Holiday Home Investments

Great Yields and Tax Breaks

All of our current UK holiday home investments can be seen here.

In today's search by investors for higher yields to give enough rental income to make a profit after higher mortgage costs everyone should review UK holiday homes as a business backed property investment. In addition it offers many investors the chance for 45% less capital gains tax than regular property investment (or even 0% tax in the right circumstances).

People have run holiday homes as a business and as a part of their property investments for decades and they have generally been very profitable but what are the pluses and minuses of UK holiday home ownership ?

Well firstly yield or rental income as a percentage of the property price. Holiday lets can earn you as much income in a week as the property could fetch in a month if let on a 6 month AST. One common mistake people make is assuming that the rent per week/month is the same for both types of let and they rightly assume that there will be voids between holiday weeks, particularly out of season. Therefore they deduce that earnings will be reasonable in the tourist period but the voids will be bigger than for buy-to-let. Wrong. The good news is that the weeks that do let, if the property is managed well and is purchased in a good tourist area, will produce greater annual income than a buy-to-let rental could have achieved, even though the property may be vacant for much longer than a normal buy-to-let void.

For example a one bed apartment may rent for £400 a week in the Cotswolds to holiday makers but may only achieve £450 a month if let to a local under a buy-to-let arrangement on a 6 month AST. This means that if you rent the property for 13 weeks you have near enough the same gross income. With the buy-to-let you may see around 30% loss of income due to management, voids cost etc whilst with the holiday home let you would again see around 30% reduction in the rent received due to the higher management, cleaning and changeover costs. Therefore you can see a property in a tourist hot-spot achieving 25 weeks rental as being very profitable and it isn’t therefore surprising that some UK lets that are well run can achieve an 8-10% gross yield on purchase price compared to around 5% for many buy to lets. One investor we have known for many years has properties in the Lake District achieving 40-50 weeks a year due to it being an all year round destination ! But then you pay in capital values pro-rata for the increased rental potential.

Secondly the tax situation is great with professionally run furnished holiday homes - this follows a full review in April 2008. Capital Gains tax is now a flat 18% for all types of investment including buy to let, commercial property, shares etc. However UK furnished holiday homes are classed as a commercial business asset if let professionally (available for public rental for 140 days a year min and lettings of 7 weeks a year minimum and let at market rent and fully furnished) and could attract the special 10% entrepreneurs' tax rate - this could take the standard 18% capital gains tax rate down to just 10% on the first £1 million of profit made as an entrepreneur by selling a business, furnished holiday rental or business premises used for occupation by your business. This means that even if you are on PAYE all of your working life and have never owned a business you should be able to make up to £1 million of capital gains selling furnished holiday rental property in the future and pay 45% tax than you would as a normal buy-to-let property investor paying 18% tax. (http://www.hmrc.gov.uk/cgt/disposal.htm)

Thirdly holiday home investments can be hands-off if you give the property to a holiday company to fully manage. Sure they will charge you for this service and 30%-45% of the gross rental is typical of what you can expect to pay but you won't have to worry about marketing, cleaners and maintenance day to day.

Finally you can easily use your new holiday home investment for personal breaks on off-weeks and in gaps between paying visitors without affecting your yield - a nice bonus.

Analysts have predicted that holiday home prices in the most exclusive seaside resorts can tend to rise at more than double the UK average in periods of strong demand. Read more in the Financial Times article.

Our holiday property investment solutions include Rental Solutions™, our fully packaged management and letting solution to make the investment hands-off, making holiday property investment easy. You don't see many high yield and low deposit property investments so we can strongly recommend this type of property investment.

We source managed holiday home property for sale to our clients continuously in all of the main tourist hotspots including :

  • Cornwall
  • Devon
  • Cotswolds
  • Lake District / Cumbria
  • Derbyshire / Peak District
  • North Wales
  • Norfolk Broads
  • Yorkshire Coast
  • Southern Ireland

All of our current UK holiday home investments can be seen here.

 



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Risk Warning and Disclaimer : The price of property can go down as well as up. Historic performance should not be taken as a guarantee of future performance. Geared property investment with mortgages can increase risk of losing money as well as increasing the possible gains. Mortgage products referred to in the website can be withdrawn by the lender or have rates or other terms changed without notice and reference to any products does not imply they are certain to be available in the future. Mortgages referred to may also have certain applicant restrictions and are for indicative purposes only although reasonable endeavours have been used to ensure that they are available at the time of publication and are applicable to a significant number of our purchasers. This site is for information purposes only and nothing on this site should be taken as definitive investment advice for your particular situation without you seeking additional guidance directly from ourselves or from other finance and property professionals. Property particulars on this site do not form part of an offer or contract. The developer and Assetz for Investors Ltd, whilst endeavouring to ensure complete accuracy in these property particulars, cannot accept liability for any errors. Valuations of property or indicated rents achievable are either estimated or derived from valuations and/or comparables and can change and should not be relied upon without your own additional valuation and research, but we have carried out reasonable endeavours to achieve accurate indications for these figures. All descriptions, dimensions, areas, reference to condition and, if necessary, permissions for use and occupation and their details, are given in good faith as provided by the developer and are believed to be correct. However, these are subject to change, especially, but not wholly, relating to any property that is off-plan or not yet complete. Any intending purchaser should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to their accuracy. The onus is on each individual investor to undertake their own due diligence, enquiries and inspections. Our standard Terms and Conditions of Sale will apply. E. & O. E.

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