Holiday property investment and lettings
Discussion
I’m considering my property options at the moment, and am not sure what is the best option. The background first, I’m British but live in Switzerland and am Swiss resident, but have a house in the UK which is rented out. We are now 9 months away from the two year ‘buffer’ where no CGT is due on the increase in value and the main question is do I keep the house or sell it and do something else with the cash, we will move back to the UK eventually, but not to this house as it’s too small and not in the right location.
As a result of the new mortgage lending rules introduced in the UK last April I can’t buy somewhere else in the UK, or even re-mortgage the current place – getting a decent deal as a non-EU resident is nigh on impossible so I’m looking at a 25% deposit and 5.8% interest as the best deal out there, which is a non-starter obviously. Yield on the current place is about 4.5%, and I’m not sure how much the appreciation in value will help support this going forward.
I’ve now been drawn towards holiday property as a potential option, the house in England is let out so we don’t use it when we visit, and it makes a little bit of money but nothing huge, and I like the idea of having something we can use ourselves as well as renting it out. Mostly I’m looking at France, either the Cote d’Azur or Ile de Re, as I speak the language and these are the two areas where we tend to holiday at the moment, but I’m also considering Mallorca (don’t speak Spanish, but do speak German and it’s pretty much a German colony now) and maybe Ibiza. With the weakness of the Euro against the CHF (which I’m paid in) and GBP (which my current property/capital is in) I think it’s probably a good time to be buying in the Eurozone, as long as it’s property which isn’t likely to bomb in value in the next recession.
What kind of occupancy rates would you expect to see on a property like this? I guess it’s easy to fill from May to September and the rest of the time it’s mostly going to be empty or have to be cheap to attract visitors. I know it’s higher risk than a normal residential rental, but I’d be less leveraged than I am now and could afford to support it if needed. I guess I’d have to use an agent of some sort to do changeovers and hand keys over, is this a load of hassle?
So, does anyone do anything similar? Would you recommend it?
As a result of the new mortgage lending rules introduced in the UK last April I can’t buy somewhere else in the UK, or even re-mortgage the current place – getting a decent deal as a non-EU resident is nigh on impossible so I’m looking at a 25% deposit and 5.8% interest as the best deal out there, which is a non-starter obviously. Yield on the current place is about 4.5%, and I’m not sure how much the appreciation in value will help support this going forward.
I’ve now been drawn towards holiday property as a potential option, the house in England is let out so we don’t use it when we visit, and it makes a little bit of money but nothing huge, and I like the idea of having something we can use ourselves as well as renting it out. Mostly I’m looking at France, either the Cote d’Azur or Ile de Re, as I speak the language and these are the two areas where we tend to holiday at the moment, but I’m also considering Mallorca (don’t speak Spanish, but do speak German and it’s pretty much a German colony now) and maybe Ibiza. With the weakness of the Euro against the CHF (which I’m paid in) and GBP (which my current property/capital is in) I think it’s probably a good time to be buying in the Eurozone, as long as it’s property which isn’t likely to bomb in value in the next recession.
What kind of occupancy rates would you expect to see on a property like this? I guess it’s easy to fill from May to September and the rest of the time it’s mostly going to be empty or have to be cheap to attract visitors. I know it’s higher risk than a normal residential rental, but I’d be less leveraged than I am now and could afford to support it if needed. I guess I’d have to use an agent of some sort to do changeovers and hand keys over, is this a load of hassle?
So, does anyone do anything similar? Would you recommend it?
Firstly, not sure which 2 year buffer you're referring to - the rules changed overnight a while back from 3 years to 18 months - I went from being well inside to over the threshold which was nice!
Holiday lets - from the perspective of renting a ski apartment - don't underestimate the time/hassle in marketing, dealing with enquiries, handling check in/out, collecting rent/deposits, cleaning, fixing issues, etc.
I found peak weeks like half term I could rent 10 times over, non peak sometimes I'd be lucky to get a single enquiry.
I'd do a lot of research in your chosen areas for businesses or people that support the local holiday let market and can handle everything on the ground for you, and more importantly you can trust. After 2/3 bad ones who only lasted a season I found a very good one that I've dealt with for quite a few years now, the main difference being she treats it as a proper business, to the others it was pocket money income.
I've given up on actively renting now as it was too much of a drain on time.
Holiday lets - from the perspective of renting a ski apartment - don't underestimate the time/hassle in marketing, dealing with enquiries, handling check in/out, collecting rent/deposits, cleaning, fixing issues, etc.
I found peak weeks like half term I could rent 10 times over, non peak sometimes I'd be lucky to get a single enquiry.
I'd do a lot of research in your chosen areas for businesses or people that support the local holiday let market and can handle everything on the ground for you, and more importantly you can trust. After 2/3 bad ones who only lasted a season I found a very good one that I've dealt with for quite a few years now, the main difference being she treats it as a proper business, to the others it was pocket money income.
I've given up on actively renting now as it was too much of a drain on time.
Thanks for that, I will have to check the CGT situation, 2 years is what I was told but maybe it's wrong, if the limit is 18 months then I have until June...
What do you pay an agent to manage the changeovers etc, a flat fee or proportion of the rental? Whichever option we go for it'll be a plane ride, or 6-8 hour drive away so having someone on the ground would be essential.
I guess you have to pay tax in the country where the property is located, although for the moment it's more about having somewhere nice for holidays which pays for itself rather than making money - if I can break even on mortgage costs and bills then I'd be happy to rely on capital appreciation and currency movements for the profit.
What do you pay an agent to manage the changeovers etc, a flat fee or proportion of the rental? Whichever option we go for it'll be a plane ride, or 6-8 hour drive away so having someone on the ground would be essential.
I guess you have to pay tax in the country where the property is located, although for the moment it's more about having somewhere nice for holidays which pays for itself rather than making money - if I can break even on mortgage costs and bills then I'd be happy to rely on capital appreciation and currency movements for the profit.
Have a look on various "owners abroad" type websites when researching various areas, you can see which weeks are blocked out/prebooked, some of these may be booked for family use but you will get a good idea.
We had a two bed plus sofabed flat in a condo in Juan les pins/ antibes let it very easily every july august which is a good time to avoid the area.
However as you have just made 20% plus on CHF/E why not buy something in UK
as an ex pat, there are one or two lenders who will back you, depends what sort of budget you have in mind and what your history is.
I've just helped a mate buy an 8 bed student house in Exeter who is ex pat and could show some wealth
We had a two bed plus sofabed flat in a condo in Juan les pins/ antibes let it very easily every july august which is a good time to avoid the area.
However as you have just made 20% plus on CHF/E why not buy something in UK
as an ex pat, there are one or two lenders who will back you, depends what sort of budget you have in mind and what your history is.
I've just helped a mate buy an 8 bed student house in Exeter who is ex pat and could show some wealth
Rangeroverover said:
Have a look on various "owners abroad" type websites when researching various areas, you can see which weeks are blocked out/prebooked, some of these may be booked for family use but you will get a good idea.
We had a two bed plus sofabed flat in a condo in Juan les pins/ antibes let it very easily every july august which is a good time to avoid the area.
However as you have just made 20% plus on CHF/E why not buy something in UK
as an ex pat, there are one or two lenders who will back you, depends what sort of budget you have in mind and what your history is.
I've just helped a mate buy an 8 bed student house in Exeter who is ex pat and could show some wealth
My capital is in GBP at the moment, not CHF so I haven't made anything with the CHF move sadly.We had a two bed plus sofabed flat in a condo in Juan les pins/ antibes let it very easily every july august which is a good time to avoid the area.
However as you have just made 20% plus on CHF/E why not buy something in UK
as an ex pat, there are one or two lenders who will back you, depends what sort of budget you have in mind and what your history is.
I've just helped a mate buy an 8 bed student house in Exeter who is ex pat and could show some wealth
The issue with buying in the UK is that I don't want a UK holiday home so it'd need to be a house we would want to move back to eventually and that puts it outside our budget on the 75% LTV which seems to be the best I can get (need 85% to get where we want to be), whereas a 70% LTV in Europe will get us a nice rentable place in Europe which we can also get some use from.
Your view on when to avoid Antibes is the same as mine - my son is 1 1/2 so we aren't tied to school hols, so we can let it for the whole of July and August happily and are more likely to use the place in April/May and September/October ourselves.
Eric Mc said:
The 18 month rule relates to properties that have been, at one point, your main residence. As has been mentioned, it was previously 36 months (or three years). It changed with effect from 5 April 2014.
There never was any "2 Year Rule".
Thanks Eric, I was clearly mis-advised by the person who told me 2 years. The house was our main residence from 11th May 2011 (the date we bought it) until Dec 24th 2013 when we moved out which I guess gives us until June 23rd to get it sold if we don't want to pay the tax. There never was any "2 Year Rule".
It appears the 'cost to buy' in Spain is prohibitively high, looking like 12-13% of the purchase price, and 70% LTV, while France is more like 7% and 80% LTV so is edging ahead now (and is also easier as I speak French but not Spanish). I can get a sub 3% mortgage in both countries too, which is not quite Swiss rates but better than I can get in the UK.
Just to keep this thread updated, it's looking almost impossible to make the UK stack financially as an option unless you rely entirely on increase in value of the house to generate a return. The best deal I can find is 4.49% at 75% LTV and given the yield is unlikely to get far above 5% for the type of place I'm looking at I'm not convinced it makes sense when I can get 2.4% and 80% LTV in France.
Money is cheap, it seems, unless you're trying to buy a house in England as an ex-pat...
Money is cheap, it seems, unless you're trying to buy a house in England as an ex-pat...
Also in a similar position to jamiebae in terms of considering property investment and have concerns about how lucrative the UK might be based on what I can stretch to.
Anyone looking at Vietnam? New property law coming into force in June this year means foreigners will be able to own land/property, but foreign ownership of houses will be restricted to 30% of the number of apartments in a block or 250 houses in an area deemed to be a ward (this is based on population rather than a geographical area but I haven't been able to ascertain the number).
Anyone looking at Vietnam? New property law coming into force in June this year means foreigners will be able to own land/property, but foreign ownership of houses will be restricted to 30% of the number of apartments in a block or 250 houses in an area deemed to be a ward (this is based on population rather than a geographical area but I haven't been able to ascertain the number).
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