16 April 2019

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Is a Holiday Home a Good Investment?

"On average, it has been found that you can make around £18,000 annually through people booking to stay in the rental. But there are massive factors that can impact how much you are able to charge people, and other things like extras..."

A holiday home
A holiday home (Image via Pixabay)
If you are looking to generate a second income, as many people are, then buying a holiday home could be a good option for you. It needs to be seen as more of an investment, that’s for sure, but it can be a good income generator and help to pay for itself. Plus, it means that there will always be somewhere for you to travel to, as well as being able to rent out to others. When it comes to owning a second home, or a holiday home, then you may be left wondering about the practicalities of it all and thinking about realistically, how much money you could earn.
If that sounds like you, intrigued but unsure, then you’ve come to the right place. Here are some answers to help guide you in making a holiday home decision, and looking at realistically what kind of money you could be looking at.

What are the best options for raising capital for a holiday home?

The majority of people are likely to choose a mortgage to help with the purchase of a holiday home, simply because a lot of people are unlikely to just have several thousands of pounds just hanging around. Holiday home mortgages tend to differ slightly from standard residential mortgages so they could definitely be worth looking into. There are, of course, options like equity release and so on.

Why Do Homeowners Let out their Homes?

Because there have been some changing tax rules around buy-to-let properties that have put people looking to invest off, short-term holiday homes to rent are becoming an increasingly attractive option, especially when compared to a long-term let option. And with sites like Airbnb on the rise, it does help to make it easier to list your property and get a second home to rent out.

But the thought of running a holiday home may sound quite stressful and a little too much like hard work. The good news is that you don’t have to do it yourself. Of course, there will be costs associated with it, but you could use a management team to run it for you.

What is the Expected Return on Investment (ROI)?

At the end of the day, the decision to get a second property can be quite a big one, so naturally, checking that you will be able to make money from it is what you will be wanting to do. How good of an investment is a holiday home? On average, it has been found that you can make around £18,000 annually through people booking to stay in the rental. But there are massive factors that can impact how much you are able to charge people, and other things like extras. The things that can make a difference, and help you to charge more (or less) are:

A summer house
A summer house (image via Pixabay)

  • The location of the property. There will be people looking for rentals in all sorts of locations. But you can make a lot more money through a central city location, as well as one that is close to certain tourist spots like the beach. So if you’re on the lookout for a new property launch 2019, then look out for the ones in the best locations (whether that is suited for tourist or business people is up to you).
  • On a similar note, the type of guests that you want to have will play a role in what you can charge. If you want to keep things pretty basic and just have families with children there, then you will make money, but perhaps not as much as a couple or business group that are looking for something more luxurious. So think carefully about the pros and cons of the guests that you’d want to stay in the home.
  • The features of the property are going to play a role in what money you can make. A property abroad with a swimming pool is going to be able to charge more than the house next door to it that doesn’t have one. So what features appeal, and what features would your ideal guests want?
  • The number of rooms in the home is an obvious one, but an important thing to think about nonetheless. You can charge more generally, in a large home compared to a small one bedroomed one.

Maximise Your Income

When you’ve bought your holiday home, making sure that it doesn’t cost you more than you can make from it is going to be one of the main goals. So you will be looking to make a good income from it. There are some trends that can certainly help to give your revenue a boost.

There are things, as mentioned above, that can help your income to be higher, by the things that your home has. If there is a pool or a hot tub, then research shows that it would be likely to earn more than half of what a home without could earn. So although there may be an upfront cost for those kinds of thing, it can help you to earn more in the long run. Small things like making sure that you have wifi is going to add extra cash too. If there is a choice between somewhere with wifi that costs a little extra compared to somewhere without, a lot of people are going to choose the former option.

Home comforts are also something that is attractive to travellers when they’re looking for somewhere to stay. That could mean providing a few bits and pieces in a welcome pack, having things that they’d need like highchairs, as well as offering a home that is pet-friendly, can all be good ideas.

If you are able to work out the finances and put a plan in place, then a holiday rental could be a great investment for your future, as well as something that you could do for work if you’re able to take over the management of it all by yourself. It just takes a leap; finding the right property is the first step, and then you can go from there.

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