Furnished Holiday Let - am I insane?
Discussion
Views welcome! I live in south Cornwall, know it inside out. The general property market is on its arse. Very little is shifting, the holiday hotspots are even worse, stuff sits around for months on end, reduction after reduction.
I’m aware of the significant headwinds facing FHL’s. Additional 5% stamp duty, double council tax (or Ltd Co for business rates), additional 2% income tax on the way, possible new EPC legislation (cottages are often below C rated), possible tourist tax etc. Hence there are more and more people trying to bail, many without luck. Your typical coastal cottage simply doesn’t appeal or work for a family etc, second home buyers have disappeared, making the addressable market small, and shrinking. Nice to stay in for a week, but to live in full time, nah.
Am I completely insane for even considering the idea? I’d manage and carry out changeovers / maintenance myself (give me something to do). Would pay cash, either buy personally or with a directors loan into a Ltd Co. The purpose would be to generate an ongoing income stream. I can’t help thinking stocks look very expensive, yet certain property seems relatively cheap, particularly if bought well from a motivated seller who wants out. Yield could be OK with good occupancy. Everything has its price, right?
I’m aware of the significant headwinds facing FHL’s. Additional 5% stamp duty, double council tax (or Ltd Co for business rates), additional 2% income tax on the way, possible new EPC legislation (cottages are often below C rated), possible tourist tax etc. Hence there are more and more people trying to bail, many without luck. Your typical coastal cottage simply doesn’t appeal or work for a family etc, second home buyers have disappeared, making the addressable market small, and shrinking. Nice to stay in for a week, but to live in full time, nah.
Am I completely insane for even considering the idea? I’d manage and carry out changeovers / maintenance myself (give me something to do). Would pay cash, either buy personally or with a directors loan into a Ltd Co. The purpose would be to generate an ongoing income stream. I can’t help thinking stocks look very expensive, yet certain property seems relatively cheap, particularly if bought well from a motivated seller who wants out. Yield could be OK with good occupancy. Everything has its price, right?
I only really know St Mawes in that neck of the woods, my ex-partner's family lived there for many years so I have spent a lot of time there at all times of the year. My view on it was that there was a lot of second home property passed down through generations, rented out for absolutely looney tunes money in the summer but desolate in winter, like a ghost town.
So, I think you'd need to factor in that the rental window is short but lucrative but you will have a lot of periods of unoccupancy.
My former in-laws had a couple of rental properties that they built as holiday lets on their property for the same reason as you, an additional income stream. However they found that the punters were such a massive pain in the arse they gave it up after two seasons. I should add that they were very wealthy and just did not really need the modest additional income these places brought them for all the related aggro.
Clientele can be very demanding (without wishing to generalise: posh home counties types expecting the moon on a stick, or foreigners expecting a 24/7 response to "emergencies" like poor wi-fi reception) so you have to deal with all of that unless employing a managing agent who will want a slice.
I think the final straw was that some punter's teenager managed to dislodge some push-fit plumbing in the upstairs loo without telling anyone, the family then checked out and basically left an open cistern fill pipe running free onto the laminate floor for 3 days until the person employed to clean the place discovered it. Massive flood to the downstairs unit, they called time on it after that.
So, I think you'd need to factor in that the rental window is short but lucrative but you will have a lot of periods of unoccupancy.
My former in-laws had a couple of rental properties that they built as holiday lets on their property for the same reason as you, an additional income stream. However they found that the punters were such a massive pain in the arse they gave it up after two seasons. I should add that they were very wealthy and just did not really need the modest additional income these places brought them for all the related aggro.
Clientele can be very demanding (without wishing to generalise: posh home counties types expecting the moon on a stick, or foreigners expecting a 24/7 response to "emergencies" like poor wi-fi reception) so you have to deal with all of that unless employing a managing agent who will want a slice.
I think the final straw was that some punter's teenager managed to dislodge some push-fit plumbing in the upstairs loo without telling anyone, the family then checked out and basically left an open cistern fill pipe running free onto the laminate floor for 3 days until the person employed to clean the place discovered it. Massive flood to the downstairs unit, they called time on it after that.
If you cant get it business rated, then it will be a minimum of £3500 a year for council tax. But you probably know that.
Loads of ex holiday lets for sale down there, as the double council tax is killing it and as you say most of these are property's folk don't want to live in.
I may be selling a lodge near Camelford later this year. If you are interested pm me.
Loads of ex holiday lets for sale down there, as the double council tax is killing it and as you say most of these are property's folk don't want to live in.
I may be selling a lodge near Camelford later this year. If you are interested pm me.
We have a furnished holiday let in North Devon its really easy to lose money, you have to go in with your eyes open
1. You never get the volume of bookings the agencies say you will. You will get booked over the summer and 60% change of bookings in the other key holidays,
2. Housekeeping and linen are expensive
3. Insurance is expensive, our 3 bed property costs £600 pa
4. If you don't take dogs you severely limit the market
5. To get zero business rates you need a large number of bookings and in bad years you won't hit the target.
6. Lots of councils charge at least 2 x rates for holiday lets not registered as a business, if its a business you have to find your own rubbish collector
7. Lots of regs on fire safety, smoke alarms, fire doors
8. Some guests will damage the property
9. Some guests are completely unreasonable - eg full refund demanded because there was a single fly in the property (rural area in summer)
10. Agency fees are expensive
11. Some guests take the piss with heating and water. We had one guest who used 10 x the monthly water volume in 1 week, and another guest who ran the heating at 24 degrees 24/7 in all rooms even though they were only using two bedrooms
12. One couple used every bed and every bathroom in the property in a 3 day stay
13. One guest managed to snap a new bedframe, another managed to smash the glass on the logburner
14. One couple left their sex toys and accessories
15. Guests rarely out te rubbish out on collection day
My wife works for Sykes - the issues they have to deal with make the above look minor.
We are selling our place because the hassle is huge and we don't get to use it enough ourselves.
1. You never get the volume of bookings the agencies say you will. You will get booked over the summer and 60% change of bookings in the other key holidays,
2. Housekeeping and linen are expensive
3. Insurance is expensive, our 3 bed property costs £600 pa
4. If you don't take dogs you severely limit the market
5. To get zero business rates you need a large number of bookings and in bad years you won't hit the target.
6. Lots of councils charge at least 2 x rates for holiday lets not registered as a business, if its a business you have to find your own rubbish collector
7. Lots of regs on fire safety, smoke alarms, fire doors
8. Some guests will damage the property
9. Some guests are completely unreasonable - eg full refund demanded because there was a single fly in the property (rural area in summer)
10. Agency fees are expensive
11. Some guests take the piss with heating and water. We had one guest who used 10 x the monthly water volume in 1 week, and another guest who ran the heating at 24 degrees 24/7 in all rooms even though they were only using two bedrooms
12. One couple used every bed and every bathroom in the property in a 3 day stay
13. One guest managed to snap a new bedframe, another managed to smash the glass on the logburner
14. One couple left their sex toys and accessories
15. Guests rarely out te rubbish out on collection day
My wife works for Sykes - the issues they have to deal with make the above look minor.
We are selling our place because the hassle is huge and we don't get to use it enough ourselves.
I have a FHL on the Isle of Skye which has been running since 2022. I manage the property and do changeovers myself which means I m able to spot if something is broken/needing upgraded so the property is always in tip top condition. I ve only ever used Airbnb to market the property but Skye is a bit of a hotspot for tourists so property fills up regardless during tourist season.
My busy season is April till October (plus Christmas/New Year) so I need to factor in that for almost 5 months there s no money coming in but still money going out. There are FHL rules that mean you are liable for business rates but as my property is small I m eligible for Small Business Bonus Scheme and get 100% discount so pay no rates. There may be something similar in England.
I ve found most guests are there to enjoy a well earned holiday not to deliberately trash your property. Yes accidents happen but, fingers crossed, I ve not encountered anything major to date. My FHL only has 2 bedrooms and tends to attract couples or families so no large groups. I also do a minimum of a 5 night stay which I think helps the type of guests who book, other hosts locally who offer 1/2 night stays sometimes attract those not always willing to follow the house rules! Despite being a dog owner I don t allow dogs (just extra cleaning I d imagine) and it doesn t appear to have any effect on bookings.
I ve set up my FHL like I would expect if I was paying money to stay there, spotlessly clean, enough toilet rolls/dishwasher tabs for the duration of the stay, welcome basket, informative visitor pack etc etc. Generally my interaction with guests is minimal as I have a lockbox and just leave them to it. Every year there s always a few guests who need their hands held in order to work the hob/woodburner or whatever. I once got a message asking me what they should do that day as it was raining!!
Generally though I enjoy what I do although I spend a considerable amount of time getting stains out of white towels and go through a ton of Vanish !
If you want to know anything else please ask.
Edit to add … in Scotland we must have a Short Term Let licence and I’d guess this will probably come into effect in England too.
My busy season is April till October (plus Christmas/New Year) so I need to factor in that for almost 5 months there s no money coming in but still money going out. There are FHL rules that mean you are liable for business rates but as my property is small I m eligible for Small Business Bonus Scheme and get 100% discount so pay no rates. There may be something similar in England.
I ve found most guests are there to enjoy a well earned holiday not to deliberately trash your property. Yes accidents happen but, fingers crossed, I ve not encountered anything major to date. My FHL only has 2 bedrooms and tends to attract couples or families so no large groups. I also do a minimum of a 5 night stay which I think helps the type of guests who book, other hosts locally who offer 1/2 night stays sometimes attract those not always willing to follow the house rules! Despite being a dog owner I don t allow dogs (just extra cleaning I d imagine) and it doesn t appear to have any effect on bookings.
I ve set up my FHL like I would expect if I was paying money to stay there, spotlessly clean, enough toilet rolls/dishwasher tabs for the duration of the stay, welcome basket, informative visitor pack etc etc. Generally my interaction with guests is minimal as I have a lockbox and just leave them to it. Every year there s always a few guests who need their hands held in order to work the hob/woodburner or whatever. I once got a message asking me what they should do that day as it was raining!!
Generally though I enjoy what I do although I spend a considerable amount of time getting stains out of white towels and go through a ton of Vanish !
If you want to know anything else please ask.
Edit to add … in Scotland we must have a Short Term Let licence and I’d guess this will probably come into effect in England too.
Edited by Catz on Monday 19th January 17:10
Fantastic insight and info, many thanks. I had supper with a friend last night who said ‘don’t even think about it’! I am a landlord so aware of the general hassle but have not owned a holiday let. It seems the agro experienced by general landlords is amplified many times over! That’s not to say there couldn’t be opportunity, but a lot of thought is required. Comes down to buying the right thing, but has to be at a fire sale price to offset the hostile environment and increased risks.
The more I look in to this, the more concerned I am about changes to EPC legislation. C rated by 2030 looks on the cards for any property that is let, including holiday lets. To get an old stone harbourside cottage from say E to C is going to be an expensive challenge. Sale prices are going to have to reflect this.
troika said:
The more I look in to this, the more concerned I am about changes to EPC legislation. C rated by 2030 looks on the cards for any property that is let, including holiday lets. To get an old stone harbourside cottage from say E to C is going to be an expensive challenge. Sale prices are going to have to reflect this.
One of the reasons for us selling. Ours is a barn conversion, some walls are 600 years old. To het to EPC D we have been told we will need to install a wind turbine.....blueg33 said:
One of the reasons for us selling. Ours is a barn conversion, some walls are 600 years old. To het to EPC D we have been told we will need to install a wind turbine.....
What will happen to all the old fishmans cottages etc? They won’t get to a C level, so cannot be let, even for holiday usage. Very few locals want to live in them because they are hopelessly unsuitable for modern living. All I can see is second homes which will remain empty most of the year. Tourism will be slaughtered! Invest your money elsewhere! I spent over a decade running our own Holiday business down there and I'm still pinching myself that we got out when we did. After COVID it was boom time but you just had a distinct feeling that once things returned to normal the absolute a*se was going to fall out of UK holidays and it has done exactly that. People were greedy after COVID and have priced themsleves out, it's very difficult to just slash your prices but some of the discounts I've seen are incredible.
For rental holiday lets the market is absolutely flooded in Cornwall, and the property market has plummeted since I sold my place 18 months ago. Contrast that with where I moved to in the midlands where my new property has gone up nearly 14% in the last 18 months. The new rules around being a landlord are enough to put anyone off but in Cornwall you now have the added council tax charges for holiday homes etc. as you've mentioned. Just looking at Holiday Cottages website reveals how tough the competition is now.
For rental holiday lets the market is absolutely flooded in Cornwall, and the property market has plummeted since I sold my place 18 months ago. Contrast that with where I moved to in the midlands where my new property has gone up nearly 14% in the last 18 months. The new rules around being a landlord are enough to put anyone off but in Cornwall you now have the added council tax charges for holiday homes etc. as you've mentioned. Just looking at Holiday Cottages website reveals how tough the competition is now.
troika said:
blueg33 said:
One of the reasons for us selling. Ours is a barn conversion, some walls are 600 years old. To het to EPC D we have been told we will need to install a wind turbine.....
What will happen to all the old fishmans cottages etc? They won t get to a C level, so cannot be let, even for holiday usage. Very few locals want to live in them because they are hopelessly unsuitable for modern living. All I can see is second homes which will remain empty most of the year. Tourism will be slaughtered! There are loads of fishermans cottages for sale in Appledore, the locals don't want them as they are not suitable for modern day to day living, no parking, no gardens, tiny rooms, expensive to heat and maintain etc
The money from holiday let owners has ensured that these are well maintained and look great, but I can see that falling away pretty quickly.
Regbuser said:
blueg33 said:
We have a furnished holiday let in North Devon its really easy to lose money, you have to go in with your eyes open
14. One couple left their sex toys and accessories
Oh yeah, sorry about that 14. One couple left their sex toys and accessories
troika said:
otolith said:
I guess all those people whining about too many tourists will enjoy living in run-down ghost towns.
Yep, with very little employment.otolith said:
troika said:
otolith said:
I guess all those people whining about too many tourists will enjoy living in run-down ghost towns.
Yep, with very little employment.blueg33 said:
Regbuser said:
blueg33 said:
We have a furnished holiday let in North Devon its really easy to lose money, you have to go in with your eyes open
14. One couple left their sex toys and accessories
Oh yeah, sorry about that 14. One couple left their sex toys and accessories
troika said:
The more I look in to this, the more concerned I am about changes to EPC legislation. C rated by 2030 looks on the cards for any property that is let, including holiday lets. To get an old stone harbourside cottage from say E to C is going to be an expensive challenge. Sale prices are going to have to reflect this.
I guess the answer is to buy something already rated C, which would have cost implications.I understand the reasoning behind private landlords needing to have property rated C as it’s the tenants who need to pay the heating bills etc. With holiday lets it has no effect on the holiday makers as it’s the owners paying the bills. I’d imagine in the future there would need to be an “all improvements made exemption” like there is at the moment for rented property rated lower than E. But who knows what may happen?
For context my old, stone, croft house was ripped apart then put back together again with new roof, insulation, new heating system etc but it’s still 1 point away from being rated C (1 very irritating point!!!). In order to get that 1 point I’d have to change to Air Source heating or install solar panels. Both far too costly to be viable so if it gets to that point I’ll be selling.
Slightly off topic but I believe the Scottish govt have plans in place for all owner occupiers to be rated C by 2033. How they hope to enforce this is beyond me, unless they’re going to be handing out free money to millions of home owners.
Catz said:
I guess the answer is to buy something already rated C, which would have cost implications.
I understand the reasoning behind private landlords needing to have property rated C as it s the tenants who need to pay the heating bills etc. With holiday lets it has no effect on the holiday makers as it s the owners paying the bills. I d imagine in the future there would need to be an all improvements made exemption like there is at the moment for rented property rated lower than E. But who knows what may happen?
For context my old, stone, croft house was ripped apart then put back together again with new roof, insulation, new heating system etc but it s still 1 point away from being rated C (1 very irritating point!!!). In order to get that 1 point I d have to change to Air Source heating or install solar panels. Both far too costly to be viable so if it gets to that point I ll be selling.
Slightly off topic but I believe the Scottish govt have plans in place for all owner occupiers to be rated C by 2033. How they hope to enforce this is beyond me, unless they re going to be handing out free money to millions of home owners.
The problem is the character cottages which people like to holiday in often have very low EPC’s, as you know! Solid stone walls, heated by a log burner / electric / oil. If these become illegal to let to anyone, short or long term, that’s going to have a huge impact on their resale addressable market and therefore value. I understand the reasoning behind private landlords needing to have property rated C as it s the tenants who need to pay the heating bills etc. With holiday lets it has no effect on the holiday makers as it s the owners paying the bills. I d imagine in the future there would need to be an all improvements made exemption like there is at the moment for rented property rated lower than E. But who knows what may happen?
For context my old, stone, croft house was ripped apart then put back together again with new roof, insulation, new heating system etc but it s still 1 point away from being rated C (1 very irritating point!!!). In order to get that 1 point I d have to change to Air Source heating or install solar panels. Both far too costly to be viable so if it gets to that point I ll be selling.
Slightly off topic but I believe the Scottish govt have plans in place for all owner occupiers to be rated C by 2033. How they hope to enforce this is beyond me, unless they re going to be handing out free money to millions of home owners.
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