Is A Holiday Let A Good Investment?

A holiday let is a good investment if approached in the right way. Right now, with the domestic holiday market experiencing something of a boom, a holiday let is a popular investment choice. It can provide a steady income if occupancy is maintained at a good enough level. Not only can you earn a decent income but the property itself is also an asset, which has tended in most places recently, to increase in value.

As with any serious investment, your own specific circumstances are what really matter. Below we have listed a few points that may be useful when you are thinking about investing in a holiday home to help you think about what is right for you.

A holiday let is a business

It may seem obvious but be clear about what you are investing in. When you invest in a holiday home to let, you are not just simply buying a property to live in, you are creating a business. As with any enterprise, it will need to be maintained and run. It will need to be marketed and promoted and guests, bookings, maintenance, cleaning and changeovers will need to be planned and managed.

There are a number of options to manage these aspects of your holiday let. As with any small business, a little effort in planning and promotion can go a long way to securing a good share of the demand that is out there and a good income.

You will need to take into account the costs of these services if you outsource them, or make an allowance for your time. Working out the cost in both time and money will help you to decide whether the holiday let is a good investment.

Consider a lettings agency

The first decision you will need to make is whether you want to handle all this yourself or use a lettings agency. Handling the bookings, maintenance and cleaning schedules for even one property can take a significant portion of your time and to do it well does take some knowledge of the market. A lettings agency can handle all of this for a fee and will have the experience and know-how to help you get bookings. A lettings agency may even be able to help with photographs, descriptions and websites for your holiday home. If you do use a lettings agency, still be prepared to do, or at least to organise, some of this yourself.

Use professional services

If you do go it alone, you will save yourself commission and membership fees for a lettings agency and will enjoy more control over your holiday home business. A lot of holiday home owners will go for a combination of the two, putting some of their marketing efforts with a lettings agency and carrying out everything else themselves. You need to decide how much time, money and effort you are personally willing to invest.

Managing your own holiday home does not mean of course, that you literally have to do everything yourself. There are professional services available for photography, copy-writing, cleaning and maintenance and booking management. When you are considering an investment in a holiday let, you should think about any services you will need and factor the relevant costs into your calculations.

Use technology to calculate the return on your investment

If you are looking to make your first holiday let investment, you might want to use a rental income calculator. We have linked to one here but there are quite a few online. It is best to try more than one and take an average to get a more accurate picture.

Vacation rental software can also be a useful investment if you decide to manage your own holiday let.

According to iGMS, (a vacation rental software specialist), there are a few metrics every owner or property manager should be looking into: occupancy rate, revenue per available room, average length of stay, average daily rate, net operating income, revenue per property, guest satisfaction, inquiry to booking conversion rate and average response time to an inquiry. Software can help process this information once you are up and running.

Of course, you will also need to calculate all of the costs involved, including interest payments if you are borrowing the money to buy the property. You’ll also need holiday home insurance and it’s a good idea to go to a specialist insurance provider as you’re likely to get better value for money.

Location of the holiday let

From surveys of income earned from holiday lets, it seems the location really does matter. North Wales and Gwynedd are particularly good locations. Also, remember that you will need to travel regularly to the property yourself and so should probably look for somewhere two hours or less away from your residence.

It is also recommended that you find somewhere no more than about two hours away from a major town or city to maximise the appeal for short breaks, which are especially important for the off-peak seasons.

Number of rooms

Do you want to invest in a four-bedroom cottage or a one bedroom flat to let to couples? The type of property you decide on will have a large impact on your potential market and will attract different types of guests. You may want to think this through before committing yourself to a substantial investment. This will of course, depend largely on your own financial situation.

The holiday let market

All of the decisions outlined above will have an effect on the market you are aiming at. It is important that you have thought about this before you buy. Does your retreat for couples actually look like it is going to work in the location you have selected or would a bigger property fit better in this area? Plan your holiday let business from purchase to booking before you buy and you will be able to make these decisions in a more informed way.

Pricing your holiday let

When making your calculations as to whether to invest in a particular property, the rental that you can charge will be crucial. Do your research. Lettings agencies and other local residents can be a great help here as they have the experience and knowledge of previous seasons to draw on. Look at off-peak and slow season pricing as well. Try to establish from local figures what the range is between a slow year and a good year and ask yourself whether you can afford to endure a couple of slow years, if any. Over optimism about every year being a good one can lead to problems further down the line.

A holiday let can be a great investment and the beginning of a great business. A good holiday let can contribute a significant income or simply pay for the mortgage and running expenses on a property, which will hopefully appreciate in value. We hope these tips are of some help in making your decision.

This is a marketing article from multi award-winning Park Home Assist Insurance. If you would like to speak to an advisor regarding insurance for your holiday let, please contact our friendly team in our Northampton office on 01604 946 796.

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Published – 09/09/21