Holiday rental - Advice please!
Discussion
My in-laws have a house in a popular tourist location in Wales. The family owns the house, 25% each, and has no mortgage. The discussion is around the dilemma of selling or actively renting it as a holiday let.
I've done the following so far
I've done the following so far
- Built a model of weekly rental charges based on similar local properties and how they change throughout the year.
- Built outgoing costs on the basic running of the property (Based on what it costs to run a house as a home, not a business, so I will be missing things here)
- I am aware of the council tax issues of a second home in Wales and have factored this in at 300% (could still rise to 400%)
- Outside of the typical costs of running a house, what else is there to consider in terms of outgoings (Agent fees, cleaning, what sort of one-off costs are there?)
- How does the income work as the house is owned between the 4 of them? Do they take a salary from the house and sort it out at self-assement time?
- I assume setting up a limited co. is out of the question due to the stamp duty charges for the company having to buy it?
ThisInJapanese said:
My in-laws have a house in a popular tourist location in Wales. The family owns the house, 25% each, and has no mortgage. The discussion is around the dilemma of selling or actively renting it as a holiday let.
I've done the following so far
From your revenue projection knock off 21% for agents / marketing fees.I've done the following so far
- Built a model of weekly rental charges based on similar local properties and how they change throughout the year.
- Built outgoing costs on the basic running of the property (Based on what it costs to run a house as a home, not a business, so I will be missing things here)
- I am aware of the council tax issues of a second home in Wales and have factored this in at 300% (could still rise to 400%)
- Outside of the typical costs of running a house, what else is there to consider in terms of outgoings (Agent fees, cleaning, what sort of one-off costs are there?)
- How does the income work as the house is owned between the 4 of them? Do they take a salary from the house and sort it out at self-assement time?
- I assume setting up a limited co. is out of the question due to the stamp duty charges for the company having to buy it?
Assume £100-£150 per week rented for cleaning and laundry.
Assume £1000 a year minimum for towels and maintenance.
Assume you’ll rent for a maximum of 30 weeks March - October.
Assume 4x council tax for the first year and ongoing unless it’s advertised all year and let’s for 180 days.
Income in to a single account, take all costs out as you go, split any profits less required balances to run business, each pay tax, will need an accountant to review and ideally to do self assessment tax submissions for each if they don’t already.
bennno said:
From your revenue projection knock off 21% for agents / marketing fees.
Assume £100-£150 per week rented for cleaning and laundry.
Assume £1000 a year minimum for towels and maintenance.
Assume you’ll rent for a maximum of 30 weeks March - October.
Assume 4x council tax for the first year and ongoing unless it’s advertised all year and let’s for 180 days.
Income in to a single account, take all costs out as you go, split any profits less required balances to run business, each pay tax, will need an accountant to review and ideally to do self assessment tax submissions for each if they don’t already.
Thanks, all useful. Assume £100-£150 per week rented for cleaning and laundry.
Assume £1000 a year minimum for towels and maintenance.
Assume you’ll rent for a maximum of 30 weeks March - October.
Assume 4x council tax for the first year and ongoing unless it’s advertised all year and let’s for 180 days.
Income in to a single account, take all costs out as you go, split any profits less required balances to run business, each pay tax, will need an accountant to review and ideally to do self assessment tax submissions for each if they don’t already.
Had put in 15% for agents, £100 per weekly rental (2 bed house in Wales, these seem about right). Maintenance is a good point, will chuck that in as well.
30 weeks seems good, I had read somewhere that 25 was the average.
It will be advertised all year and 25 weeks of rental should be doable... The tax all seems to be straightforward as well, shouldn't be too hard to manage and in time I'm sure we can work out what's decutable or not etc etc
Frimley111R said:
The key issue, financials aside, is managing it. Short term lets are a PITA unless you're there all the time. Guests arrive and depart at random times, you need to clean the place each time, etc. Rent it long term or sell if you're not there.
Interesting, I woke up this morning thinking the place should be sold.I looked at a long-term rental, and there are 3 properties within 10 miles of the town that are on Rightmove for rental. It's very much a seasonal holiday town that doesn't seem to have a strong long-term rental market. Will look into it a little more, as the one thing that does bother me is that if my wife were to run it, the house is 4 hours away and not something that we can manage ourselves.
ThisInJapanese said:
- I assume setting up a limited co. is out of the question due to the stamp duty charges for the company having to buy it?
ThisInJapanese said:
Interesting, I woke up this morning thinking the place should be sold.
I looked at a long-term rental, and there are 3 properties within 10 miles of the town that are on Rightmove for rental. It's very much a seasonal holiday town that doesn't seem to have a strong long-term rental market. Will look into it a little more, as the one thing that does bother me is that if my wife were to run it, the house is 4 hours away and not something that we can manage ourselves.
If you think your wife will end up doing all the work, for 25% of the reward, and the hassle of the other three owners all thinking they could do better on top of the hassle of holiday renters - sell!I looked at a long-term rental, and there are 3 properties within 10 miles of the town that are on Rightmove for rental. It's very much a seasonal holiday town that doesn't seem to have a strong long-term rental market. Will look into it a little more, as the one thing that does bother me is that if my wife were to run it, the house is 4 hours away and not something that we can manage ourselves.
Mr Overheads said:
HolidayHouse Ltd could be appointed to manage the property, so it has a bank account etc, HH Ltd has 4 shareholders who each take a quarter of the Dividend. You coudl even have 4 different share classes, each with their own Dividend declaration, so if someone doesn't want to take a divi for their personal tax circumstances then they don't need to and you accrue it in the accounts. HH Ltd doesn't need to own the property, it's simply the managing agent. HH Ltd then appoints cleaners and whoever else it needs.
Thanks.HolidayHouse Ltd doesn't have to buy it then and doesn't have to pay the stamp duty again. That's interesting as what I skimmed last night was either written to put people off or wrong.
wisbech said:
If you think your wife will end up doing all the work, for 25% of the reward, and the hassle of the other three owners all thinking they could do better on top of the hassle of holiday renters - sell!
Maybe / maybe not, but it's certainly not impossible that it could end up that way. I think 25% of the profit isn't enough to justify the work, but that's for them to decide. bennno said:
Where in Wales?
Unless you are in an area that’ll support 30 weeks + occupancy then might be worthwhile if not then probably not, without a USP then there’s a lot of competition and rental reductions going on.
Tenby, 5 minute walk from the beaches / town. Unless you are in an area that’ll support 30 weeks + occupancy then might be worthwhile if not then probably not, without a USP then there’s a lot of competition and rental reductions going on.
Lots of competition, but lots of the places I looked at last night are already booked for the 15 weeks of school holidays. It's just getting it from 15 weeks to 30 weeks which will be the challenge.
Mr Overheads said:
ThisInJapanese said:
- I assume setting up a limited co. is out of the question due to the stamp duty charges for the company having to buy it?
The key is getting a decent management co - the flat I rent short term is in a major city so there's tonnes of management companies that specialise in short term lets. On a day-to-day basis, I do very little and they manage all the bookings, listings, check-in/check-out, turnaround (inc. cleaning, linen, etc).
I would recommend you get a book of your own trusted trades, though - electrician, plumber and handyman. If the management company sends out their own, you're going to be paying extortionate fees!
Don't ever underestimate how badly guests can ruin your home...
We used to rent out our villa in Portugal, but never again. Phone calls to say 'the air conditioning vent has fallen down' - how? How does a vent which has been attached to the ceiling for years fall down within minutes of you and your children's' arrival.
Glasses washed with scouring pads, food down the cracks in the sofas, sink basins cracked, one wall ruined in the games room where people have missed the dart board by some margin, fire extinguisher discharged 'accidentally'...
Of course, some guests are lovely.
We used to rent out our villa in Portugal, but never again. Phone calls to say 'the air conditioning vent has fallen down' - how? How does a vent which has been attached to the ceiling for years fall down within minutes of you and your children's' arrival.
Glasses washed with scouring pads, food down the cracks in the sofas, sink basins cracked, one wall ruined in the games room where people have missed the dart board by some margin, fire extinguisher discharged 'accidentally'...
Of course, some guests are lovely.
Were a bit further East than Tenby but typically Holiday let firms here are charging 30% - lots of AirB&B companies looking after properties down that way as well (Pass the Keys is one of them - no connection) - sometimes by the time you take in the voids the repairs, the upkeep etc, a single long term rent can be not £ better but just so much easier (particularly if there a re family involved)
wisbech said:
ThisInJapanese said:
Interesting, I woke up this morning thinking the place should be sold.
I looked at a long-term rental, and there are 3 properties within 10 miles of the town that are on Rightmove for rental. It's very much a seasonal holiday town that doesn't seem to have a strong long-term rental market. Will look into it a little more, as the one thing that does bother me is that if my wife were to run it, the house is 4 hours away and not something that we can manage ourselves.
If you think your wife will end up doing all the work, for 25% of the reward, and the hassle of the other three owners all thinking they could do better on top of the hassle of holiday renters - sell!I looked at a long-term rental, and there are 3 properties within 10 miles of the town that are on Rightmove for rental. It's very much a seasonal holiday town that doesn't seem to have a strong long-term rental market. Will look into it a little more, as the one thing that does bother me is that if my wife were to run it, the house is 4 hours away and not something that we can manage ourselves.
22s said:
This is how I currently do it.
The key is getting a decent management co - the flat I rent short term is in a major city so there's tonnes of management companies that specialise in short term lets. On a day-to-day basis, I do very little and they manage all the bookings, listings, check-in/check-out, turnaround (inc. cleaning, linen, etc).
I would recommend you get a book of your own trusted trades, though - electrician, plumber and handyman. If the management company sends out their own, you're going to be paying extortionate fees!
What does your accountant say about the limited company not really managing the property (given you use a management co)? Personally I wouldn't be confident advising that works and I don't think HMRC would like it either.The key is getting a decent management co - the flat I rent short term is in a major city so there's tonnes of management companies that specialise in short term lets. On a day-to-day basis, I do very little and they manage all the bookings, listings, check-in/check-out, turnaround (inc. cleaning, linen, etc).
I would recommend you get a book of your own trusted trades, though - electrician, plumber and handyman. If the management company sends out their own, you're going to be paying extortionate fees!
MaxFromage said:
22s said:
This is how I currently do it.
The key is getting a decent management co - the flat I rent short term is in a major city so there's tonnes of management companies that specialise in short term lets. On a day-to-day basis, I do very little and they manage all the bookings, listings, check-in/check-out, turnaround (inc. cleaning, linen, etc).
I would recommend you get a book of your own trusted trades, though - electrician, plumber and handyman. If the management company sends out their own, you're going to be paying extortionate fees!
What does your accountant say about the limited company not really managing the property (given you use a management co)? Personally I wouldn't be confident advising that works and I don't think HMRC would like it either.The key is getting a decent management co - the flat I rent short term is in a major city so there's tonnes of management companies that specialise in short term lets. On a day-to-day basis, I do very little and they manage all the bookings, listings, check-in/check-out, turnaround (inc. cleaning, linen, etc).
I would recommend you get a book of your own trusted trades, though - electrician, plumber and handyman. If the management company sends out their own, you're going to be paying extortionate fees!
22s said:
To be clear, I'm not advising anyone - I'm just saying how I do it. Accountant thinks it's fine, though admitted it's a grey area.
I appreciate that. If the company setup essentially saves personal tax at 40% and moves to 19% corporation tax, then I'd be very wary. And thinking it through, are you sure you aren't losing your right to business asset disposal relief (10% tax) on the sale of the holiday let given you may have split the trade from the asset and therefore no longer qualify? I really don't think it's a risk worth taking without solid tax advice. Grey area isn't the right answer here. Ask your accountant this question and get them to confirm why you can carry on with this setup.
MaxFromage said:
22s said:
To be clear, I'm not advising anyone - I'm just saying how I do it. Accountant thinks it's fine, though admitted it's a grey area.
I appreciate that. If the company setup essentially saves personal tax at 40% and moves to 19% corporation tax, then I'd be very wary. And thinking it through, are you sure you aren't losing your right to business asset disposal relief (10% tax) on the sale of the holiday let given you may have split the trade from the asset and therefore no longer qualify? I really don't think it's a risk worth taking without solid tax advice. Grey area isn't the right answer here. Ask your accountant this question and get them to confirm why you can carry on with this setup.
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