Lake district holidays

Are Holiday Homes a Good Investment?

The Lodges

Many people find the combination of rental income and convenient future vacations appealing. Still, it’s vital to think carefully about whether owning a holiday home is a good investment for you.

Holiday homes: 

Many of us fantasise about having a holiday home or second home that may also be a good investment.

In past generations, a holiday home may have been unoccupied for most of the year, complete with shabby furniture and a few bunks in the sleep-out. Before the advent of services, that made it easy to put holiday home to work and generate money.

Having a holiday home is no longer considered a luxury. You may put it to work for you, bringing in regular revenue or a possible profit if you opt to rent it out to a renter. You and your family may still utilise the facility at your preferred times of the year.

Why can holiday homes be a good investment?

You would be wondering that why holiday homes are a good investment? Well, below are the five major reasons, 

  • You can generate profits:

You may generate extra money by renting out your holiday home. Holiday rentals may be substantially more lucrative than longer-term rentals. A basic rule of thumb is that you may charge the same for a week of vacation rental during peak season as you can for a month of long-term rental.

  • They are expanding in popularity:

Holiday homes are projected to grow in popularity. Taking vacations in the UK – or “staycations,” as they’re known – seems to be on the rise right now. Among the causes is the Covid-19 epidemic. As a result, holiday homes’ rentals are expected to be in high demand in the future, and certain places may even face a scarcity.

  • The tenancy rights of holiday property are limited: 

Renters on holiday homes do not have the same rights as tenants on assured shorthold tenancies (ASTs). As a result, there’s minimal chance of being trapped with difficult-to-evict renters. (holiday home renters usually pay their rent ahead of time as well!)

  • The tax benefits of vacation rentals:

Holiday lease homes may qualify for significant tax incentives that conventional buy-to-let landlords are unable to access. These may have a significant impact on your property’s profitability.

It’s critical to speak with an accountant to see what tax benefits a holiday rental may provide. On the other hand, HMRC considers holiday rentals to be a company rather than a buy-to-let property. This means you may be able to claim full mortgage interest tax relief instead of the relatively modest amount that most landlords already get.

Depending on how you run your holiday rental company, you may be able to save money on Capital Gains Tax (CGT) and Inheritance Tax (IHT).

You may be able to pay Business Rates instead of Council Tax on your property. If the rateable value of your property is less than £15,000, you may be eligible for business rates relief and pay no rates at all.

  • You can use holiday homes for yourself:

You are free to utilise your vacation time as you like. Last but not least, you may utilise your holiday home for personal purposes. Many holiday home investors value this, and you may save thousands of pounds each year if you do it well.

What should you check for when buying a holiday home?

First and foremost, your holiday home should be a place where you like spending time, not merely a possible source of rental money. The amount you may charge and the final return on your investment will be determined by the location and kind of property you choose.

When you purchase a holiday home to rent, you’re hoping to benefit from either capital appreciation or rental revenue.

A consulting firm can provide professional guidance if you want to have a solid picture of your property’s earning potential. Based on their extensive knowledge of the region, price, and demand, they will walk you through purchasing a property and offer you an estimate of the income you can anticipate.