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  • Holiday Lets

    Holiday lets - do they work as a business model?

    What's the difference between "holiday lets" and serviced apartments?

    Is the only difference that the first is next to a beach and the latter is in a major town? I have several properties that I "holiday-let" in capital cities. I would never buy a holiday let if I'm right that that means buying something on the coast for the holiday seasons only. Waste of money and you'll never make a profit. Yes, they rent for a lot of money in the high season, but you've got them sitting empty most of the year.

    Another negative is that you'll probably have to buy them 100% in cash, as the banks don't like to lend on properties that won't be yielding a steady income.

    I suggest, if you want to go down the short-term-letting route, stick to towns that get a lot of tourists.

    Even with those, the profits are getting lower, for three reasons: local and central authorities are clamping down on them in certain cities, so e.g. in London you can only rent for up to 90 nights a year, and the next two reasons are both related to increasing competition: most markets are saturated (not just due to more such properties coming on the market, but also due to a huge boom in hotel building, offering cheaper rooms with better services, that are taking business away from people like me), so nightly rates are falling (even dropping to 50 pounds a night, I can't rent some of them on week nights, and in Budapest, they rent all the time but sometimes only at 25 quid a night for a 2-room apartment with balcony!) plus the expectations of guests have increased, so you have a situation of what Hungarians call "over-quality", meaning that you're having to spend ever-larger sums on making your place stand out (new TVs, great furnishings, constant renovations, etc).

    However, if you're prepared to work reasonably hard at it, and you buy sensibly, you can still make around 60% more on a net basis than renting long term. But forget the places by the beach - buy those only because you want to stay there yourself, but not stricly as an investment.

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    I am confused on your stance Adiel.  Almost the exact opposite to another post you wrote on another thread which I answered here. 

    Forgive me for pointing this out, but some of what you have written above is factually incorrect.

    I would never buy a holiday let if I'm right that that means buying something on the coast for the holiday seasons only. Waste of money and you'll never make a profit. Yes, they rent for a lot of money in the high season, but you've got them sitting empty most of the year.

    That is most definitely not the case with holiday lets that tick all the boxes I apply to them.  Possibly true for Devon and Cornwall, but I do not invest there.

    Another negative is that you'll probably have to buy them 100% in cash, as the banks don't like to lend on properties that won't be yielding a steady income.

    Incorrect.  There are specialist holiday let mortgages available, typically 60% LTV maximum.

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    Well, good luck to you on that.

    I'm yet to find a lender who'll lend on them, not unless you're earning a considerable sum of money on your day job which has nothing to do with property. I'm also yet to find anyone who makes a decent profit on holiday lets (if by holiday lets you mean a property near the beach, or in a little village somewhere, unless the town near the beach also happens to be a tourist destination in its own right, such as Southampton or Bournemouth, in which case I'd term it a serviced apartment like any other).

    Can we agree on some terminology here?

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    Hi Adiel,

    The terminology I use is all explained in the links I have provided to you on the other thread you commented on - but here's a reminder for this thread - Short term letting strategies - differences.  Please read them as I don't really want to keep repeating myself.

    Luck is not required to source a holiday let mortgage either - there are lenders for this (and more and more releasing products), as evidenced by putting the search term into PT search box:

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    “Be fearful when others are greedy and greedy when others are fearful”.

    This is the view I’ve arrived at with holiday lets.  With the ongoing ‘landlord bashing’ from the government, a lot of investors have moved from BTL into the holiday let sector. 

    Sometimes, extra competition is healthy as it can drive up standards and therefore drive up customer experiences and therefore demand.  Other times it just drives down cashflow/profit.  I guess time will tell what happens here.

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