Buy to let or invest?

Whiterose23

Hi, I’ve recently been made redundant at 60 years old and I’m at a bit of a crossroads.

I’ve sold my house and once the mortgage is cleared will have around £210,000 left over.
I would like to move to a different part of the country but keep a ‘boot in both camps’ so to speak, due to the fact one of my grown up daughters lives where I live now (Devon coast), and the other one lives with me but wants to relocate and I would like to go along too.

My rough plan is to buy a 2-bed flat where I live now (approx £150,000) and let it out as an Airbnb so I can use it a few times a year to visit my daughter and other friends here. I would pay someone to look after the practical issues around that (cleaning/repairs etc). We are in a popular coastal resort.

I would then rent in the new city with my younger daughter and share the cost with her (a flat).

I ultimately want to have some form of investment so my money works for me, whilst not being tied to one place or the other.

I intend to work part-time or freelance whilst I’m doing this.

My other thought is that I could invest the £210,000 for a passive income. I have another £20,000 beside this to set us up in new rental place.

Any advice from anyone doing something similar would be greatly appreciated.

Albermarle

Well investing it for an income would be a lot less work than running an airbnb.

Of course there are risks with both strategies. Potential airbnb ones were discussed in your previous thread.

Whiterose23

Yes I’m aware of all that but it’s important for me to maintain a base here. Thank you for reading all my threads :-). I would appreciate helpful comments.

UnsureAboutthis

Costal area you say re you possible hol rental - as you know its a seasonal income.

Falts equate to service charges/managment charges and the potential of idiots

making like misearable for all.

you have Airbnb fees, taxes, repairs, may get a lower price especially in markets crash etc.

What is the competition like in the area you are considering. What type of hol renter you looking at.

Maintenance is a matter of trust

A couple of neg reviews really messes up stuff.

Put your money in fixed rates, most of it, good income, safe income subject to infaltion etc. However, if

you are paying tax at 40% - then consider the falt as you want to enjoy it as well

My tip would be to get the best location you can afford in a building that you/family would love to

rent if you were on hols. Thanks

ps - there is always scope for a preprty to go up in price but many with falts get bogged down with service fees and loads of competiton for hol lets - so do your research fully before deciding and look/think about the falt you may may be buying, ie how long on the market and are there many others up for sale and if so, why.

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81875534#Comment_81875534

Thanks for your input. I understand the costs and efforts involved as I have friends who run Airbnbs and I’m aware of the leasehold/service charges on flats etc.

My question is more about how to get a good return for my money whilst achieving my aims of retaining ownership of a property that I can let out as a holiday let whilst I’m not using it myself.

poseidon1

Essentially you seem to be asking for general investment advice so this seems to be the wrong forum. Perhaps if you head across to the Savings and Investment forum you might get a greater range of responses other than the current critique of your Airbnb business idea.

However, an observation I think necessary to make is looking at your past posts you have never really engaged with the investment world so you dont really have a starting point to properly understand and evaluate the opportunity/risks of investing your property proceeds to produce long term retirement income.

Similarly you don't appear to have any background in running a business with a view to profit and getting involved in running a holiday let with no real idea of the net profit you could achieve after meeting all running costs, would seem unwise at this juncture ( no one here can give you an instant crash course).

As an example an aspect to consider in keeping costs down for an Airbnb, is do you resign yourself to a 100% council tax surcharge for running a serviced let or do you opt for business rates treatment as set out below -

https://www.gov.uk/guidance/apply-for-business-rates-for-a-self-catering-property-in-england#:~:text=it%20was%20available%20to%20let,in%20the%20following%2012%20months

Clearly an area for specialist advice or research for yourself, as well as getting yourself familiar with self assessment tax ( unless you plan to employ an accountant).

It is clear this Airbnb proposal is driven by a desire to keep a property foothold in Devon whilst living fulltime elsewhere. Is this because you ultimately wish to return and retire to the area in the fullness time?

Retaining such a property solely for the reason of being able to access it when returning to visit your child and local friends, seems a rather expensive and complex indulgence, especially if all the business ultimately does is wash it's face profit wise rather than provide you with net income.

Finally, you asked whether anyone is doing something similar to what you now propose.

A friend of mind converted an exsisting long let BTL flat in Leeds to Holiday let in October 2024. Found out very quickly that in low season there remained a constant drain by way of fixed running costs, that took the shine off the higher rents achieved in mid /high season. It was personally owned. Long story short, he is now selling the property having realised for him the business model did not work unless he held the flat in a Limited Company.

Whiterose23

Yes I don’t have experience of investing or running an Airbnb but everyone has to start somewhere right? I don’t see why that should present as a barrier for doing this. Hence asking for advice generally.

Equally I’m not totally naive with money and do understand what is involved and how it could go wrong, but would still like to glean any helpful advice as I’m aware it could also work very well.

I’m also fully aware of the potential issue around paying double council tax until the property has been occupied for X-amount of nights a year, after which time I can apply to move over to business rates.

Yes, keeping a foothold in both areas is extremely important to me - I realise it isn’t probably the best choice for the best return on my money, but I have family and friends here and may choose to retire here in 10 years or so but who knows how things will change.

Thank you for the pointer about asking on the investment threads.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81875936#Comment_81875936

I suppose your starting point should be what can I generate risk free and with no effort on £210K.

4% fixed interest on savings is currently achivable which translates in to gross taxable interest of £8,400.

Based on that and the fact that alot of your liquidity would be inflexibly tied up in bricks and mortar, I would have thought you would want to at least double that ( net of all costs), to make the enterprise worthwhile. Is 16/17,000 p.a ( after all costs) achievable from a £150K flat in the location you have in mind?

As I say, if your primary objective is just to retain a foothold in the area, then a reasonable enterprise profit return becomes a secondary consideration. Nice to have, but perhaps unreasonable to try and achieve both for the modest funds you have available to invest.

I bought property for investment income back in 2017 at a yield of 8.5% when savings interest rates were then near zero. That yield is minimally what i would still expect now from a passive rental investment, but well into double figures if I were ever to contemplate the holiday let's market (I wouldn't).

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81876015#Comment_81876015

I guess i’m focused on doing the best I can in the situation, even though I am aware it wouldn’t necessarily bring the best return.

Isn’t investing in property a good idea though? Not just for a return from renting it out but for the fact it will more than likely increase in value over the years?

Whiterose23

An alternative would be for me to rent an Airbnb myself so I can visit, but this would be five or six times a year at least, possibly for a week or two at a time.
My younger daughter, whilst happy for me to move away, could be quite vulnerable in a couple of years with regard to having somewhere to live and she is adamant she wants to remain in the area. So this would also ‘tick’ that box. Whilst accommodating her may not bring the best return, it would help her stay where she wants to be until she’s on her feet financially.

That doesn’t mean I would let out the property rent-free, but I could help her as well as benefit myself and my other daughter by keeping a property here. So I guess it’s for all kind of personal/emotional reasons but at the moment these reasons matter and I’m trying to make the best of it.

daveyjp

The only way to get a good return on your money from air bnb is to have it booked as much as possible. That either means a competitve price or a higher quality than the competition. Be aware legislative changes which can affect air bnb adversely.