Buy-to-let or holiday home
Discussion
Had a holiday home and currently have a BTL.
If you want the best yield then BTL.....unless you can afford to buy a holiday home with a booking season exceeding 30 weeks per year.
The real problem with a holiday home is the clash of interests - I can guarantee every time you want to use it you've booked it out!
Also our holiday home was just over an hour away on the coast. This made it easy to get to (particularly as I used to do the change-overs at the weekends). We didn't use an agent and managed it ourselves; this was the only way to generate enough gross margin to cover the standing costs of owning the property (never made a profit!)
If you choose a HH in Devon then you will be totally reliant on 3rd parties to manage who will undoubtedly enjoy 40% of your income.
If you want the best yield then BTL.....unless you can afford to buy a holiday home with a booking season exceeding 30 weeks per year.
The real problem with a holiday home is the clash of interests - I can guarantee every time you want to use it you've booked it out!
Also our holiday home was just over an hour away on the coast. This made it easy to get to (particularly as I used to do the change-overs at the weekends). We didn't use an agent and managed it ourselves; this was the only way to generate enough gross margin to cover the standing costs of owning the property (never made a profit!)
If you choose a HH in Devon then you will be totally reliant on 3rd parties to manage who will undoubtedly enjoy 40% of your income.
Everyone I know who has rented out a holiday home has made zero money at it in reality.
Especially now that in-term holidays are out, house rentals out of season are harder to let.
The only ones who do well out of it are people who inherited the house/bought it 40 years ago when it was cheap. Management companies will take a big share unless you live next door and can do all the changeover stuff yourself (and do you really want to be tied to washing a heap of towels and duvets every Saturday?).
Especially now that in-term holidays are out, house rentals out of season are harder to let.
The only ones who do well out of it are people who inherited the house/bought it 40 years ago when it was cheap. Management companies will take a big share unless you live next door and can do all the changeover stuff yourself (and do you really want to be tied to washing a heap of towels and duvets every Saturday?).
pacoryan said:
anonymous said:
[redacted]
Is additional taxed income something you actually have need of? There is a reason why most landlords use finance.Typically our BTL generated £3,300 p.a income but our total costs of running it as holiday let business was around £4,000 p.a so never made a profit (and up until a year or two ago the loss could be offset against your personal tax liability
). The aspect that made this arrangement acceptable was that it was a holiday home and our usage was worth a good deal more than the nominal loss.Leveraging your cash as equity in say a couple of properties and taking out mortgages would be the way to go providing you generated sufficient income from the property to service the mortgages.
budfox said:
Go for the North Devon option.
It's a region with a very low average wage so you get to price locals out of living locally, safe in the knowledge that your second home isn't even occupied for months at a time.
Stop crying in your beer, it happens to all of us. I could not afford to live where my parents were, you need to get over it and move on. It's a region with a very low average wage so you get to price locals out of living locally, safe in the knowledge that your second home isn't even occupied for months at a time.
caiss4 said:
pacoryan said:
anonymous said:
[redacted]
Is additional taxed income something you actually have need of? There is a reason why most landlords use finance.Simple figures!
Outstanding Mortgage say £200k at say 4%
Savings say £50k at say 1%
Basic rate tax payer.
Where is it best to put my money? Into my property or keep in savings? I should also add that I'm looking to sell the portfolio in about 1 years time so this is a short term answer requirement rather than a 20 year need.
S6PNJ said:
So, an interesting conumdrum. As a Landlord with a small (but modest) portfolio, I'm keen to make my money work for me. I have savings I could use to pay off some of my outstanding mortgages but this would then mean I'm paying less in interest on the mortgages and hence have less to offset against tax. At what point is it more benificial to have money in the mortgage (ie paying off the capital to reduce the interest (and hence increase the Bank's money rather than mine) on the loan) against money in my savings (so more mortgage interest to offset against my tax requirement)?
Simple figures!
Outstanding Mortgage say £200k at say 4%
Savings say £50k at say 1%
Basic rate tax payer.
Where is it best to put my money? Into my property or keep in savings? I should also add that I'm looking to sell the portfolio in about 1 years time so this is a short term answer requirement rather than a 20 year need.
I think you need to think about funding costs in terms of whats available, i think the minimum amount of cash required in the property in order to access the cheapest possible funding. Thats what i did. 40% deposit, rest funded at 2.99% for a first time landlord seemed reasonable. Simple figures!
Outstanding Mortgage say £200k at say 4%
Savings say £50k at say 1%
Basic rate tax payer.
Where is it best to put my money? Into my property or keep in savings? I should also add that I'm looking to sell the portfolio in about 1 years time so this is a short term answer requirement rather than a 20 year need.
anonymous said:
[redacted]
You mentioned the Suffolk coast, somewhere I'm very familiar with for rental options. The most established markets for holiday lets are in Aldeburgh and Southwold. House prices there have gone up over 60% in the last 8 years, and the whole market has been elevated (10 years ago a holiday let would often be presented in the same state it left probate, now the top half of the market is very expensively fitted and furnished).If you choose the right property, and go with the right agent, after the property has established itself you might get 20 weeks per year rented with a yield of around 2% (after agents fees of 20%+, between-let cleaning, basic house maintenance, council tax & utilities etc.), so there are no quick bucks to be made. But you do have the capital asset, which is likely to appreciate, and the benefit of using the property in between lets.
If you would like any more info feel free to PM me.
anonymous said:
[redacted]
On a BTL you should get the highest interest-only mortgage on it you can - otherwise 25%-40% of your rent profit goes straight to HMRCIf it was me I'd be putting down the cash as a 50% deposit and getting an interest only mortgage for the rest and buying a more expensive BTL. You'll get the full relief on the mortgage payments and higher capital growth (leverage). You'll also get a higher rent which will pay the mortgage and give you the income you want.
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