Holiday Let or Buy to Let?

We speak to Evolution Park Homes and Lodges Limited about which is the more effective and sensible investment: holiday let or buy to let?

Over the past decade the UK tourist industry has grown and is expected to be worth a whopping £257 billion by 2025—or 10% of UK GDP. With concerns over the security of foreign travel and unfavourable exchange rates, more and more people are choosing an affordable ‘staycation’ rather than holidaying abroad. Together with the recent restrictions on tax breaks for Buy-to-let landlords, UK investors are viewing Holiday Lets as a great way to enjoy an income as well as take a UK break.

Buy-to-let tax changes

To the dismay of Britain’s 2 million landlords, earlier this year UK government announced a 3% stamp duty surcharge for anyone buying a second property. This was on top of plans to curb mortgage interest relief for landlords and scrapping the wear and tear 10% tax allowance. But this bad news on tax changes for buy to let properties doesn’t extend to holiday lets, meaning that holiday home investors can enjoy higher incomes and the benefits of a modern leisure home!

See also: Should You Buy-to-Let?

Why a holiday letting is so attractive

When deciding between holiday let or buy to let, consider that a holiday let provides holiday makers with a variety of on-site facilities such as a central bar and meeting area, games rooms and children’s play areas. Luxury holiday home accommodation is more likely to generate a steady income, in most cases guaranteed for the first few years. Holiday park operators can also normally enjoy several weeks exclusive use of their lodges every year, including at least 1 peak period week as standard so they can enjoy free holidays into the bargain!

A Holiday let could be more profitable than a Buy to let investment

Unlike buy to let investors, holiday home buyers do not pay the stamp duty of 3% of property purchase value, so it can be a financially more beneficial choice. In addition, second home buyers are subject to the following fees: Valuation fee—The mortgage lender will assess the value of the property to establish how much they are prepared to lend you. The cost can be £150-£1,500 based on the property’s value. Surveyor’s fee—so that you understand if there are any problems before you buy. Surveys range from a basic home condition survey costing around £250 to a full structural survey from £600 or more.

Legal fees—you will normally need a solicitor or licensed conveyor to carry out all the legal work when buying a home.  Legal fees are typically £850-£1,500 including VAT at 20%. They will also do local searches, which will cost you £250-£300, to check whether there are any local plans or problems. Running costs of a buy to let property can also add up. Based on an annual turnaround of tenants, these include EPC, Gas Safety certificates, smoke alarms, landlords insurance and tenants Fees of typically £720 based on 8% of a £750 monthly rent.

When letting a property, landlords also have the worry and cost of dealing with ongoing repairs, redecorating and maintenance, as well as concerns over empty/void periods of no occupation which is typically one month per year without a rental income. Many holiday parks on the other hand will let and fully manage all aspects of an investment Lodge, including bookings, changeovers, cleaning, maintenance, repairs. Some will even pay site fees and utility bills, giving full peace of mind on your investment with a reliable level of rental income.

See also: Property Hotspots 

Is a holiday investment right for me?

There are key points to consider when choosing the perfect lodge including annual ground rent and location benefits. Talk to other lodge owners in the area and ensure your lodge park has a variety of facilities for a holiday environment.

What is the best location for a holiday lodge?

Choosing the location of your investment is of upmost importance if you’re looking for that extra profit. Self-catering accommodation in holiday hotspots such as Devon and Cornwall is in high demand so there’s lots of potential for income. Consider the travel distance between major urban areas and your holiday lodge—choose a maximum of 2.5 hours travel time and 30 minutes from the coast.

Guaranteed Investment return—with peace of mind!

A brand new luxury holiday lodge park has opened this year in North Devon. The Retreat at Romansleigh Park will let and fully manage all aspects of an investment Lodge including bookings, changeovers, cleaning, maintenance, repairs and even pay site fees and utility bills, giving full peace of mind on your investment. Investors can also enjoy 6 weeks exclusive use of the lodge every year, including at least 1 peak period week as standard. Contact The Retreat for a free brochure, including details of investment packages.

Our thanks to Evolution Park Homes and Lodges Limited for their assistance with this article. If you have enjoyed this article about choosing between holiday let or buy to let, click here to read more on Celebrity Angels about buy to let investments. 

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