Taking money out of a BTL to invest in a holiday let

hjf12345

We're considering selling our BTL flat in London (£300k mortgage, worth £500k) and buying a holiday home on the Kent coast (£350k-ish) with a holiday let mortgage.

The plan is to AirBnB it most of the time, except for some weekends etc when we'll visit and stay there.

I was hoping for some advice from this knowledgeable community: 

• Any advice for first-time holiday let landlords (e.g. best type of property to buy? Should we use a managing agent? What are the unexpected costs? etc.)
• With BTL no longer attractive from a tax perspective, have others followed this path to FHL? On reflection, has it made financial sense in the mid/long term?
• What do holiday let mortgage lenders take into account when working out affordability? Is it all based on our salaries, or do they review the rental potential of the property and its location?
• I've never been one to play the stock market so have always naturally invested in property, but should I reconsider?

Any advice gratefully received!

Thanks

steampowered

That sounds like a bad investment to me. If you want to own the property to visit and acknowledge that the financial cost of doing that is far greater than the cost of paying for a holiday cottage every now and then that's fine, but I wouldn't view it as an investment.

- As you do not live in the area, you'd need to pay someone to manage the property, which will take a big chunk of your returns.
- AirBnB is an active form of property usage so costs and wear on the property will be high. 
- Lots of hassle fixing things which get broken (which will happen frequently); managing agents/cleaners and so on.
- It's very high risk - presumably the demand is seasonal and you are exposed to a drop in bookings.
- Higher rate stamp duty will see you forking out £18k on a £350k second property.

I know a few people who tried to do something similar with holiday property in Europe. It's taken up an enormous amount of their time and not made them any money.

You should reconsider the stock market. Over the long term, the returns generated by the major stock markets have been very consistent over the past 50 years - 7-8% per year. A balanced stock market investment is less risky than investing in BTL property with a big mortgage on it. Plus, you can invest through a pension (giving you a 20% top-up from the government, or 40% if you are a higher rate tax payer - possibly more if you can do it through salary sacrifice); or through a stocks & shares ISA (which has tax free returns - compared to the income tax and capital gains tax you face with BTL).

Albermarle

I've never been one to play the stock market so have always naturally invested in property, but should I reconsider?
Nearly every regular poster on this forum , is mainly invested in the financial markets ( via pensions, ISA's etc ) rather than in property ( apart from their own home and the occasional old BTL ) . So the answers you get will be mainly in the same vein as above.
However very few 'play the stock market' in the way you probably mean. Most have long term investments with little short term 'playing' 
- AirBnB is an active form of property usage so costs and wear on the property will be high
My experience of actually staying in airNnB's is that the majority ( not all) seem to be furnished to a very high standard with all new fixtures and fittings ( better than my own home !) so must be a lot of work keeping them like that .

hjf12345

Thanks both, you've done a good job of scaring me off the idea! I've re-posted on the property forum and will see what people say over there. Really appreciate you taking the time to respond. Thanks