Are you thinking about buying a second home to rent out on a short-term basis for holidaying purposes? Fancy yourself as an Air BnB landlord? A holiday home may be your solution, and our mortgage advisers can help you finance it.
It’s no surprise that since the covid-19 pandemic, the rise of the staycation has been steadily increasing. With more and more Britons looking to holiday in some of the most attractive parts of the UK, we’ve caught up with LDN Finance’s Associate Director Drew Somerston, who has seen a sustained increase in the purchase of holiday homes for commercial purposes and additional income since 2019.
What is a holiday let home?
Rather than a long-term buy to let (BTL) property, a holiday let investment home provides more flexibility by allowing you to rent it out on a short-term basis to holidaymakers as a business. Additionally, you can also use it personally as a holiday home at certain times in the year.
When you drill down to the properties themselves, we see many applications for holiday let mortgages cross our desks for all different kinds of properties. Whether it’s a small house or big house, flat or HMO, there are finance options available. As a London mortgage broker specialising in complex property finance, we’ve also encountered challenging covenants that stipulate regulations which can’t be avoided. With a team of advisers who think outside of the box, we were able to arrange finance through our extensive panel of lenders.
The potential of high returns
One of the main attractions for purchasing a holiday home is the lucrative yields they can obtain. These yields have rocketed over the past few years and it’s not surprising to see that well-maintained properties, in coastal and countryside locations, are producing yields over 10% pa.
Most importantly, as furnished holiday lets (FHLs) are considered businesses they offer appealing tax benefits for many landlords. Depending on your circumstance, there may be taxable allowance offsets available to you. For example, council tax, repairs and specifically, mortgage interest against profits are all options to explore. However, in order to understand your options, it is vital you seek professional tax advice with an appropriate tax adviser before proceeding.
Not an experienced landlord? Finance may still be available
With holiday homes taking the property industry by storm, we’ve also noticed an increasing trend of two types of purchases. First-time holiday home owners and experienced portfolio landlords. On one hand we see first-timers investing extensively into the market to add high-yielding rental assets to their income, whilst on the other we see experienced landlords diversifying their portfolios by adding a holiday home into the mix, given how lucrative an investment they can be.