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Joseph Silmon-Clyde · 11-08-2012, 12:09 PM

Hi all

I am a new member on this site and am thinking about buying a property to holiday let. I have quite a few questions that I wondered if the forum could help with...

The property is a detached house about 2 hrs drive from London, inland, sleeps 8-10, sits in 4 acres of land. It is very old (build about 1500) and architecturally very interesting but recently restored beautifully. I think it would be perfect for larger family get-togethers etc - I have rented similar properties myself in the past.

I am thinking about buying it as holiday letting for the next few years, with a view to moving there in the future. While I really like the property, it needs to make financial sense renting out for the next few years.

What I am trying to get a sense of is:
- How much might I expect to rent it for say high season and low season?
- what sort of occupancy would I expect?
- how does renting through and agent such as English Country Cottages compare to renting directly?
- Have people come across specific issues with renting larger houses compared to smaller properties?

Thanks for any help.

John Corey · 13-08-2012, 04:40 PM

Joseph,

While your personal experience might be interesting, I think it is more likely to blind you to the pitfalls. Is there really any market for such a property?

If you were going to advertise it, where would you place the ad? Can you check ads for similar places? Are they competition? If so, ring them and do some market research.

If you think there is a letting firm that can take on the property, speak with them. They will know what sort of demand they receive, what the season really is like and the type of expenses you might have.

If there any way to rent the place for a year or two and see if you can make a go of it? A try before you buy strategy?

Vanessa Warwick · 13-08-2012, 09:21 PM

Hi Joseph,

Welcome to PT. If you stick around, you'll come to understand that I am a big fan of holiday lets, although I prefer coastal ones for reasons explained >>> here.

To answer your questions:

- How much might I expect to rent it for say high season and low season?

Unless I know the location that is hard to estimate. My advice is to go on homeaway.co.uk and search on similar types of property. That would give you a rough estimate.

- what sort of occupancy would I expect?

Your occupancy will be in direct relation to the quality of the property, the standard you fit it out to, the location, how you market it, ad the level of similar type inventory in the immediate area.

Generally speaking, even a poor quality holiday let will get summer (July/August) plus bank holidays, half term, Easter, Christmas and New Year without too much effort. However, your real cash flow will come from filling the "shoulder" months.

You may get some value from this blog about Signposts to a holiday let with year round occupancy potential to see how many boxes your proposed property ticks.

- how does renting through and agent such as English Country Cottages compare to renting directly?

You benefit from their marketing spend & traction in the marketplace. You should do both. It takes a holiday let about 2 - 3 years to get traction and start benefitting from repeat bookings and word of mouth. Expect the first year to be a bit patchy and then you won't be disappointed.

- Have people come across specific issues with renting larger houses compared to smaller properties?

With larger groups, you may get parties happening where damage can be considerable.

Hope you find this helpful and happy to answer any further questions you may have.

Phil Schofield · 17-08-2012, 11:57 AM

Firstly I would speak to a holiday cottage agency in the area who will have insights into the local market (occupancy rates, what to charge, any niche markets to target).

There is a market for those who travel with extended family, but the property will need to be designed to suit their requirements, such as min 2 bathrooms, large kitchen and social areas.

Joseph Silmon-Clyde · 18-08-2012, 07:50 AM

Thanks John, Vanessa for your comments.

I can see I need to do quite a lot more research to understand how the economics are likely to play out. I will keep reading the forum, which seems to be a treasure trove of useful info and viewpoints!

Judith Abraham · 22-08-2012, 09:49 PM

You could always do something truly innovative and look in the direction of Sophie Conran - Temple Guiting for inspiration. Bespoke country house parties.

Joseph Silmon-Clyde · 26-08-2012, 08:39 AM

Thanks to members for giving me their views. Judith, the Temple Guiting idea was interesting but it seems like a full time job - and I already have one of those.

I have done a fair amount of research on this property now, including speaking to some holiday let agents and other large house owners in the area. I think I could expect gross yields of 6-7% after a few years building up reputation. After letting costs (cleaning, repairs, insurance, advertising but not financing) of around 2% I might see net income is 4-5%. If I finance with a 75% mortgage at 4%, my pre-tax income is 1-2% of the property value - and clearly this falls when interest rates rise.

I have a couple of questions based on the above:
- Do the gross yields and costs I have given above sound like the sort of thing that would be an attractive holiday let investment? i.e. would an experienced investor look at this and be interested enough to do some more due diligence?
- If so then I can see that income is not the attraction behind holiday lets (at least for an owner with significant borrowing). So I assume that the reason people buy holiday lets is for the capital gain, and because the income should at least go up with inflation? Can people comment from their own experience?

I guess what I am searching for is a sort of "model" holiday let, showing for a prime opportunity how the income, costs and value might develop over time. Also, some actual results from specific investments, if anyone is prepared to share summary information.

Many thanks, JSC

MARY LATHAM · 26-08-2012, 01:16 PM

This is a guide to Furnished holiday lettings: changes to the rules - 2011-12 and following from HMRC worth checking before you do your sums.
[/b]
http://www.hmrc.gov.uk/manuals/pimmanual/pim4113.htm

There are some significant changes for tax year 11-12 and more in 12-13

"Qualifying tests for 2011–12 and for 2012–13 and later
Please note that for 2011–12 the old availability and occupation tests apply. The new tests apply for 2012–13 and later.

All three of the following tests must be satisfied if a letting is to qualify.
1. The availability condition (availability test/threshold) – during the period (normally the tax year), the accommodation is available for commercial letting as holiday accommodation to the public for at least 140 days (210 days for 2012–13 onwards).
2. The letting condition (occupancy test/threshold) – during the period the accommodation is commercially let as holiday accommodation to the public for at least 70 days (105 days for 2012–13 onwards).
3. The pattern of occupation condition – the accommodation must not be let for periods of longer-term occupation for more than 155 days during the year."[b]

Follow me on Twitter @landlordtweets

Judith Abraham · 28-08-2012, 09:55 PM

JSC: This podcast may be of benefit for you. As it seems your decision is purely driven by the head and not the heart. The podcast talks about high and low property yields within the UK, buy to lets, tenant arrears, repossessions, capital growth, high rental incomes in certain areas. You will find it at podcast.ft.com go to the FT Money Show Aug 16, 2012.

John Corey · 29-08-2012, 01:43 PM

JSC,

What you fail to realize is mot holiday let decisions are purely emotional and the 'income' angle is used to justify why buying is an investment and not just excessive indulgence. Most people expect to use the property or to retire there. They rarely check the numbers carefully.

Assume for a minute that someone does a great job of focusing on the investment aspects and they completely strip out the emotional or personal use aspects. Who is their competition? Likely other holiday let properties that were not so logically reviewed. People who are not operating as a real business and who just hope to cover the mortgage.

If you really want an investment property and do not care to live in it one day, you likely can find something that is better than a holiday let. Some holiday lets will be money spinners. Those tend to be properties that are let short term where the owner has in effect created a second job so the extra income is compensation for the hours it takes to manage the property.

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