Should you buy a holiday let?

When considering life as a landlord, buy-to-let beginners immediately focus on the value and income that can be generated by purchasing and letting residential property. With rental properties in greater demand than ever – a trend that’s expected to continue throughout 2023 due to the higher mortgage rates and rising cost of living – the advantages of becoming a buy-to-let landlord right now are for all to see.

There are several challenges that go hand-in-hand with being a UK landlord, keeping your buy-to-let property tenanted being just one of them. Looking elsewhere for buy-to-let opportunities however could provide a fitting solution, especially as UK staycations remain a popular choice…

The holiday let market is booming

The number of holiday let mortgage options has doubled since autumn 2022, with the holiday let market booming as a result, and more and more finance products becoming accessible to would-be or experienced landlords.

As Rachel Springall from Moneyfacts details, current market conditions and longer running trends set during the Covid-19 pandemic could mean blossoming businesses for holiday let landlords:

“Due to the pandemic, there was a huge demand for UK-based holidays, so BTL investors could have seen the potential to dip into holiday lets. As the holiday aspirations of consumers change, demand for UK holidays could fall, but at the same time, the country is facing a cost-of-living crisis which may keep them interested in a more cost-effective UK break.”

According to the same expert, there are now over 400 mortgage products that specifically finance holiday lets, compared with the 173 mortgages available in October last year.

The benefits of becoming a holiday let landlord

The greater range of holiday let mortgages means more and more landlords are coming into the market in search of fast profits and steady incomes. The holiday let market represents an attractive opportunity, with the cost of living crisis resulting in many holidaymakers searching for self-catering accommodation on home turf.

This demand is not expected to fall as the need for a cost effective, UK-based break continues to be a reality for solo travellers, couples, families and friendship groups.

The drawbacks of letting a holiday home

As with the residential buy-to-let market, there are several challenges that you will have to overcome as a holiday let landlord.

While the cost of living crisis will see the best, most affordably priced or most ideally located holiday accommodation in demand, it will also put a strain on a landlord’s personal and professional finances. As a result, landlords may dip into savings and holiday let profits to account for shortfalls.

The recently introduced rules regarding how holiday lets are qualified also makes for essential reading for any would-be holiday let landlord. Holiday accommodation must now be rented for a minimum of 70 days and available for rental for at least 140 days annually to qualify as a holiday let and receive that all-important business rates relief.

Exploring the holiday let market

With increased availability of holiday let mortgages comes a heightened level of competition among buy-to-let purchasers.

When searching for the perfect property with plenty of holiday home potential, research into the property, the surrounding area, and its amenities and appeal is crucial to success. Deciphering how you’ll market the property and determining the cost of listing services are other musts for remedying concerns about letting exposure and seasonal dips.

Thinking of growing your portfolio with a holiday let? Speak to our experts today to discuss your holiday let mortgage options and your next steps.