Buying A Holiday Cottage
Are you buying a holiday property to rent out?
Before you start calling estate agents, here are ten questions you need to ask yourself.
If you want advice to help you answer any of these questions, contact us (our help is freely given). Just have a pen and paper to hand! We'll do our best to help you.
1. Why am I doing this?
What's your motivation? An investment? Annual profits? Somewhere to stay yourself? The answers will help you determine what and where you should buy and the implications for property management, tax and revenue expectations.
2. How will you pay for it?
Work out what you can afford. Are you a cash buyer, or will you need a Buy to Let Mortgage? Cumberland Building Society offers useful BTL Mortgages for short-term let holiday properties.
Can you afford the monthly repayments? All this will help you determine your budget and possible locations to search for a property. For example, a £400,000 property in Croyde, North Devon, would cost a lot less ten miles further along the coast near Bideford. Allow around 15% for other attached costs involved in the purchase and essential maintenance, decoration and inventory expenditure to bring the property into a rentable state.
3. Will you rent it as a holiday home all year round - or just for a few weeks when you don't plan to use it yourself?
If you want to offset the cost of managing and maintaining your property against revenue from rental, you will need to let it for at least 140 days a year (which means having it on the market a lot longer to hit your target. If you want it for your personal use with a few lettings outside that time, you will need to consider tax implications.
4. Old or New?
Do you want to convert a barn, restore an old cottage, or buy a new property? This depends on whether you want a character property with the potential to increase its resale value (but with a lot of work necessary to achieve that) or an 'off the peg' new home built to modern building and environmental standards.
Keep in mind that location is key to a property's rental potential. A good-looking house on a residential street can be a challenge. Character houses tend to have more appeal unless you're looking at beach apartments but tend to have higher maintenance costs.
5. How will you manage the maintenance of your property, including cleaning and gardening? Will you be living on the premises or nearby, or will you need to find and rely upon a team of people, including but not limited to cleaners and a gardener? If you live outside the area, you'll need to find a pretty good plumber, electrician etc., who do 24-hour callouts (emergencies always seem to occur 'after-hours').
6. How will you market it? Will you do it yourself or through an agent? You've got to get those bookings somehow. You may want to market the property yourself rather than pay commission and probably some other fixed costs to an agent to get bookings for you. If you do, factor in the price of building and maintaining a website plus Internet advertising on reputable holiday cottage directory sites such as My Favourite Holiday Cottages. Put together a marketing plan and budget of at least 5% of your expected rental income.
7. Income: How do you work out prices and estimate bookings? Do some local research to help you work out rental prices. Find properties similar to yours near your property and look at their prices. Also, look to see how many bookings they have got. You'll also need to decide on a price strategy so you won't let it at one price all year round! Decide what tariff bands will work best and whether or when you will allow weekend end or midweek breaks.
8. Location: Where do you want to be and why? Very important if you're going to max out on rental income. Don't buy somewhere cheap and think you can charge the same rental prices as a similar-sized property in a more expensive area. Again, using the North Devon example, Ilfracombe and Croyde are two seaside reports less than eight mails apart. However, rental prices in Croyde can be twice those in Ilfracombe for similar properties.
When you first start to let, you won't have the comfort of having repeat bookings, so you must be competitive. Top tip: Red estate agents' descriptions very carefully and do your research: There's a world of difference between the phrase 'Uninterrupted views' and Uninterruptable views'.
9. What's your get-out plan? Is this a long or short-term thing? Do you plan to sell it at a profit or leave it to the kids? What if it goes wrong or other unforeseen circumstances- will you need to be confident of selling it quickly? You will find it very reassuring to know that you can exit from the business should you need to without it being a complete disaster. Working out your options before buying will help you choose your property and location.
10. How much will it cost to run? Aside from maintenance costs (and you'll be redecorating and replacing furniture more frequently than a domestic household, you'll need to note fixed and variable costs. Fixed costs include council tax and insurance costs and mortgage repayments. Variable costs include agency commission, utility bills, welcome packs, and cleaning. Work these out before you do your pricing to ensure you'll not be out of pocket.
Contact us, My Favourite Holiday Cottages, if you'd like further help and advice on any of these questions.
Curious About How My Favourite Holiday Cottages Works?
As well as giving out free expert advice and support to individual cottage owners, we are also pretty good at advertising holiday cottages - and currently have around 2,000 properties on the site. We don't charge booking fees or commission rates to owners or guests - just a single annual payment backed up by outstanding customer service.
Rates start at £98.99 for a single cottage advert for 12 months, with generous discounts for multiple cottage listings or for including a link back to us on your own website.
Click here to view further information on the benefits of advertising with us - and what makes us uniquely successful.