Reading Time: 6 mins
Inherited a property you don’t know what to do with? Second home that sits gathering dust? Time to make money by renting out your holiday home!
If you are lucky enough to own a holiday home, it could become more of a financial burden than a luxury. If this is the case, check out our ways to cash in on that second abode.
- Why would you rent out your holiday home?
- Is your home suitable for holiday letting?
- How much money can you make?
- Expert advice
Personally, we think it’s a brilli-rent idea.
Sarah Woods is the founder of Mulberry Cottages, a boutique holiday lettings agency that, among other things, works to match homeowners and guests together for the creation of luxury self-catering holidays.
She explained to us the advantages of renting out your holiday home over long-term letting, an arrangement that grants you helpful tax benefits and allows you to use it as a holiday home for yourself.
“Holiday lettings are counted as a business for tax purposes and as such are able to take advantage of tax breaks not able to be claimed from a traditional property investment. In recent years holiday lettings have seen real benefits including offsetting a lot of the initial costs, furnishings, mortgage interest and you may not even have to pay council tax. Lastly profits could be put towards pension contributions which bring other tax advantages and if you decide to sell there is also the scope to reduce capital gains to a rate as low as 10%, whereas typical residential sales attract capital gains at the higher rate of 28%.”
However, these tax advantages are only applicable for properties registered as an FHL or Furnished Holiday Let. Qualifying as an FHL is fairly easy; among other things, the property must:
- Contain furniture for “normal occupation” – if you are not normal, then research may be in order.
- Be within the UK or EEA (excluding the Isle of Man or Channel Islands).
- Be available for letting at least 210 days of the year, and booked for at least 105 of these days.
- Let your property with the intent of earning a profit.
You can read more about the various terms and conditions on this link here.
Keep it as a holiday home
After all your hard work getting the house together for your guests, it’s only fair that you have a holiday too!
Besides, staying in your property for a significant length of time will help you understand the experience of your guests.
- How is the wifi and/or phone signal?
- Is there a tripping hazard in the garden?
- Does the heating sometimes turn itself off in the middle of the night?
- Do you need directions to the nearest supermarket?
Of course, if you live here on a regular basis you may not notice or may have already dealt with such concerns. For those who have never lived in their property properly, taking a holiday could be an invaluable piece of research.
Now that’s the kind of working holiday we all dream about.
As every business student and watcher of The Apprentice knows, the most important thing to think about is:
- And location!
For long-term tenants, the distance from home to school or employment is usually the most important consideration, as well as easy access to the nearest town.
Holidaymakers, however, often want an escape from the trivialities and congestion of everyday life, and are looking for somewhere undisturbed and beautiful.
On the other hand, tourists going to honeypot locations like Devon or Cornwall might want to be offered something more intimate and personal than a generic hotel experience.
Both holiday and long-term letting are viable options, but the location of your property is of vital importance in determining which avenue of business to pursue.
The benefits we discuss below has made renting out your holiday home a very popular option, and as a result the market is overflowing. In order to be noticed by prospective guests, you must be conspicuous.
“Guests want aspirational properties where they can escape the everyday, they want somewhere interesting but comfortable, giving them a wonderful experience. We find that our properties with outstanding and unusual designs are the most popular.”
Whether your house is modern, retro, cute, or imposing, the property agents of Mulberry Cottages offer advice on how to best bring out what makes your holiday home unique.
This is then marketed using the services of a professional photographer, to capture the beauty of your home as closely as possible.
When people first consider letting a house, the obvious option is usually long-term letting, where people stay for months or years at a time. This definitely has its advantages, but may actually garner you less income than holiday letting.
“Holiday letting of a second property is an income that can often be overlooked but our owners are seeing a great return on investment. For example, a Mulberry Cottages 1-bedroom cottage in rural Sussex earned £20,500 in the past year, it would have achieved £8,200 net as a long term rental.”
Staycations are becoming ever more popular as UK citizens turn to exploring their own country rather than more expensive foreign shores; this is the perfect time to begin renting out your holiday home. The money that families save on flights also encourages them to splash out on the other aspects of their holiday, and as such are willing to pay a higher price for one week than a regular tenant might do.
Do you have anything extra – or could you install anything extra – to draw more attention?
As global warming gives us long hot summers of glorious sunshine (sorry icebergs), all anyone wants is a swimming pool and a cold drink. Sadly, there is rarely room for a swimming pool in one’s back garden. So, a holiday home boasting even a small pool is likely to see a significant increase in bookings.
Alternatively, a hot tub is a favourite for the rest of the year, and much cheaper to install.
Less obvious (or more obvious, depending how you see it) features can also be included in your marketing, such as:
- Wifi access
- Ensuite bedrooms
The basics should also be carefully considered. For example, Sarah suggests that high-quality beds are an essential. Guests who did not have happy sleep will not be happy guests, and might leave irate reviews on TripAdviser.
Unfortunately, the boring bit is once again the most important:
- Holiday cottage insurance including public liability – necessary in case you unwittingly host a wild rave and all your crockery ends up as smashed as the occupants.
- Fire Risk Assessment – needs to be carried out and the details of fire exits placed in a Welcome Folder.
It’s also often appreciated when this Welcome Folder is supplemented with local knowledge and helpful information. You could include:
- Telephone numbers of the local taxi service, a nearby takeaway, the hospital, and your own contact details (just in case)
- Directions to the beach, the pub, the supermarket
- Hidden gems like local natural wonders, quaint restaurants, sites of historical interest
The personal touch
The indication that someone cares is what will bring your guests back again and again. Make the house look inviting for their first arrival, with the rooms bright, clean and warm.
Try leaving them a welcome hamper of local produce or a handmade souvenir. Or, pop in yourself to show them around. It will cost you hardly anything, and as shoppers of Tesco will know – every little helps!
Ask your money-making questions
The Magpie community is full of savvy money savers and makers – and now’s your chance to ask your burning questions!
The new MoneyMagpie Messageboard brings together the Magpie community, MoneyMagpie team, and vetted experts to make sure your essential money-making questions get answered.
Take a look here and register to post a new thread or reply.