Published: 27/05/2020Holiday lets vs Long Term Residential lets
In recent years holiday letting has grown in popularity as another option to the traditional residential buy to let. North Norfolk specifically has been highlighted as one of the top 5 locations to own a holiday let in the UK. A prime example of this is the beautiful market town of Holt which currently has circa 5000 holiday homes. It is clear that in the right locations there is high demand throughout the year with good levels of income to be generated.
Like most things that work well, news gets around quickly and over the last few years the holiday market in Norfolk has become highly saturated and competitive. Whilst some properties in prime locations continue to do very well, there are certainly others that are not getting the levels of bookings required to make the margins viable. When looking at investing in a holiday or residential let property its important to consider all the options.
Holiday Let Cons
- The expectation from customers is very high and therefore the long-term maintenance costs are high
- The managing and running costs are high. Charges of between 20%-30% of the booking are not uncommon
- As the owner you are still responsible for the council tax (if not qualified for business rates) and utility bills (which can often be higher than normal)
- Wear and tear can be a lot more than you would think. At the end of the day they are on holiday!
- Increased costs of insurance cover
Holiday Let Pros
- You get to use the property when it isn’t booked
- Can be highly lucrative - if you get it right
- Holiday lets are subject to more favourable tax laws than standard rental properties, thanks to being seen as a trading venture rather than an investment
Obviously, the Covid-19 pandemic put a hold on the holiday market just at the beginning of peak season, but we do envisage a busy period once restrictions are fully lifted. However, it is worth considering that properties which were perhaps struggling to maintain consistent bookings may find this harder over the longer period post Covid-19 if more people decide to consider their finances and perhaps cancel or postpone holidays.
So, should you be looking at the option of switching over to a full-time residential option? Let’s look at the finer details and see how things compare.
Long term lets are great if consistent steady income without the seasonal variations is appealing. It is also in the most part, less stressful if you use a professional managing agent and they source good quality tenants.
Residential Let Pros
- The property is occupied the entire time which gives extra peace of mind
- Good quality tenants will look after your home as if it were their own
- Income is much more consistent with good cost-effective rent guarantee options available
- Less ongoing investment
- Marginal differences in profit often seen against lower performing holiday lets when looking at net results
- Lower running costs as agent fees are considerably cheaper and you aren’t liable for additional costs such as council tax, utility bills and cleaning
- You don’t have to worry about expensive fixtures and furnishings.
Residential Let Cons
- Tax breaks have been reduced so you need to understand that and take financial advice
- There are chances of late or non-payments of rent but at Sowerbys we provide a Rent Guarantee and Legal Cover option for as little as £8.30 per month for complete peace of mind.
- You will be unable to check the property as often as you may like, which is why we recommend our managed option with professional inspection service.
- There are more legalities and complexities to paperwork, but we can take care of all these for you.
So, in summary both options can provide a great investment choice. It is important to be honest about which suits you best and of course consider what suits the property and location. If you have a prime location and are willing to invest, then with good levels of bookings it can be highly profitable as a holiday let. If, however you do not fulfil all these pre-requisites you may find the cons beginning to outweigh the pros.
The good news is residential rents are increasing significantly as the demand in the private rental sector continues to rise. We have a huge database of professional, fully vetted tenants looking for their next home in Norfolk. If you would like to find out more about potentially changing direction with your property please get in touch.
We are delighted to be able to offer a free consultation and advice session with our Head of Lettings via the online conference platform Zoom or via phone initially.
If you would like to benefit from this, please email email@example.com to arrange your meeting.