If you can afford to buy a holiday home, should you take the plunge? That’s not a question you should take lightly, with a number of pros and cons to weigh up first before you make your decision.
With more and more people in the UK becoming second-home owners – second-home ownership is up 30% since 2000, figures show
– it would suggest that a holiday home is money well spent.
But, while for some people owning a holiday home is everything they’d hoped it would be – a home away from home; a place where many happy memories are made – for others, it proves to be a bit of a nightmare, acting only as a drain on their finances and decidedly more trouble than it’s worth.
To help you make the decision that is right for you, we’ve compiled some of the potential advantages and disadvantages of second-home ownership, concluding with how taking out holiday home insurance
would cover you if the worst did happen.
Pros of owning a holiday home
1. Easy getaway
What attracts most people to the idea of a second home is the ability to go on holiday whenever they like. Who doesn’t want to just be able to jump in the car and get away from the humdrum of life?
Owning a holiday home means you don’t have to worry about packing too much. Just leave some stuff like clothes, surfboards and the like at your second home and you can travel light and at the drop of a hat, knowing that you’ll not be forgetting anything that will impact you having a great time.
Spare weekends with nothing to do will never be the same again…
2. Highly lucrative
Another strong reason why Brits are getting themselves onto the second-property ladder is that holiday homes can often prove highly lucrative, especially at peak times of the year.
If, for example, your holiday home is family friendly (and located in a desirable spot), people might be willing to pay a premium to stay in your property during the school summer holidays.
Obviously, you need to weigh up how often you make your property available for letting, if you want to use the property personally. And you need to bear in mind that there might be quiet spells where you’re unable to make much money in renting out the property. But, if you can master the peaks and troughs, you could have the best of both worlds. Just make sure that you’ve got the right holiday home insurance in place so any guest accidents or mishaps will be covered.
3. Marketing is easy
Websites like Airbnb and HomeAway have made it easy for second-home owners to let out their holiday homes.
They do most of the work for you from a marketing point of view – all you have to do is ensure that you’ve uploaded some pictures that show your holiday home in its best light and respond to any customer queries quickly and efficiently.
4. Favourable tax laws
Holiday lets are subject to more favourable tax laws than standard rental properties, thanks to being seen as a trading venture rather than an investment. But, in order to get on the right side of Her Majesty's Revenue & Customs (HMRC), you may have to let it out to holidaymakers. As we’ve already covered, there is a strong financial incentive to do so in terms of yield, but some people may prefer to keep their second home entirely to themselves.
Cons of owning a holiday home
1. Inflated prices
As you might imagine, buying a property in sought-after areas of the UK, like Cornwall, often means paying ‘over the odds’ for a holiday home. For some people, this might mean they have to settle for somewhere less desirable – but that isn’t to say it will be any less enjoyable when you come to spend time there.
If you’re going to try and make some money on your holiday let, the more you pay for it, the longer it will take to turn a profit. You might even be forced to let it out at certain times of the year that you wanted to use it personally.
2. Obtaining a mortgage
If you need to take out a mortgage on your second home, you could have trouble meeting increasingly tough affordability criteria set by lenders.
Unsurprisingly, banks and building societies will want to see some strong evidence that you will be able to keep up with the mortgage repayments on your second home – especially if you have a mortgage for your current property.
Lenders might also be put off from giving you a mortgage if your holiday home is located in a place where there is a risk of flooding, such as the Lake District, or stipulate that you will need to take out extensive holiday home insurance cover.
3. Damage & disruption
If you’re planning to let out your second home to the public (i.e. strangers) you need to prepare yourself for potential damage and disruption.
While you can go some
way to ensuring that you don’t allow anybody in the property who’s going to careless and disrespectful, accidents do happen – and the more guests that use the property, the higher the risk of accidental (or deliberate) damage.
Make sure you’re covered
Standard home insurance will not provide adequate cover for a holiday let. Therefore, you’ll need to take out specialist holiday home insurance.
If you plan on renting out your holiday home to paying guests, for example, you’ll need to consider including public liability cover as part of your holiday home insurance policy.
Also, if the property is going to be left unoccupied for long periods of time, you’ll need to ensure that you’re covered for the raised risk of water leaks, burst pipes and theft.
While insurance is often seen as unnecessary extra expense, it does provide you with some crucial peace of mind – not to mention covering you for the cost of any accidental/malicious damage and anything else that goes wrong with the property.
When it comes to getting the right holiday home insurance
cover, look no further than Insurance Choice. Get a no-obligation holiday home insurance quote from us today.