Potential Profits Prompting Property Investors To Consider Holiday Lets

The number of Brits holidaying in the UK is increasing due to the implications of the current economic stability, including the weakness of the pound and the cost of living crisis. With the increasing appeal of British-based holidays, is now the time to invest in holiday lets?

There has been an increase in property investors exploring new avenues for earning additional income, with a sustained interest in the holiday let market – a consequence of the booming popularity of staycations, this route of investment can offer attractive long-term returns and potentially high profits for investors.

Finbri, a property bridging finance broker, explains, “Holiday lets are becoming increasingly popular among Britons, due to the restrictions imposed when traveling abroad. One recent survey discovered just  13% of Brits would choose to holiday abroad over holidaying in the UK, with 63% finding less appeal in traveling abroad following the Covid-19 pandemic.

The value of the pound plummeting and less disposable income as a result of the cost-of-living crisis has increased the number of those looking to holiday in the UK.”

What Are The Benefits Of Investing In Holiday Lets?

In addition to the rental income, holidays also offer attractive tax benefits for property investors.

Some benefits of investing in holiday lets include:

»Return On Investment (ROI) –

Holiday lets offer a higher return on investment than traditional buy-to-let investments. During the busiest times of the year, a week of vacation rental income is equivalent to a month’s worth of buy-to-let income. Compared to buy-to-let landlords, vacation rental owners can generate up to 30% greater yield.

»Tax relief –

Holiday lets offer tax relief, such as capital gains tax relief, which is based on the length of time you have owned the property. Certain CGT reliefs are available when selling your furnished holiday let, including:

• Entrepreneurs relief
• Business assets disposal relief
• Business assets rollover relief

What Are The Disadvantages Of Holiday Lets?

In spite of the potential profits, especially as a result of increased demand, there are a few factors that investors need to consider before investing in holiday lets, this includes:

• Vacancy rates – During off-peak seasons, when demand is low, holiday let owners may struggle to find tenants. This means that they could be left with an empty property and no income until peak season returns.
• Seasonal income – Although holiday lets can bring in more income than traditional buy-to-let properties, the income is usually much more seasonal. Landlords of vacation rentals must also pay expenses that a long-term tenant would typically pay. such as broadband and utility bills.
• Maintenance – Holidays let owners be responsible for the maintenance and upkeep of their property, which can become costly depending on how often it is used.
• Competition – As with any investment opportunity, there’s always the chance of a large number of competitors in the market, which can make it difficult to maintain a steady demand for your property.

Where Are Some Of The Popular Tourist Destinations In The UK?

Property investors can benefit from this trend by strategically sourcing properties that are close to tourist attractions or beach resorts. This type of location is sought after by visitors and can lead to higher occupancy rates. Additionally, it allows investors to charge premium prices for their holiday lets.

Some of the more popular locations include:

1. Scottish Highlands. There are a number of tourist locations in Scotland, this includes Loch Ness, Cairngorms National Park, a castle on the Isle of Skye, Ben Nevis, and Fort William. Many fans of the film franchise Harry Potter also look to travel on the Jacobite steam train, making the Scottish Highlands one of the most popular tourist destinations in the UK.
2. Norfolk.  Tourist attractions range from adventure playgrounds, and seaside resorts including Great Yarmouth, 125 miles of man-made broads, and plenty of shopping. This allows for a perfect combination for those looking to stay in the UK, as a result, Norfolk is a popular staycation destination.
3. Pembrokeshire. Located in Wales, providing a number of trails, hidden coves, and towns – as well as Britain’s smallest city. Therefore, Pembrokeshire is known as a popular tourist destination in the UK.

Beaches remain a key component when the younger generation looks for holiday destinations with 39% sharing this view. In comparison, 69% of 55-64-year-olds considered picturesque scenery the most important factor when deciding on a holiday destination.

Where Are The Popular Locations For Holiday Lets In Particular?

Despite a number of popular destinations in the UK, many Brits look for particular holiday lets in certain locations, these include:

1. Dorset

The Jurassic Coast is one of the most popular destinations for tourists, with high demand for cottages. There are a number of locations in Dorset suitable for holiday lets, this includes Broadmayne and Pentridge.

The average revenue for a holiday let in Dorset is £12,561 annually – £3,655 more when the property has a hot tub.

2. Devon

Those who visit Devon are looking to visit the quintessential countryside, with many towns this location draws a large volume of tourists. Unlike other destinations, Devon provides a number of watersports – including surfboarding and sailing. There are a number of locations in Devon that are suitable for holiday lets, this includes Seaton and Satterleigh.

The average revenue for a holiday let in Devon is £11,606 annually – £2,039 more when the property has a hot tub.

3. South Coast

There are a number of locations along the South Coast that offer a desirable tourist location for Brits, this provides access to the New Forest and many activities. There is high demand for holiday lets in this location, with the opportunities available in locations such as Totland and Swanwick.

The average revenue for a holiday let in the South Coast is £10,502 annually – £2,659 more when the property has a hot tub.

Final Thoughts

With the demand for staycations increasing, it’s worth considering investing in holiday lets as they can offer attractive returns on investment and tax reliefs. It’s important to be aware of the risks involved and make sure you are up to date with regulations regarding holiday lets before investing.

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