Buying a holiday home as an investment

Californianinuk

I’m a grad student at a London uni and will be receiving about £50,000 inheritance in the next month or so. I won’t be able to get a mortgage as a student, and property prices are expensive around here. However I was wondering about how sensible it might be to buy a holiday property in somewhere like Wales or Cornwall. I’ve seen a few that are not prefabs but actual brick and mortar apartments or small houses. I’d really like to make my money work for me until I am in a position to buy a house for myself. I don’t have any parents I can ask for help, so if anyone has any advice (motherly or otherwise) I’d be very grateful. Thank you.

SunnyCat

My husband and I are currently in the process of buying a house here in the UK (but we're both not from here, if that matters). Before we had enough money saved up for that, I considered buying a summer property in my home country as an investment. The one thing that held me off was that by doing so, I would be losing all the benefits of being a first time buyer in the UK - the access to government schemes like Help to Buy, H2B savings accounts and associated bonuses and importantly the Stamp Duty relief. I would suggest that you consider this, if you think at some point you will be buying a place in the UK for yourself to live in.

csgohan4

put it in a LISA, high interest saving account, ISA.


50k for a house in cornwall is not going to go far. Even if you did, void periods, maintenance costs, eviction costs e.t.c, legal and tax implications, too much hassle

AdrianC

£50k will not buy a nice holiday home in a nice holiday area of Wales or Cornwall. It'll buy something cramped, needing work, in a depressed ex-industrial area that you won't particularly want to visit, and will be hard to resell when you need to.

And you'll waste your FTB status on it.

Property is not the only investment. Or necessarily the best one.

davidmcn

You might prefer to save the benefits of your first-time buyer "virginity" for your first proper house.

Oh, and £50k will barely buy you a parking space in somewhere like St Ives.

SunnyCat

Another thing is - I am assuming from your username that you are American. Sorry for jumping to that conclusion, but if you are, this is quite important... You probably know that regardless where you live, you still need to file and pay (if required) US taxes. For your regular income when you work somewhere and get paid for it, there is a US-UK treaty preventing a double-payment of tax to a fairly generous amount of about $100k a year, but things get a little more tricky with investment income. Some types of investment that are tax free (like stocks & shares ISA) in the UK, are heavily taxed in the US. I suggest that you seek advice from expat experienced accountant before making an investment decision.

AnotherJoe

Keep your money in a LISA or HTB isa until you are ready to buy something with a mortgage, maximise your ftb benefits such as no SDLT, and not get trapped into owning a money pit along with the hassle of long distance management of a property. Add to that the cost of managing and check in check out would be fairly similar for a £50k or a £250k house but the rent wouldn't be, so costs would be out of all proportion to income.
TL;DR terrible idea

AdrianC

Let's look at what £50k will buy in Cornwall...

Excluding places on a holiday site (they're usually horribly expensive with site fees on top of the purchase price), retirement and shared ownership, you're left with...

https://www.rightmove.co.uk/property-for-sale/property-57819472.html (OIEO £50k)
https://www.rightmove.co.uk/property-for-sale/property-70271662.html (repo, £45k offer received)
https://www.rightmove.co.uk/property-for-sale/property-71977561.html (fire-damaged former snooker club with PP for change of use, £40k)

And that's about your lot.

Californianinuk

Thank you for all your kind replies.

To quickly answer some questions, I am a british citizen, despite the username (have spent many years in California) so luckily the good old US of A will not be taking any of my money.

With regard to the types of places I was looking at, I was considering somewhere like this Rightmove.co.uk/property-for-sale/property-80117222.htm

The site fees are 2500 per year, but rental income looks to be approx 2000 per month at a very general estimate over May to October.

Alternatively I was wondering whether it might be better to buy a student studio apartment in Plymouth, as several are available in my budget, and yielding rent of about £400 a month.

I agree a LISA is a much safer way to go. And I absolutely hadn’t considered I’d be losing my advantages of being a first time buyer. This is all excellent advice.I have this awful entrepreneurial streak that causes me to think I know better than everyone else and can make more money. I know from experience this is not true 😂

AdrianC

Californianinuk wrote: »

With regard to the types of places I was looking at, I was considering somewhere like this Rightmove.co.uk/property-for-sale/property-80117222.htm

The site fees are 2500 per year, but rental income looks to be approx 2000 per month at a very general estimate over May to October.

So £9,500 net income/year = 19% yield. Obviously, there's hand-over cleaning and maintenance and marketing costs out of that, but...

Now, what do you think the likelihood of that being realistic is...? If it was that simple, don't you think it'd have long since sold? Instead, it's been on the market for three months - and it's one of eight similar for sale at the moment, just on that one site, two of which have been for sale since before Xmas.

Why hasn't somebody bought them all...? £400k outlay, £76k income...?

So the question then becomes "What have you forgotten about or not noticed yet...?"

Californianinuk

AdrianC wrote: »

So £9,500 net income/year = 19% yield. Obviously, there's hand-over cleaning and maintenance and marketing costs out of that, but...

Now, what do you think the likelihood of that being realistic is...? If it was that simple, don't you think it'd have long since sold? Instead, it's been on the market for three months - and it's one of eight similar for sale at the moment, just on that one site, two of which have been for sale since before Xmas.

Why hasn't somebody bought them all...? £400k outlay, £76k income...?

So the question then becomes "What have you forgotten about or not noticed yet...?"

I was worried about why it hadn’t sold. My rough estimate for rental yield is from spending a few hours on air b n b and seeing how booked up these cabins are for the summer, and what the average rates are. Thanks for taking a look for me.

My thought was that it’s apparently hard to get a mortgage with a holiday home, and cash buyers aren’t as common. I’m not sure what else I’m missing, it does sound too good to be true though I agree!