Buying a holiday home as an investment

xylophone

In your position I wouldn't go down the route of property investment you propose.

I would open a cash LISA and make sure that it was filled each tax year.

Because the rates on the LISA aren't even as high as you would get on an ordinary deposit account, I would just open now with a small amount and then fill a few weeks before the tax year ends.

As you live in London, and can easily access a Virgin Money store, consider making an appointment at a convenient branch and opening a branch regular saver - up to now there has been a new issue every couple of months and you can have one of each issue.

Consider opening a TSB Classic Plus account if eligible- you can hold £1200 here at 3% - the monthly deposit requirement is easily managed on an in/out basis if you wish.

If you have never held a Nationwide Flexdirect Account, and are eligible, then consider opening one as a home for £2500 at 5% for a year - again, the monthly deposit requirement is easily managed on an in/out basis, most conveniently by matching same same Standing Orders from eg TSB to NW and back again.

Other savings rates in tables here

https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

AnotherJoe

I can't get that rightmove link to work but assuming its one of those log cabins or mobile homes, they have a limited life usually about ten to fifteen years. They will actually last for much longer but the site owner doesn't want a load of old tat as it makes teh park look poor. So, it becomes effectively worthless at some point unlike a house which can be resold.
Also, dont underestimate expenses, holiday homes get used much harder than your own home and so will require refreshes of furniture, beds and appliances much more than a normal home.

Bottom line if it was as profitable as you seem to think, someone would have bought it already, including the holiday site itself.
Also, your thoughts that its hard to get a mortgage and cash buyers arent that common are well off the mark for a £50K property, plenty of people could afford that.

seven-day-weekend

Californianinuk wrote: »

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!

How long is the lease? A very cheap price would suggest a very short lease. Then unless you extend it (which will probably cost at least £10k), you will have the same problem selling it as the people who own it now are having.

(If of course, if it's a cabin or static on a holiday park, then the freeholders may well not allow you to extend it).

csgohan4

OP stop looking at the inheritance as a quick rich scheme. Finish your studies, advance your career and use the money to invest or for your career and eventually for a deposit for a house.

If you need a mortgage, no lender is going to touch you with no income.

See the inheritance as a bonus and treat it with respect, not to be wasted on BTL pipe dreams.

AdrianC

AnotherJoe wrote: »

I can't get that rightmove link to work but assuming its one of those log cabins or mobile homes

It's a step above those.
https://www.rightmove.co.uk/property-for-sale/property-80117222.html

gingercordial

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.

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.

Neither type of business (holiday lettings or student lettings) is easy passive income.

For holiday lettings who is going to deal with making the bookings and discussions with customers on any questions they have (cancellations, can we move dates, directions, does it have a pool...), check in and out, handing over of the keys and cleaning between visits? Who is going to look to see what damage has been done and handle the negotiations when they inevitably protest that the massive stain on the bed was already there? Who is then going to buy new furniture to replace what's been broken (holidaymakers seem to treat holiday homes terribly) and cart it down there?

Lettings, and especially student ones, may be equally tiring. Constant questions about them falling out, one dropping out of their course and wanting to move out, finding replacements. Complaints from neighbours about parties. Trashing the place. Not paying rent because they've spent it all on beer. Not all students, of course, but there's a danger. Student-focused lets don't tend to be nice or easy.

Meanwhile you're a student and you should be concentrating on your own studies, not trying to run what can be a full-time business on top.

I'm sure in both cases you could pay someone for a full management service, but that's going to cost you, especially if you're not fully booked for the holiday home/have a void with no students from June to September each year. Your yield from when you are receiving income is therefore going to have to be amazing to cover all the extra costs and voids as well as to make up for the loss of all your FTB incentives and the massive additional stamp duty bill you'll have if you fail to sell this before you buy your own home.

Also bear in mind there have been plenty of horror stories about selling holiday homes/caravans on sites. They often come with a requirement that any onward sale be handled by the site owner or their agent. At the same time the site owner is probably going to have a few of their own units for sale. Guess which ones they'll promote to buyers? Yours will be at the very bottom of the list and may never sell.

It's a bad idea all round I'm afraid.

AnotherJoe

AdrianC wrote: »

It's a step above those.
https://www.rightmove.co.uk/property-for-sale/property-80117222.html

Yep it certainly is. Must be the lease length then. There's a reason a 3 bed place is £50k and its not because 20% ROI per year is insufficient to attract investors !



Anyway, what gingercordial said, use this on your first residential house, being a LL is hassle enough without dealing with students or weekly changeovers of holidays.

AdrianC

AnotherJoe wrote: »

Yep it certainly is. Must be the lease length then.

I dunno about you, but I'd have thought the year 2979 would be fine for a lease expiry?

There's a reason a 3 bed place is £50k and its not because 20% ROI per year is insufficient to attract investors !

We just haven't figured it yet...

martindow

AdrianC wrote: »

It's a step above those.
https://www.rightmove.co.uk/property-for-sale/property-80117222.html

As it's on a holiday village maybe there are massive annual fees payable.

p00hsticks

martindow wrote: »

As it's on a holiday village maybe there are massive annual fees payable.

Yes, that would be my guess - it mentions a 'leisure complex with pool'. I've heard of sites where you have to be a member to access these facilities and membership is very pricy (and possibly compulsory ?)