Owning a furnished holiday let

This article is an introduction to owning a furnished holiday let.

We will outline the ins and outs, factors you should consider, and the expected rate of return on your investment – everything you need to consider when thinking about starting or increasing a property portfolio through the addition of furnished holiday lets (FHLs.)

It is a well-known fact that institutional investment funds have known about the profits available by investing in the UK holiday park industry for many years, so why shouldn’t everyone have the opportunity to make their money work smarter by owning a furnished holiday let?

In our recent article why the UK staycation market is a sound investment, we outlined the main factors that have boosted the boom in UK staycations and why now is the perfect time to invest capital into furnished holiday lodges.

If you would like to discuss your options, email us, and a member of the Holmeshaw team will call you back to discuss our assured property investment opportunities.

Whether you are new to property investment or have an existing property portfolio, there are some important things to consider before investing in short-term rental holiday properties.

Location, location, location

We know it’s a cliché, but it is one for a sound reason – it happens to be true!

When searching for the ideal location for a holiday home investment, you need to consider a few factors.

1.     Is it situated in a locale well known for holidays? If so, you are tapping into an established market where there will already be a high demand for rental and resale property, so there is less chance of:

·       The property stands empty

·       The market is experiencing a fall in rental values

·       A drop in resale value, other than fluctuations caused by external financial factors, such as the budget

2.     Does the location have a unique selling point? For example, coastal locations provide family activities, water sports, coastal walks, picturesque villages, places of interest etc. Inland locations can offer freshwater lakes for fishing, swimming,  and water activities. Rural settings provide idyllic natural surroundings for well-being retreats, nature walks, and the opportunity to get away from the stress and ‘noise’ of normal life.

3.     Does the location appeal to several types of holidaymakers? If the location offers various kinds of holiday experiences, then it will appeal to a wider customer base. Activity holidays for families or the adventurous, relaxing or romantic getaways for couples, luxury retreats for those with busy lives, places of interest for history lovers, interesting or celebrated restaurants for foodies etc.

4.     Is the location easy to get to? The location of your holiday home should be easily accessible to increase its appeal to a higher number of visitors.

Although we always recommend that investors research the location thoroughly, at Holmeshaw we carry out location research ourselves to make sure the project is a viable investment opportunity.

This includes checking that our furnished holiday lodges are in amazing locations with high rental demand, so clients maximise both the rental return and the opportunity for capital growth.

If you would like to know more about our research, our article called due diligence for property investments explains everything.

Furthermore, because Holmeshaw partners with a variety of the largest family-owned portfolio holders of holiday parks within the UK, our investors benefit from specialist property management services. This offers clients a hands-free investment opportunity because everything from marketing to daily management is taken care of.

Tax benefits of investing in a holiday home

The tax benefits of investing in an FHL (especially for business owners) are:

·       Tax relief on trading expenses, including interest costs, insurance, repairs, energy costs, and travel to and from (purely as a business, not when using for personal holiday use).

·       Some furnished holiday lodges are classed as plant and machinery by the HMRC, so you can enjoy full expensing (until the end of March 2026.) This also applies to fixtures, furniture, heating/lighting and ventilation.

·       On resale of the property, the owner will benefit from Capital Gains Tax Relief

·       Tax advantages pension contributions because income from rental is classed as earnings

·       Ownership can be split between two parties, so both can benefit from pension contributions and rental profits

For more in-depth information, please read our article Budget Update: Property investment for business owners. 

Understanding the financials

There are many reasons why people choose to build a property portfolio, from retirement plans and seeking a higher return on savings to establishing a second income stream or investing company profits.

Individual circumstances vary, so it is important to check out the financials to ensure that buying a holiday home is right for your financial situation, both now and looking forward.

This type of investment can tie up capital for at least five years, so you must carefully consider the implications to your personal or business finances.

·       Full cash investment required, whether personal or business

·       Fully secured deposit

·       Unit cost = starting price, which varies according to the specification

·       Net rental = the average monthly or annual profit you can earn.

·       Number of days per year for personal use

·       No stamp duty or council tax to pay

Don’t forget to take into account the running costs (check to see whether they are included) and any tax implications (both personal and business), alongside the rental return and personal benefits of owning a holiday home.

With Holmeshaw property investment, the expected rental return is higher than leaving your cash in the bank.

According to The Time money mentor, at the time of writing this, the top cash ISAs and savings accounts offered the following returns:

·       Top cash ISA - 4.71% (two-year fixed rate)

·       Top easy access cash ISA - 3.75%

·       Top easy-access savings account - 4%

· One-year fixed terms bond - 5.36%

N.B. Although a personal regular savings accounts can offer up to 9%, strict criteria apply.

Escape to the serene beauty of Woodlakes Park

If we compare these figures to luxury holiday lodges offered by Holmeshaw property investments, the net rental return starts at 8%, rising to 9% for Woodlakes Retreat in Norfolk

There are other factors to take into consideration when buying a holiday home, which are offered as standard on our holiday lodges:

·       Management/maintenance fees are already deducted, so 8% rental return is what you can expect based on the average annual occupancy for the same type of holiday lodge on the site (up to 80%.)

·       Structured exit strategies for some locations

·       Buy back options from some parks after as little as five years at 110%

Holmeshaw has a range of holiday lodge investment opportunities to make your money work smarter:

·       Woodlakes Park @ Norfolk - units start at £179,000

·       Sherwood Castle Holiday Forest @ Nottingham -  lodges start at £179,000

If you choose owning a furnished holiday let for investing capital, why not contact us for more information? At Holmeshaw, we stand by our client promise that we only recommend property investment opportunities we would be happy to invest in ourselves.

As with all investments, Holmeshaw encourages investors to seek advice from a financial advisor before deciding to invest capital into the property.