The UK has long been popular as a holiday destination and while the hotel sector is still performing well, there is a strong and growing demand for self-contained holiday homes. With this in mind, here is a quick guide to investing in them.

Rural areas may be seasonal but they are more likely to be left in peace by regulators

Many people enjoy city breaks in the UK, however cities tend to be places where competition for residential property is at its highest and hence local authorities in urban areas are increasingly showing themselves willing and able to rein in the short-term lettings market.

Rural areas, however, are more likely to have surplus property and to welcome the extra income tourists bring. With that in mind, it seems entirely possible that what will end up happening is that short-term lettings in cities is restricted to licensed hotels, while short-term lettings in country areas are left open.

That being so, holiday homes in the Isle of Wight, Cornwall, Devon Dorset, Pembrokeshire, the Cotswolds, the Lake District, the Peak District, Snowdonia and Yorkshire are probably better long-term options than the likes of London, Liverpool and Edinburgh.

Short-term lets are all about marketing and servicing

There is a certain amount of marketing involved in the residential lettings market, but it’s fairly minimal.

In the short-term lettings market, however, marketing is key, especially if you’re buying investment property in rural areas, when you’ll usually be aiming exclusively at the tourist market (rather than having access to business people, language students and so forth). This means that you want to have at least one specific angle for your property and ideally you want to look for angles which would be hard to reproduce elsewhere.

For example, you could look at dog-friendliness, environmental-friendliness, luxury, local associations (for example Daphne du Maurier in Cornwall) or even just choose a theme, such as Harry Potter. If you’re going for the themed approach, ideally, you’d want some sort of loose tie-in with your local area, for example some of Harry Potter was filmed in Cornwall.

On a similar note, there is a very limited degree of servicing in the residential lettings market, in fact, all a landlord really has to do is ensure a property is kept in a liveable condition. With short-term lets, you usually need to offer a “hotel-lite” service, which means, as a minimum, taking care of cleaning, including changing linens.

Landlords have to keep themselves informed regarding the law and taxes

This also applies to the residential lettings market but possibly even more so to the short-term lettings market since it is under a lot of scrutiny at the moment. Taxes could, potentially, also become a significant issue, although there is a distinct possibility that their impact will vary by locality.

In other words, any changes to mainstream taxes such as income tax could make a lot of people very unhappy, and implementing a UK-wide tax purely to “catch out” property investors in cities could be challenging, but local councils in cities could be very open to the idea of using council tax as a way both to deter short-term letting and to ensure that they make money out of it if it does happen. This is another argument for sticking to rural areas.

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Spot Blue are international property agents, helping clients to buy and sell a range of villas, apartments and houses worldwide.

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Daniel Peacock

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