Over recent years, the abolition of tax relief on mortgage interest, changes to stamp duty and an ever-increasing regulatory burden have seen many (former) buy-to-let landlords looking to diversify their portfolios away from purely residential buy-to-let, some have even exited the residential buy-to-let market completely.
While commercial property may seem the obvious alternative (and can be an excellent investment), there is a third option, which is to invest in property to be used for holiday lets.
A brief overview of the realities of short-term letting
There are two key points to remember before taking a final decision as to whether or not short-term letting is for you.
First of all, holiday lets, by definition, are used by people on holiday and these tend to be people who are looking to enjoy the finer things in life, which means that properties used for holiday lets tend to have to be appointed to much higher standards than ordinary residential properties.
They also require more customer service/management (for example turnover will be higher and properties will, at the very least, need to be cleaned and “turned over” between guests) and very different marketing.
The good news is that renters are prepared to pay well to enjoy luxury. “Staycationers” (who account for a significant percentage of this market) are not necessarily holidaying at home to save money, in many cases they will be doing so either for environmental reasons or because they prefer to avoid air travel.
Secondly, holiday lets are becoming a politically-sensitive area and certain local authorities are already clamping down on them.
In practical terms, the parts of the country where there is likely to be most resistance to holiday lettings are the parts of the country where there is high demand for property amongst locals, in other words cities.
Property investors wishing to tap into this market may, therefore, want to focus on parts of the country where there is less competition for housing and where local authorities are more likely to welcome tourism and see it as a benefit to the local economy.
Unexpected holiday-home investment hotspots
If you thought you’d have to travel to the Mediterranean coast beaches, golf and sailing then think again. Aberdovey has them all and access to Snowdonia too. It’s only a couple of hours away from both Yorkshire and Lancashire so appeals both to staycationers and international tourists visiting these historic areas.
Isle of Mull, Argyll and Bute
This part of Scotland has some of the most spectacular coastal and inland landscapes in the world. To this may be added historic monuments, whisky tasting, amazing food and drink and a wide range of independent shops, (farmers’) markets and fairs. The area is easily accessible from the north of England as well as both Edinburgh and Glasgow.
Mudeford is probably the most famous beach hut destination in the UK and overnight stays are permitted for most of the year (currently from March to October), which makes them potential candidates for holiday letting.
It has to be said that beach huts at Mudeford can easily cost more than residential properties in other parts of the country, as in up to around £300K and buyers are unlikely to be able to get a mortgage.
On the plus side, however, the demand for them is massive (hence the prices) so buyers can expect to achieve impressive returns.