cases pay TV in holiday lets or serviced apartments, and you'll also need to pay for utilities. In addition, you'll need to provide linen and kitchenware as well as furniture.
... but also some savings?
Depending on your mortgage conditions (and check as not all allow this) you can use the property yourself, thus cutting down on holiday costs.
However, some owners find themselves reluctant to do so during busy periods due to the higher income you'll be forgoing, so this might be more of an off-season perk. If you have a flexible work schedule or are self-employed the opportunity to use the property when it just happens to be vacant may be more of a bonus.
The bottom line
In the past, many people with properties with holiday let potential did all the sums and concluded they'd hardly yield any more than they would with a single let property.
However, with the new tax rules, it is likely to suddenly makes a lot more sense. Let's compare a £300,000 property yielding 5% owned by a higher rate taxpayer, first as a buy to let property once the new tax rules are fully in force, and then as a holiday let.
Scenario 1 - property run as buy to let
Rental income received - £15,000 Mortgage interest at 4% on 75% LTV - £9,000 Allowable deductions - £2,000 Profit - £4,000
Other income - £45,000 Tax due on property under new rules (£15,000-£2,000 X 0.4) = £5,200 Plus add back of 20% mortgage interest relief - £1,800 Total tax due - £3,400
Scenario 2 - property run as holiday let
Rental income received - £15,000 Mortgage interest at 4% on 75% LTV - £9,000 Allowable deductions - £2,000 Profit - £4,000
Other income - £45,000 Tax due on property (£15,000-£2,000-£9,000 X 0.4) = £1,600 Total tax due - £1,600
This is a basic example that ignores the fact that you'd probably have more allowable expenses with a holiday let, but you can see that even if the property brings in the same amount of income in both circumstances, you pay more than double in tax if it's a buy to let. So even if your property ends up yielding about the same as a holiday let as it would with a standard let, you may be significantly better off once tax is figured into the equation, particularly if you are a higher rate taxpayer or the new buy to let tax rules will push you into becoming one.
