Having your own holiday let can be easier than you think. And there’s no better time or place. Staycations are on the rise and the Lake District is the most visited national park in the UK with 15.8 million visitors annually.
We spoke to one of the experts, Grant Seaton, senior business lending manager at Cumberland Building Society.
A holiday let can be an excellent source of income. You will want to consider whether your priority is rental income, or capital gain when you sell the property again. But, in fact, in the Lakes you are likely to benefit from both, says Grant.
The Lake District is one of the best places for holiday lets in the country, says Grant. ‘Looking at it from a business perspective you can be looking at quite a high yield of return of income versus the value of the property,’ he says.
Also, the Lake District is attractive to visitors year-round, and not just summertime.
Even within the Lake District, it is important to research where you will buy. ‘Don’t let your heart rule your head too much. Look for somewhere that will make a good business case,’ says Grant.
‘You will pay more in the purchase price in honeypot areas that have high occupancy, so it’s worth also researching up and coming areas in the Lakes.
Undiscovered areas can become popular, like Eskdale which I think is somewhere people are starting to go to and keep going back.
Not everyone wants the hustle and bustle of Keswick or Ambleside. Some like seclusion.’
Working out your costs is a must – before you fall head over heels for that cute Lakes cottage.
Grant says you will be typically looking at a *25 per cent deposit on a holiday let mortgage and there is a significant stamp duty which is three per cent on top of the normal tax band.
Also, bear in mind costs will differ if you buy an existing holiday let business or a building that was previously a residential property.
‘We would ask you to speak to a representative of a letting agency like Lakelovers as part of working out your costs,’ says Grant. ‘A letting agent will be able to tell you what needs to be done to the building to bring it up to scratch.’
There’s some good news on tax. There are capital allowances which you can claim for work undertaken to make the building more suitable or attractive to holidaymakers, and also ‘allowable expenses’ which can be offset against revenue, for things like utility bills, maintenance, interest on loans for the property or letting agency fees.
You’re going to need one! What pricing and occupancy rate can you expect?
‘Make sure you have robust financial figures so that you know it will be profitable,’ says Grant. ‘For example, you need to consider that probably a high amount will need to go into maintenance and repairs because it has to be looking its best all the time. It’s a different beast compared to maintaining your own home.’
Grant believes everyone should draw up short, medium and long term business plans including possibly an exit strategy.
‘Have goals for income,’ he says. ‘And consider, is the plan to run for five or 10 years and then sell?’
Or perhaps you want to buy with retirement in mind. Some make this their long-term aim – retiring to their holiday let when they are ready, making a sound business also deliver on a personal life goal.
Also, consider how you are going to separate yourself from the competition – will you make sure visitors are greeted by a welcome card and a bottle of wine, and find a handy cupboard stocked with spare wellies?
‘Little touches like this can make sure people keep coming back,’ says Grant.
Get the right professionals on your side
You will almost certainly want a good letting agency, an accountant and a lender all with experience in the field.
‘The letting agent is dealing with tens and hundreds of holiday lets and they understand what works. Those customers are constantly telling them what they want – so letting agents are the knowledge bank,’ says Grant.
‘And choose a lender that is well versed in the sector. We aren’t just there to lend money, but we are also a sounding board to go forward and to support you if you a looking to grow the business,’ he says.
‘At The Cumberland, we are always open to people coming to talk to us.’
Whether you already own a holiday let cottage or are at the early stage of viewing properties, Lakelovers can help and we’d love to hear from you to chat through your individual needs: Windermere – 015394 88855 | Keswick – 017687 44122 | [email protected].
Alternatively, find out more about our services by downloading our Lakelovers Property Management Services Brochure by clicking on the following link: letting your cottages with Lakelovers.
*As of 04/09/2019 The Cumberland’s minimum deposit for holiday let mortgages is 25%