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Top things to know when buying a property for holiday letting

Written by Agnese Rugevica on

We always say to prospective new homeowners that they should chose a property for holiday letting that they like themselves, if they like it then there is a huge possibility that other people will think the same. However, it also must make financial sense, and taking those first steps in financing things can be scary. That’s why we wanted to give you a quick insight into financing the purchase of holiday let.

Financing a holiday home can be arranged in several ways and these are the most popular of them:

  • As a standard mortgage - you are purchasing a holiday home for your own use and you intend to let it out only in the summer season while away on your own holiday.
  • As a commercial mortgage - the property that you have chosen has been a successful holiday let before and you want to continue letting it. The amount of finance you will get will be dependent on the letting history (how well the house has done in the past and how your future plans will impact this).
  • As a second home mortgage - the amount of finance can be combined by an assessment of the house’s valuation, monthly repayment affordability and income forecast from an agency. As an agency, we can help by providing an income forecast for your chosen property that helps you to understand what income is realistic and achievable in a competitive market.

For the last two options, you’re likely to need a larger deposit (25% is typically the minimum) and may receive higher interest rates and fees than on standard mortgages. Your choice of lenders may also be limited, as not all providers offer second home mortgages, so checking both options out for any perspective lenders is a must.

There are also some additional side of holiday let that you should consider, before deciding the best property to holiday let. These include:

Holiday Home Insurance - It will be slightly different from the insurance you take out on your own home, since there is a greater security risk when a house is unoccupied for part of the year and open to the general public for the rest. Insurance is also a good tool of providing your guests with a stay that is not only enjoyable, but also safe.

Furnishing and equipping the Holiday Home - You’ll need to fit your new home with a full set of furniture, plenty of kitchen equipment, utensils, linen, towels, Wi-Fi internet connection, cleaning tools and potentially furnishing a garden also.

Taxation - There are range of tax related implications including council tax and capital gains tax that you will need to pay on your second home, but there are specific expenses and fees that can be written off against your end of year tax bill when holiday letting the property, these include:

  • All agency’s commissions and fees
  • Checks and tests expenses
  • Legal and accountant fees
  • Buildings, contents and public liability insurance
  • Interest on mortgage payments
  • Maintenance and repair costs (but not improvements)
  • Utility bills
  • Council Tax
  • Additional services paid for such as, cleaning or gardening
  • Costs related to letting the property, such as phone calls, advertising and stationery.

This is just an overview to let you know what is behind the scenes of taking that first step into investing in a holiday let, but it is not only about finance and expenses! It is also picking the right property for you, where you would enjoy spending your holidays, so that guests enjoy themselves and will want to come back to again and again. It is hugely rewarding to have not only a base for you to get away to South Devon when you want to, but also share that with other people. Of course, there’s also the added benefit of an additional income, and the potential to even make it a small business!

If you would like some more information about buying a property for holiday letting, get in touch with our property recruiters Toni and Mel on recruitment-brc@bluerivercottages.co.uk or give them a call on 01803 833 682

Agnese Rugevica

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Property Assistant
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