Furnished Holiday Let - am I insane?
Discussion
Views welcome! I live in south Cornwall, know it inside out. The general property market is on its arse. Very little is shifting, the holiday hotspots are even worse, stuff sits around for months on end, reduction after reduction.
I’m aware of the significant headwinds facing FHL’s. Additional 5% stamp duty, double council tax (or Ltd Co for business rates), additional 2% income tax on the way, possible new EPC legislation (cottages are often below C rated), possible tourist tax etc. Hence there are more and more people trying to bail, many without luck. Your typical coastal cottage simply doesn’t appeal or work for a family etc, second home buyers have disappeared, making the addressable market small, and shrinking. Nice to stay in for a week, but to live in full time, nah.
Am I completely insane for even considering the idea? I’d manage and carry out changeovers / maintenance myself (give me something to do). Would pay cash, either buy personally or with a directors loan into a Ltd Co. The purpose would be to generate an ongoing income stream. I can’t help thinking stocks look very expensive, yet certain property seems relatively cheap, particularly if bought well from a motivated seller who wants out. Yield could be OK with good occupancy. Everything has its price, right?
I’m aware of the significant headwinds facing FHL’s. Additional 5% stamp duty, double council tax (or Ltd Co for business rates), additional 2% income tax on the way, possible new EPC legislation (cottages are often below C rated), possible tourist tax etc. Hence there are more and more people trying to bail, many without luck. Your typical coastal cottage simply doesn’t appeal or work for a family etc, second home buyers have disappeared, making the addressable market small, and shrinking. Nice to stay in for a week, but to live in full time, nah.
Am I completely insane for even considering the idea? I’d manage and carry out changeovers / maintenance myself (give me something to do). Would pay cash, either buy personally or with a directors loan into a Ltd Co. The purpose would be to generate an ongoing income stream. I can’t help thinking stocks look very expensive, yet certain property seems relatively cheap, particularly if bought well from a motivated seller who wants out. Yield could be OK with good occupancy. Everything has its price, right?
I only really know St Mawes in that neck of the woods, my ex-partner's family lived there for many years so I have spent a lot of time there at all times of the year. My view on it was that there was a lot of second home property passed down through generations, rented out for absolutely looney tunes money in the summer but desolate in winter, like a ghost town.
So, I think you'd need to factor in that the rental window is short but lucrative but you will have a lot of periods of unoccupancy.
My former in-laws had a couple of rental properties that they built as holiday lets on their property for the same reason as you, an additional income stream. However they found that the punters were such a massive pain in the arse they gave it up after two seasons. I should add that they were very wealthy and just did not really need the modest additional income these places brought them for all the related aggro.
Clientele can be very demanding (without wishing to generalise: posh home counties types expecting the moon on a stick, or foreigners expecting a 24/7 response to "emergencies" like poor wi-fi reception) so you have to deal with all of that unless employing a managing agent who will want a slice.
I think the final straw was that some punter's teenager managed to dislodge some push-fit plumbing in the upstairs loo without telling anyone, the family then checked out and basically left an open cistern fill pipe running free onto the laminate floor for 3 days until the person employed to clean the place discovered it. Massive flood to the downstairs unit, they called time on it after that.
So, I think you'd need to factor in that the rental window is short but lucrative but you will have a lot of periods of unoccupancy.
My former in-laws had a couple of rental properties that they built as holiday lets on their property for the same reason as you, an additional income stream. However they found that the punters were such a massive pain in the arse they gave it up after two seasons. I should add that they were very wealthy and just did not really need the modest additional income these places brought them for all the related aggro.
Clientele can be very demanding (without wishing to generalise: posh home counties types expecting the moon on a stick, or foreigners expecting a 24/7 response to "emergencies" like poor wi-fi reception) so you have to deal with all of that unless employing a managing agent who will want a slice.
I think the final straw was that some punter's teenager managed to dislodge some push-fit plumbing in the upstairs loo without telling anyone, the family then checked out and basically left an open cistern fill pipe running free onto the laminate floor for 3 days until the person employed to clean the place discovered it. Massive flood to the downstairs unit, they called time on it after that.
If you cant get it business rated, then it will be a minimum of £3500 a year for council tax. But you probably know that.
Loads of ex holiday lets for sale down there, as the double council tax is killing it and as you say most of these are property's folk don't want to live in.
I may be selling a lodge near Camelford later this year. If you are interested pm me.
Loads of ex holiday lets for sale down there, as the double council tax is killing it and as you say most of these are property's folk don't want to live in.
I may be selling a lodge near Camelford later this year. If you are interested pm me.
I've done it for year, though not in Cornwall. I wouldn't start now.
There are incoming changes to business rates I believe so that max relief will be 40%. Do you think it'll stay at that rate? If you use an agent they'll take 20% + VAT. I've heard a lot of negatives re Air BnB. There are lots of costs and problems - cleaning, damage, etc.
Worth a read https://www.facebook.com/groups/345173179415606/
When I started an experienced agent told me how important it was to decide on how you pitch it/the type of guest you want. I aim for older people and it works (for me).
On the positive side, a friend has a small annex on his land, one bed I think. His own cleaner cleans it (cheaper and better than min wage-paying company) and he gets couples, or singles working nearby. He books 51 weeks of the year.
If you are thinking of borrowing to do this I'd do that, buy yourself a better house with a on site let. Subject to costs, taxes etc.
There are incoming changes to business rates I believe so that max relief will be 40%. Do you think it'll stay at that rate? If you use an agent they'll take 20% + VAT. I've heard a lot of negatives re Air BnB. There are lots of costs and problems - cleaning, damage, etc.
Worth a read https://www.facebook.com/groups/345173179415606/
When I started an experienced agent told me how important it was to decide on how you pitch it/the type of guest you want. I aim for older people and it works (for me).
On the positive side, a friend has a small annex on his land, one bed I think. His own cleaner cleans it (cheaper and better than min wage-paying company) and he gets couples, or singles working nearby. He books 51 weeks of the year.
If you are thinking of borrowing to do this I'd do that, buy yourself a better house with a on site let. Subject to costs, taxes etc.
We have a furnished holiday let in North Devon its really easy to lose money, you have to go in with your eyes open
1. You never get the volume of bookings the agencies say you will. You will get booked over the summer and 60% change of bookings in the other key holidays,
2. Housekeeping and linen are expensive
3. Insurance is expensive, our 3 bed property costs £600 pa
4. If you don't take dogs you severely limit the market
5. To get zero business rates you need a large number of bookings and in bad years you won't hit the target.
6. Lots of councils charge at least 2 x rates for holiday lets not registered as a business, if its a business you have to find your own rubbish collector
7. Lots of regs on fire safety, smoke alarms, fire doors
8. Some guests will damage the property
9. Some guests are completely unreasonable - eg full refund demanded because there was a single fly in the property (rural area in summer)
10. Agency fees are expensive
11. Some guests take the piss with heating and water. We had one guest who used 10 x the monthly water volume in 1 week, and another guest who ran the heating at 24 degrees 24/7 in all rooms even though they were only using two bedrooms
12. One couple used every bed and every bathroom in the property in a 3 day stay
13. One guest managed to snap a new bedframe, another managed to smash the glass on the logburner
14. One couple left their sex toys and accessories
15. Guests rarely out te rubbish out on collection day
My wife works for Sykes - the issues they have to deal with make the above look minor.
We are selling our place because the hassle is huge and we don't get to use it enough ourselves.
1. You never get the volume of bookings the agencies say you will. You will get booked over the summer and 60% change of bookings in the other key holidays,
2. Housekeeping and linen are expensive
3. Insurance is expensive, our 3 bed property costs £600 pa
4. If you don't take dogs you severely limit the market
5. To get zero business rates you need a large number of bookings and in bad years you won't hit the target.
6. Lots of councils charge at least 2 x rates for holiday lets not registered as a business, if its a business you have to find your own rubbish collector
7. Lots of regs on fire safety, smoke alarms, fire doors
8. Some guests will damage the property
9. Some guests are completely unreasonable - eg full refund demanded because there was a single fly in the property (rural area in summer)
10. Agency fees are expensive
11. Some guests take the piss with heating and water. We had one guest who used 10 x the monthly water volume in 1 week, and another guest who ran the heating at 24 degrees 24/7 in all rooms even though they were only using two bedrooms
12. One couple used every bed and every bathroom in the property in a 3 day stay
13. One guest managed to snap a new bedframe, another managed to smash the glass on the logburner
14. One couple left their sex toys and accessories
15. Guests rarely out te rubbish out on collection day
My wife works for Sykes - the issues they have to deal with make the above look minor.
We are selling our place because the hassle is huge and we don't get to use it enough ourselves.
I have a FHL on the Isle of Skye which has been running since 2022. I manage the property and do changeovers myself which means I m able to spot if something is broken/needing upgraded so the property is always in tip top condition. I ve only ever used Airbnb to market the property but Skye is a bit of a hotspot for tourists so property fills up regardless during tourist season.
My busy season is April till October (plus Christmas/New Year) so I need to factor in that for almost 5 months there s no money coming in but still money going out. There are FHL rules that mean you are liable for business rates but as my property is small I m eligible for Small Business Bonus Scheme and get 100% discount so pay no rates. There may be something similar in England.
I ve found most guests are there to enjoy a well earned holiday not to deliberately trash your property. Yes accidents happen but, fingers crossed, I ve not encountered anything major to date. My FHL only has 2 bedrooms and tends to attract couples or families so no large groups. I also do a minimum of a 5 night stay which I think helps the type of guests who book, other hosts locally who offer 1/2 night stays sometimes attract those not always willing to follow the house rules! Despite being a dog owner I don t allow dogs (just extra cleaning I d imagine) and it doesn t appear to have any effect on bookings.
I ve set up my FHL like I would expect if I was paying money to stay there, spotlessly clean, enough toilet rolls/dishwasher tabs for the duration of the stay, welcome basket, informative visitor pack etc etc. Generally my interaction with guests is minimal as I have a lockbox and just leave them to it. Every year there s always a few guests who need their hands held in order to work the hob/woodburner or whatever. I once got a message asking me what they should do that day as it was raining!!
Generally though I enjoy what I do although I spend a considerable amount of time getting stains out of white towels and go through a ton of Vanish !
If you want to know anything else please ask.
Edit to add … in Scotland we must have a Short Term Let licence and I’d guess this will probably come into effect in England too.
My busy season is April till October (plus Christmas/New Year) so I need to factor in that for almost 5 months there s no money coming in but still money going out. There are FHL rules that mean you are liable for business rates but as my property is small I m eligible for Small Business Bonus Scheme and get 100% discount so pay no rates. There may be something similar in England.
I ve found most guests are there to enjoy a well earned holiday not to deliberately trash your property. Yes accidents happen but, fingers crossed, I ve not encountered anything major to date. My FHL only has 2 bedrooms and tends to attract couples or families so no large groups. I also do a minimum of a 5 night stay which I think helps the type of guests who book, other hosts locally who offer 1/2 night stays sometimes attract those not always willing to follow the house rules! Despite being a dog owner I don t allow dogs (just extra cleaning I d imagine) and it doesn t appear to have any effect on bookings.
I ve set up my FHL like I would expect if I was paying money to stay there, spotlessly clean, enough toilet rolls/dishwasher tabs for the duration of the stay, welcome basket, informative visitor pack etc etc. Generally my interaction with guests is minimal as I have a lockbox and just leave them to it. Every year there s always a few guests who need their hands held in order to work the hob/woodburner or whatever. I once got a message asking me what they should do that day as it was raining!!
Generally though I enjoy what I do although I spend a considerable amount of time getting stains out of white towels and go through a ton of Vanish !
If you want to know anything else please ask.
Edit to add … in Scotland we must have a Short Term Let licence and I’d guess this will probably come into effect in England too.
Edited by Catz on Monday 19th January 17:10
Fantastic insight and info, many thanks. I had supper with a friend last night who said ‘don’t even think about it’! I am a landlord so aware of the general hassle but have not owned a holiday let. It seems the agro experienced by general landlords is amplified many times over! That’s not to say there couldn’t be opportunity, but a lot of thought is required. Comes down to buying the right thing, but has to be at a fire sale price to offset the hostile environment and increased risks.
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