Residential versus Holiday Lets quandry

Werdnal

Apologies, this may be a long post!

I own a 1 bed flat, which I have let on a residential basis since 2000. In 2010, it had a major flood, resulting in costly repairs (its in an EA red zone and flood insurance has a very high excess, so hardly worth claiming and I am conscious to keep the insurance going and not risk a refusal/withdrawal of cover by claiming too often!). Just before Christmas, it flooded again, this time the tenant understandably has had enough, and moved out, and I am faced with another bill to decorate, refloor and refurbish it all again.

I always thought it would be difficult to use the flat as a holiday let, but talking with the Freeholder over the weekend (he also has a flat in the building which has been flooded twice in 2 years), we are looking at all options - obviously selling at the moment is likely to be a no-go, so he is wondering about letting on a holiday basis, say Feb-October, and leaving it empty over the winter months when the flood risk is higher. Therefore he would have no objection to my doing the same, and infact we could compliment each other as people wanting larger accommodation for their holiday could rent both adjoining flats for their family.

So, I have been looking into the cost implications and wonder if anyone has any advice. My flat is not mortgaged, so no issues there. I would need contents and PL insurance - had a quote online last night for less than £150/annum which I thought quite reasonable. I would have to change from CT to Business Rates - another flat nearby is already holiday let, and having done some research, their BR is £1350/annum, for a considerably larger property - 3 bed/sleeps 6-8, so I am guessing my BR would be £800'ish at the outside. There is also a small business exemption available at the moment, which could mean free BR until March 2014.

I would need to pay for TV licence - £145.50, PAT testing - I am estimating <£50 as some charge per item and some per property, might even reduce if me and the other LL can share the test.

Obviously we would then have water and power (no gas), on top. Wondering about a key/coin meter for power, giving a small balance for the start of the week, and clients can top up as they go. Water is metered with a drainage/sewerage charge on top, which will be mine to pay.

Then we have the currently unquantifyable costs - advertising/website, changovers (may do this myself but property is 25 mile round trip away, so might be able to employ someone locally to clean/change linen etc), linen/towel cleaning, breakages/repairs etc - anything I've forgotten?

I also need to furnish and equip initially, but as it will only sleep 2, this won't be a huge outlay.

I think it will appeal for a holiday let, mainline rail station less than 10 minutes level walk and has its own private off road parking for anyone driving. Its a lovely location, in a very historical town setting in the South West, with several good pubs and restaurants. Convenient for the coast, country walking and lots of major attractions.

Working on an estimated letting season of 26 weeks max, and a minimum charge of £200/week low season (obviously increasing through the peak months), I have calculated rental income of £5,200 at the lowest rate - however, that is assuming 100% occupancy which is unlikely in the first year without any repeat business/customer base to rely on. Then have to take out the already estimated costs above (should clear £4K'ish), then the unknown costs of marketing, running and maintaining, so I am looking at perhaps £3-3,500 per annum - bearing in mind this is the minimum rental tariff, as I am hoping peak season will top £395/week.

My current residential letting rate is £400/month, plus have no utilities/CT, TV license or contents insurance. However, I don't know how long it will take to secure a tenant this time, having have major headline news about the flooding, and fear another flood episode will put me back to square one with a disgruntled tenant having to be rehomed whilst work done to repair the property, and maybe even surrendering their tenancy as they can no longer face living there with a flood threat hanging over them.

I know the repairs would still be required it if happened with a holiday letting arrangement, plus I would have to cancel, refund and recompense any cancelled holiday makers. I am in such a quandry over this as the property is currently empty and nearly ready to re-let, but don't want to get a tenant in and scupper the holiday proposition, if it might work out to be the better option.

Sorry for the long post, but felt full background was required. Anyone any ideas, suggestions, advice, thoughts for or against, please feel free to comment.

Thank you if you have got this far!!!!

unmissable

Get a local agent to discuss with you. I have a residential let and a holiday let and they both have advantages.
Don't forget for a holiday let, you will need to equip it fully, every knife, spoon and fork, lamp, plates (lots).
Don't try to use a meter, just adjust the price to over electricity.
Also biggest attraction these days is wifi.

Try a website like https://www.laymyhat.com which specialises in FHL.

Finally read up about the tax implications, although they appear restrictive with number of days available / let, their are lots of allowances you don't get with normal residential lets.

Bottom line is discuss with a local agent, whether you end up using them or not.

Madmel

Hi Werdnal

We own a holiday let which is attached to our house. I can't speak for all areas, but the small business relief definitely doesn't mean nothing to pay here [I wish it did!] We will have paid just over £1k in BR for the year ending 31st March 2013 for a 2 bed single storey property.

I suggest speaking to your local Tourist Information office regarding the suitability of your property for holiday lets. There should be no obligation, they will probably be fairly quiet at this time of year [mine has shorter opening hours until Easter]. I pay to advertise in the brochure my local TIC produces and on their website. It is not cheap, but I am supporting local businesses and organisations, and in return I do get phonecalls from them looking to book guests in. They take 10% of the rental cost in commission.

A local barn was converted into living accommodation and sold around 5 years ago. The people who bought it intended it to be a second home, but then saw the pound signs and let it out through an agency. The manager of our local TIC is aware of the property but thinks that the money this agency charges is ridiculous for the area. The agency takes 25% [probably why the charges are so high] and the owners employ a local couple as "housekeepers" [their words] to do changeovers.

I agree with unmissable about electricity - most guests these days expect it to be provided and included within the price. Wifi is also important for most people. If I can be of any help, please let me know by PM as I am also in the SW of England, wishing the rain would stop...!

Fuzzyness

other things to consider include the cost of advertising your property. to get weeks let out you'll either need to spend money adversting it yourself or sign it up to a cottage company to do it for you. if you use a company you could lose as much as 20% of your weekly letting income for the priveledge.

also who would do the change overs? you'll need someone reliable and good. people have very different opinions on what is clean and what is not.