Lets earn as you learn
WITH the last of the generous tax benefits available to buy-to-let landlords disappearing after next April, investing in a holiday-let home is looking more attractive by the day. They are not only tax deductible but offer the opportunity to run your own business in a way that fits your lifestyle, while providing you with a holiday bolthole of your own.
It’s a win-win scenario for anybody looking to invest in a second property, boosted by the fact that holidays in the UK have increased by 10 per cent in the last two years.
That’s not just because of Brexit and sterling’s drop in value though; it’s part of a trend that started during the 2008 recession and skyrocketed when the 2012 London Olympics put Britain back on the international tourism map.
Now interest in UK holidays is so high that letting agency Mulberry Cottages is running masterclasses for investors who want to run a holiday-home business.And the main message, as always with property, is location.
Coastal properties, countryside homes near national parks or similar and hideaways in tourist towns will spark most interest but those within a two-hour drive of a major city will do best.
As for the properties, the quirkier and more luxuriously decorated and equipped the better says Jo Thompson, marketing director at Mulberry Cottages, who runs the masterclasses with business development manager Mark Maultby.
“Back in the day, the smart money was on buy-to-let or student accommodation,” says Jo, “but since the tax changes there has been a real switch.”
Buy-to-let landlords have seen their mortgage interest tax relief clawed back from 100 per cent in the 2016-2017 tax year to 25 per cent in the present tax year. From April 5 next year there will be no tax relief, just a 20 per cent tax credit on mortgage interest payments that will mean higher taxpayers’ returns will dwindle.
By contrast, holiday-let home-owners will still be able to offset all sorts of expenses, from insurance and water rates to crockery, linen and cutlery, as long as their property is available to rent as a furnished holiday home for 30 weeks in the tax year and is actually rented out for at least 15 weeks.
Mark, who mentors holiday-home owners, says: “I always tell people that 30 to 50 per cent year-round bookings is about what you should expect but you do get properties that hire out more.”
As for the size of holiday-let homes to buy, both Jo and Mark suggest houses with two or three bedrooms for year-round interest from couples and families – depending on whether it offers attractions outside summer months – and very large properties for big groups.
Four or five-bedroom houses will probably be too small for things like family celebrations.
Of course there’s far more to running a successful holiday-home business: public liability insurance, holiday-let mortgages, reliable cleaners and super-fast wi-fi are all part of the mix.
But for anybody interested, Mulberry Cottages is holding three masterclasses in October in the Cotswolds, Dorset and Hampshire.