Take advice before buying a ‘staycation’ investment
Last updated at 12:17, Monday, 19 November 2012
Millions of families have holidayed in Britain over the last few years in the belief that a “staycation” is cheaper than going overseas.
Whether it is actually cheaper or not is a matter for debate, but there can be no doubt that hiring a holiday cottage for a week or two in the UK is a popular choice.
The demand for holiday homes has seen a lot of people enter the holiday let market. There is money to be made but, as with all investments, there is the potential to get it wrong too. If you’re thinking about buying a holiday let there are a few things you should consider.
Location is a key factor. Areas with an all year round appeal, such as the Lake District, do benefit from a much longer letting season which gives you the opportunity to generate significantly more income than could be obtained by letting your property on a six monthly tenancy.
High quality properties in the best locations in the Lake District can obtain bookings for most weeks of the year.
Convenient parking, good views, a garden with outside furniture and a barbeque, and a shop and pub within walking distance are all attractive features for people looking to rent a holiday property.
Inside the property should be well equipped with a dishwasher, washing machine, television and CD/DVD player. Furnishings need to be clean and comfortable.
For family size properties an additional bathroom could be an important factor. Most people would expect the property to be at least as comfortable as their own home.
Once you have purchased your property you will have to decide whether you obtain bookings through a holiday booking agency, paying them around 20 per cent of the rental income, or whether you advertise the property yourself and manage your own bookings. Arrangements also need to be made to ensure that the property can be cleaned, and the laundry done between lettings and that someone is available to deal with any essential maintenance or breakdowns.
If you need to borrow money to purchase your property your lender will need to be reassured that your forecast income for the property is realistic and sufficient after costs to cover your mortgage payments.
Buying an existing holiday let property is the safest way into this business in which case you should be looking for records of past bookings to substantiate the income you would expect to receive.
Typically lenders will be looking for letting income to be 125 per cent of the interest on your loan.
A deposit of at least 25 per cent is typical at present and the lender will also require an arrangement fee.
You will also have to pay for a valuation of the property.
- Visit the website at www.cumberlandbusiness.co.uk. This article should not be relied on when making investment decisions. Always seek financial advice. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
First published at 08:51, Friday, 16 November 2012
Published by http://www.cumberlandnews.co.uk