If you're looking at investing in property and therefore are looking for the best option to a residential buy-to-let, a UK holiday let may be the answer to creating a decent yield.
A study this past year found that nearly three in five Brits were likely to get their annual summer break in the united kingdom – and also the number of people opting for a staycation could rise if Brexit uncertainty puts holidaymakers off going abroad this season.
With this in your mind, buying a UK-based holiday let could be the way to go. Growing amounts of British holiday let investors are choosing to have their money in their house country instead of buying abroad. In fact, research from estate agent Savills has found that 39% from the Brits who bought holiday lets in 2022 opted for UK properties, up from just 14% prior to the 2007 financial crash.
This investment trend is likely to continue as holiday homes in the united kingdom are easier for proprietors to visit, manage and service than holiday lets bought overseas.
Here, we reveal the home features that bring the highest yields and explain the holiday let mortgage considerations you’ll have to bear in mind.
Which holiday let features earn the most money?
According to Sykes Holiday Cottages, certain features and availability types can help you get a much better yield.
On average, holiday let owners could earn 10% more if their property is as simple as the coast, in a national park or pet-friendly.
You could earn up to 20% more just for having good wifi or perhaps an open fire.
An additional 30% could be added to your yield should you offer short breaks over the winter period.
Of course, if you have bought a holiday let and it is nowhere near the coast, there's not much you can do about this – but purchasing decent wifi and opening availability in the colder months might make a big difference.
Can I get a home loan on a holiday let?
It can be challenging obtain a mortgage on a holiday let property.
Many lenders don't offer these kinds of mortgage whatsoever. They begin to see the chance of lending as way too great as there's no guaranteed income, especially as some holiday lets are left empty beyond peak season.
Some lenders provide specialist mortgages, however. To become eligible, you'll usually need a deposit with a minimum of 25%, but to qualify for a decent interest rate you’ll need 35%-40%.
Some homeowners decide to remortgage their home, releasing equity to place towards a more sizeable deposit for any holiday let. This could lessen the amount you needed to borrow for that holiday home and could get you a better rate, however, you may pay for this through increased costs around the mortgage in your home.
It’s worth taking expert mortgage advice before making a choice in either case.
Lenders will frequently impose extra rules with holiday let mortgages. These may include:
Holiday home tax relief
For your property to be considered a vacation let for tax purposes, it has to be available for a minimum of 210 times of the year, and occupied by tenants for at least 105 days annually.
Longer lets well over 31 days can’t be contained in these figures.
The benefit of your property qualifying as a holiday let is that you’re not technically a landlord, and therefore some of the usual buy-to-let tax liabilities don't apply.
Plus, if the house is fully furnished it will likely be seen as a business venture, as opposed to a property purchase.
This means you should be in a position to claim tax relief against accessories and offset mortgage costs, tax and utility bills against your income as self-employed expenses.
But, when it comes to buying a holiday let, you will still have to pay the 3% stamp duty surcharge if you already own another property.
Expert suggestions about holiday let mortgages
Only certain lenders offer mortgages on vacation lets and the rules can be complicated, therefore it is effective take expert consultancy.