Oh, we do like to be be­side the sea­side. So why not in­vest there?

Buy­ing to let by the sea­side has proved a shrewd in­vest­ment for David Co­p­ley. So what is the se­cret of his suc­cess? Sharon Dale re­ports.

Yorkshire Post - Property - - PROPERTY -

FASH­ION­ABLE Whitby is now a year-round des­ti­na­tion for hol­i­day­mak­ers and week­enders but with no short­age of ac­com­mo­da­tion, there is com­pe­ti­tion for their busi­ness.

Keen to in­vest on the coast, Har­ro­gate-based in­vestor David Co­p­ley ar­rived on the scene five years ago and iden­ti­fied two gaps in the mar­ket.

One was for lux­ury lets and the other was for large properties cater­ing for ex­tended fam­i­lies and groups of friends. In essence, Whitby needed more of the big and the beau­ti­ful.

David’s first pro­ject was Al­bany House, a Ge­or­gian town­house in need of ren­o­va­tion. He gut­ted it and trans­formed it into a five star hol­i­day home that sleeps 10 and pro­vides him with a bolt hole by the sea.

In 2010, he bought East Row Lodge, a tired prop­erty with a small an­nexe, in nearby Sand­send. He spot­ted the po­ten­tial to change the lay­out and cre­ate a top end let just feet from the beach.

“It needed a lot of work but the lo­ca­tion was amaz­ing and it had three pri­vate park­ing spa­ces, which was a real bonus. I changed the lay­out, re-wired, re-plumbed and re-dec­o­rated. I also added some clap­board to the front of the an­nexe to make it look more at­trac­tive and beach hut in style and that now houses a dou­ble bed­room and en-suite,” says David, a char­tered sur­veyor and for­mer es­tate agent, who was one half of the Bead­nall Co­p­ley agency.

East Row Lodge now sleeps six and brings in £27,000 a year gross profit. It has a 75 per cent oc­cu­pancy in an area where 50 per cent is the aver­age.

“Both of the hol­i­day lets give me dou­ble the re­turn that I can make with stan­dard buy-to-lets,” says David.

The se­crets of his suc­cess are size and qual­ity but he stresses that hol­i­day let­ting also in­volves more work.

“There are lots of two bed­room lets in Whitby and Sand­send but there is in­creas­ing de­mand for large prop­erty so par­ents, chil­dren and grand­par­ents can hol­i­day to­gether,” he says.

To en­sure qual­ity, he and his friends Bob and Su­san GossCle­ments, who also have a hol­i­day home in Sand­send, formed their own let­tings com­pany, York­shire Coastal Cot­tages.

“Hol­i­day lets are more lu­cra­tive than stan­dard lets but they need con­stant hands-on prop­erty man­age­ment and more main­te­nance. High stan­dards are cru­cial at the five star end of the mar­ket. I’ve put sound in­su­la­tion in East Row Lodge so you can’t hear the peo­ple cough­ing and sneez­ing up­stairs. Guests want great dé­cor, high thread count sheets and good crock­ery and glasses,” says David.

For those who want to be hands off, he charges 18 per cent of the book­ing for a fully-man­aged ser­vice plus main­te­nance costs. For those think­ing of in­vest­ing, it also pays to have a good ac­coun­tant, as hol­i­day can have tax ad­van­tages.

Here are some tax tips from Richard White­lock of Gar­butt and El­liott:

If a hol­i­day homes is not let and no in­come is gen­er­ated, in­come tax does not come into the equa­tion. But when the prop­erty is even­tu­ally sold there may be cap­i­tal gains tax (CGT) due on any profit made on the sale of 18 and/or 28 per cent.

If the owner oc­cu­pies the hol­i­day home them­selves, even if only for a few weeks per year, then the prop­erty may be treated as a sec­ond res­i­dence for CGT pur­poses. De­pend­ing on the cir­cum­stances and with care­ful plan­ning and use of a for­mal CGT elec­tion, it may be pos­si­ble to re­duce or even elim­i­nate any ex­po­sure to CGT on sale.

In cases where the prop­erty is let as hol­i­day ac­com­mo­da­tion, any profit will be sub­ject to in­come tax, in ad­di­tion to the CGT on sale. How­ever, properties which qual­ify as ‘fur­nished hol­i­day let­tings’ (FHLs) can ben­e­fit from more favourable treat­ment than or­di­nary buy-to­lets, as they are treated as a trade for some tax pur­poses.

The main ad­van­tages of FHLs are:

Some ex­pen­di­ture may qual­ify for cap­i­tal al­lowances (on fur­ni­ture, fur­nish­ings, etc.), which can of­ten mean a greater de­duc­tion from in­come and lower tax­able prof­its.

CGT re­liefs for traders ap­ply to FHLs, in­clud­ing En­trepreneurs’ Re­lief which gives en­ti­tle­ment to a CGT rate of just 10%.

Rental prof­its count as rel­e­vant UK earn­ings for pen­sion con­tri­bu­tion pur­poses.

In or­der to qual­ify as a FHL, the prop­erty must meet all of the fol­low­ing cri­te­ria:

The prop­erty must be avail­able for com­mer­cial hol­i­day let­ting to the pub­lic for at least 30 weeks per year

The prop­erty must be ac­tu­ally let for at least 15 weeks per year

Any pe­ri­ods of “longer-term oc­cu­pa­tion”, more than 31 con­sec­u­tive days by the same per­son, can­not ex­ceed 155 days dur­ing any year.

If the prop­erty is used per­son­ally by the owner or by fam­ily or friends for no or be­low-mar­ket rent, while also let, there will be a re­quire­ment to ap­por­tion cer­tain ex­penses be­tween the pe­ri­ods of com­mer­cial and per­sonal use, which will re­sult in the par­tial dis­al­lowance of some ex­penses in or­der to ar­rive at the net profit for in­come tax pur­poses.

Gar­butt & El­liott are char­tered ac­coun­tants and tax ad­vis­ers with of­fices in Leeds and York, www. gar­butt-el­liott.co.uk.

York­shire Coastal Cot­tages, Skinner Street, Whitby, www. york­shire­coastal­cot­tages.co.uk

SEA­SIDE SPE­CIAL: David Co­p­ley re­vamped East Row Lodge and its an­nexe to cre­ate a highly suc­cess­ful, five star hol­i­day let that sleeps six.

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