There are many investment opportunities available for those looking to make some money, particularly in the property sector. However, whilst much of the focus is often placed on long-term residential properties, holiday homes can offer unique benefits. Considering that “staycations” have skyrocketed in popularity in recent years, mainly due to the effects of the pandemic and general financial uncertainty, it has never been a better time to invest in a holiday home. The number of people choosing to holiday within the UK is growing and it’s likely this trend will continue.
With this in mind, what are the advantages to investing within this type of property?
Growing Market
Research from this year has shown that a whopping 73% of adults are more likely to choose a staycation, rather than holiday abroad. This rise in popularity of holidaying within the UK began during the pandemic, for practical reasons. However, the fact that it’s continuing, in a post-pandemic world, shows that the market is expanding. This is probably due to a number of different factors. Of course, the cost-of-living crisis is having an effect on people’s wallets and therefore holidaying abroad may be too expensive. It could also be that those people who had a taste of staycations during the pandemic have been converted to this type of holiday. Either way, the market is continually growing and therefore providing attractive investment opportunities.
Short Term vs Long Term
When we think of buy-to-let properties, we often think of landlords offering long-term lets to residents. However, there are many benefits to short-term buy to lets, such as holiday homes. One of the main advantages is the return on your investment. In general, you can charge much more for a holiday let, compared to a standard residential letting. Often, you can charge more for one week in a holiday home, than an entire month in a residential property.
Another factor is that of responsibility. When you’re letting to long-term residents, there are expectations from you as a landlord. Those who utilise a holiday let, don’t enjoy the same tenancy rights as long-term residents and therefore less responsibility is placed on the landlord.
Taxes
Another difference between standard buy to let properties and holiday lets is the opportunity for tax breaks. This is because HMRC categorise holiday lets as a business, rather than a buy to let scheme. This means you can claim tax relief that isn’t available to landlords, for example mortgage interest tax relief. There can also be tax relief in the form of running expenses, maintenance costs and potentially even capital gains tax and inheritance tax.
Holidays
One of the main benefits of investing within a holiday home is that you can also use it as your own holiday home. Therefore, not only will you see a return on your investment but you also have a location that you can escape to, whenever you fancy a break. Those that continue to utilise their holiday home over multiple years will begin to see a significant saving. This combination of both using this property and renting it out, means you will be both saving money and making money, at the same time.
Downsides
There are many advantages to investing in a holiday home but it’s worth noting that there are some downsides to consider. One of the main considerations is that holiday homes tend to be relatively expensive and therefore you will need to invest a lot more money at the beginning of the process. Also, you will be the one who pays the utility bills and council tax, which is another cost to keep in mind. Due to the nature of holidays lets, there’s likely to be more wear and tear when compared with long-term residential lets. Again, this is another potential cost to keep in mind when deciding whether to take the plunge.
Investing within a holiday home can be expensive and incur ongoing costs but the potential for a return on this investment is substantial. For those who have done their research and have the money to spend, a holiday home could be the perfect investment.
Properties are often the most valuable asset that people own and therefore it’s important to protect them. The team at Salhan Accountants offer an expert asset protection service, for those looking to safeguard their future.
