What’s a good ROI on a holiday cottage let in the U.K.?

Stu6781

Looking at a couple of holidays cottages that are said to be producing a £18k turnover (15k profit for the 2) with an asking price of 255k for the 2. They are situated in Norfolk and let through Airbnb. Does this sound a reasonable investment?

Thanks all.

Zanderman

Is £15k profit realistic for an £18k turnover?
Surely running costs would be rather higher than £3k.

Zanderman

And, to add to my first comment, it's impossible to say whether it's a 'reasonable' investment, even if the profit figures are correct, unless you also say whether you'd be buying outright or with a mortgage or other loan.

Re the profits, costs to consider for holiday lets (which get a lot of wear and tear) are council tax, utility bills, cleaning, replacing damaged/broken goods, maintenance of te building and appliances, redecorating, compliance with safety regulations etc. I reckon those would come to more than 3k for two properties.

Plus of course insurance suitable for holiday lets - and if mortgaged a mortgage suitable for holiday lets. [You could, with Airbnb, and if you were so-inclined, 'get away' with ordinary insurance and mortgage but that would be irresponsible for your tenants and yourself and you'd be in trouble (and potentially very seriously out of pocket) if anything went wrong.]

Stu6781

You sound so positive about holiday lets. Oh and there’s the income tax to consider

Zanderman

Stu6781 wrote: »

You sound so positive about holiday lets. Oh and there’s the income tax to consider

I'm not being negative, I'm just querying the realism of figures you are quoting.

You did ask!

Reed_Richards

Do you plan to clean them yourself between changeovers or hire help? We had a cottage for a while which we tried to rent-out but getting it cleaned reliably without being there to see the standard of work was the hardest part.

dunstonh

Stu6781 wrote: »

Looking at a couple of holidays cottages that are said to be producing a £18k turnover (15k profit for the 2) with an asking price of 255k for the 2. They are situated in Norfolk and let through Airbnb. Does this sound a reasonable investment?

Thanks all.

We were looking at converting a couple of our barns for holiday lets. Size matters obviously but £15k p.a. is the most commonly used figure as a broad guide to let income per conversion. These were for proper barn conversions to a high specification. So, £18k turnover sounds right in the ballpark if they are relatively low-quality cottages (£9k each is at the lower end).

I doubt £3k is sufficient expenditure as a long term average. Again, it will depend on maintenance and type of let. Lodges suffer with age and you need to factor complete destruction and restart at some point. Or at least very heavy repairs and replacement. Chalets attract lower quality and suffer greater damage (generalisation I know). Cottages and barns typically need more routine maintenance. If you can do a lot yourself, then you reduce costs. If you get people in, costs increase.

So, £3k in one year as costs is fine but there could be a £10k cost in another year. Indeed, a friend who rents a couple out found the Klargester failed and had bookings on the Saturday and had to pay emergency rates to get the old one dug out and replaced in 24 hours. Just under £10k.

Expect things like boilers to be replaced more frequently than you may do in your main residence and you will need to decorate far more frequently. Sometimes multiple times in a season.

AnotherJoe

That's £60 a week to cover cleaning maintenance and a fund to cover replacements of bedding furniture and redecorating for two cottages.
Doesn't sound at all realistic to me. Maybe per cottage.

Ken68

My late brother bought a holiday bungalow at Potter Heigham more than 20 years ago for £40k and it has now been sold for £135k. He charged £300 per week , mainly to fishermen , though it was mostly used by the family. There seemed to be no shortage of customers. A maintenance service was available which could have been offset against tax.

Tom99

Stu6781 wrote: »

Looking at a couple of holidays cottages that are said to be producing a £18k turnover (15k profit for the 2) with an asking price of 255k for the 2. They are situated in Norfolk and let through Airbnb. Does this sound a reasonable investment?

Thanks all.

The figures look grossly optimistic unless you are buying for cash and doing everything yourself.
Cleaning/Laundry could easily be £100 per week so say £2,500 if you assume 50% occupancy. Then say you pay Airbnd £1,000 for £18,000 worth of rental and you have already exceeded the supposed £3,000 cost of running 2 cottages with gas/electricity, water, broadband, insurance, repairs, gardening, depreciation on furniture and maybe council tax still to pay.

Johnnyboy11

Don't forget the Higher Rate Stamp Duty, at 3% on your £255k purchase