Buying a house as holiday let before permanent move

Just thinking aloud on this one, and it's completely unknown territory, so any comments and advice gratefully received.

My OH and I are intending to move to the coast when we retire, which could be anywhere between imminent and a few years depending on employer whims. We have recently accepted an offer on our house, and have always acknowledged the potential need to rent for a while if we sold before we could make the move. However, we don't want to be in a position where we are renting in the medium term whilst house prices rocket around us.

We have seen a property (online only at the moment) that is currently in use as a holiday let (through an agency), and could presumably continue as such. This seems, in theory, ideal as we could derive an income from it in the time before we could move. However, we know nothing about the pros and cons of holiday rental...

I've asked for details of bookings / accounts for the last three years. Rates are £350 p.w. for short break now, rising to almost £900 p.w. in summer. Agency fees are 15% according to the website.

We would probably need a mortgage of £70000 maximum. Total rental income wouldn't be absolutely critical, as it isn't something we had anticipated, but would be a bonus providing the negatives don't outweigh positives.

So, what are the pitfalls that we need to be wary of? How is tax dealt with? What sort of contingency should we need for maintenance issues? It's a 3-bedroom stone built house with night storage heaters (no mains gas) and two wood-burners, which brings me to another point (of great concern to OH). Potentially difficult to heat a stone house? Any estimate on heating costs?

Apologies for the rambling nature of the questions. Thanks for any help.

Replies

  • kidmugsykidmugsy Forumite
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    You will be paying tax on the rental income while paying your own rent out of taxed income, all because of "house prices rocket around us", which they might not. Meantime you'll have a geared, illiquid and indivisible investment. You haven't said: is the holiday let intended to become your own home once you retire?
    Free the dunston one next time too.
  • FairzoFairzo Forumite
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    Thanks for the quick reply. Yes, we would intend to use it as a permanent home when the time arrives.

    Sorry, don't understand what "a geared, illiquid and indivisible investment" means. As I mentioned, completely new territory for us :o
  • RASRAS Forumite
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    Please do not buy a holiday let intending to live their permanently unless you have checked the planning permission for the property.

    A lot of holiday lets have restrictions that preclude them being lived in permanently and the chances of getting that altered is very slim.
    The person who has not made a mistake, has made nothing
  • FairzoFairzo Forumite
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    Ah yes, good point. It's not being marketed as a holiday let, just "currently in use"as one. I suspect that the age of the property is such that the planning system won't have imposed itself but will need checking.
  • RASRAS Forumite
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    A lot of converted farm buildings and properties previously used to house agricultural workers in my closest national park are designated as holiday lets as are some properties that ceased to be used as housing but have been recently repaired. This is diversification.
    The person who has not made a mistake, has made nothing
  • shamacshamac Forumite
    415 Posts
    Running a holiday let is hard work, MUCH harder than ordinary rental.

    You need to consider:
    1 marketing-how will you get your guests-the rental agency is charging you and will get you SOME bookings-it is less than a quarter of our total bookings.

    2 Changeovers-who will clean it?-how do you know they are any good/reliable/will turn up!

    3 What happens if the boiler breaks/guest locks themself out/breaks a window/ can't work the tv etc etc etc-they will ring YOU-and it spoils your weekend I can tell you!

    4 Tax implications
    5 How much income you need to cover costs which will be light/heat/internet/phone/insurance/ cleaning/maintenance/gardening/window cleaning/ laundry/marketing/business rates (currently nil hurrah!).

    Have a read of this forum https://www.laymyhat.com for more help.

    Good luck!
  • Most owners either do everything themselves, use and agency or a combination of the both.

    Running a holiday let certainly is hard work and one of the pitfalls is the time it takes to manage the property - marketing and day to day running. For many owners the decision to buy a holiday let is both lifestyle (family holidays, end goal is to retire there etc.) and financial.

    If you don't have a passion for the property, the location and letting, then it will be even harder.

    The alternative is to use an agency who will do a lot of the work for you and take 20-25% commission.

    Take note of the furnished holiday letting tax changes; here is an overview;


    For a property to qualify as a furnished holiday let, it must be:
    • in the UK or EEA
    • furnished
    • available for commercial letting to the public, as holiday accommodation, for at least 210 days a year
    • the accommodation must actually be let as holiday accommodation for at least 105 days a year
    Good luck.
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