Thinking about buying a holiday home? If recent trends are anything to go by, the UK holiday market is set for another booming year with searches and bookings for domestic stays going up by a third compared to last year. This could mean a very profitable investment if you decide to take the plunge.
Whether you’re renting to friends and family, to the wider market or buying for personal use there are a few things to consider before closing the sale; the best location, holiday home insurance
and the type of mortgage you might need are just a few. Insurance is especially needed if you’re planning on your home being left unoccupied for a few of months of the year.
Is buying a holiday home a good investment?
Thinking about purchasing a holiday home but not quite sure if it’s right for you? A UK holiday home in the current times can be a fantastic investment, with searches for staycations rising. But as with any investment, there are a lot of things to consider before you take the plunge.
One of the biggest pluses to owning a holiday home is the income it can generate with some reports suggesting average earnings of circa £18,000
. This will differ, of course, depending on the location and size of the property and the features on offer. You can maximise your investment by considering trends like rising bookings for places with hot tubs, pet-friendly homes and capacities for large groups.
Besides monetary value, your holiday let investment also gives you the benefit of owning a gorgeous home in a stunning location meaning you and your loved ones will also have a place to escape for a few days or weeks every year.
When thinking about investment worth it’s good to consider the responsibilities of owning a holiday property like the cost of upkeep, regular visits and necessary holiday home insurance to cover you against any damage especially during vacant periods.
Where is the best place to buy a holiday home in the UK?
It’s definitely worth giving some consideration to location if you’re serious about buying a holiday home. Some places will be more popular than others and some will be more likely to attract certain types of visitors, like families, so it’s important to think about the type of market you want staying at your property. As a little helping hand, here are our top five suggestions for the best places to buy a holiday home in the UK.
Home to the stunning Jurassic Coast, a multitude of unspoiled beaches and miles upon miles of pristine countryside; it’s no wonder that Dorset springs up as a top-earning location
for UK holiday homes. There’s a range of attractions for families, couples and friends alike.
Coastal holiday lets will appeal to beach-goers and multi-generation holiday-makers looking for a healthy mix of powdery sands, town-life and nature. Meanwhile holiday homes further into Dorset’s impressive countryside will attract adventurers and outdoor-enthusiasts with its abundance of forest walks, country parks and wildlife. Wherever you choose in Dorset you’re bound to be in a good location for fairytale castles, historic houses and stately homes.
The Cotswolds area spans five counties and sits pretty centrally in the UK, meaning your holiday home here will draw visitors from every direction. Made up of quintessentially English towns, quaint villages and rolling hills, no matter where exactly you choose to buy, this special location could give you a very profitable return. Many tourists come for the cute cobbled streets, lively little market towns and to recharge amongst some of Britain’s most beautiful countryside. Little places like Bourton-on-the-Water with its web of cobbled bridges, honey-coloured houses and adorable tea rooms are popular destinations for families and couples alike. The bonus of the Cotswolds is that you can buy your holiday let in a town or out in the rural countryside and visitors can use it as a base for exploring many of England's prettiest locations.
3. The Lake District
It will come as no surprise that the Lake District is one of the most popular staycation breaks for UK holiday-makers with its incredible range of attractions and inspiring natural beauty. In 2017 it was even made a UNESCO World Heritage Site, and it’s not hard to see why. This is home to 12 of England’s largest lakes and the tallest peak - Scafell Pike. Tourists pour into the area from across the country on family breaks and romantic escapes, all looking to connect with nature. No matter where you decide to buy your holiday home – near Lake Ullswater, Coniston or Windermere – this is bound to be a great investment with upwards of 19 million visitors each year.
Inverness is a great destination if you want your holiday let to have an exciting mix of city life and natural beauty. With the stunning Scottish Highlands just a stone's throw away, it certainly hits the mark for guests seeking breathtaking views. The biggest draw for this city is that it’s got a small town feel and unhurried pace of life meaning a nice, stress-free escape for your guests. One of the star attractions guaranteed to bring in visitors for you is the city’s proximity to the Loch Ness – famed, of course, for it’s legendary ‘monster’. But besides a touch of crypto-zoology, Inverness has plenty of castles, cathedrals and historical treasures which will draw all manner of tourists from across the country and further afield.
5. North Wales
Wales is another great location for a holiday home, with research indicating that there we 10.2 million overnight visitors last year alone, over half of which were all in self-catered accommodation.
Towards the north of the country is where things get rural and scenic with visitors flocking to sights like Snowdonia and the Brecon Beacons, as well as coastal destinations like Anglesey and Llandudno. Outdoor activities like mountain hikes, zip-lining and beach days come in spades here. These are equally matched by impressive cultural and historic sites like Aberconway House and Conwy Castle. Whether you want to cater to families, couples or group bonding breaks, you’re sure to reap the rewards in Wales.
Can you get a mortgage on a holiday home?
You might be thinking about the initial costs of financing and buying a holiday home but you’ll be glad to know you can get a mortgage on it. However, this will differ from a standard mortgage and even a buy-to-let mortgage. You can find specific short-term/holiday let mortgages for this kind of property. They may be harder to source than others and with some lenders, you might see some further restrictions compared to your mortgage on your first home so it’s important to do your research when looking for a loan.
You should be aware that most lenders won’t approve a buy-to-let mortgage for your holiday home with the main difference being that holiday homes are let on a short-term basis, usually a few days to weeks at a time unlike long-term tenancies of 6 months or more. As HomeOwners Alliance
explains, your holiday let mortgage will take into consideration things like projected income and other ways of repaying your mortgage when your property is unoccupied.
There are some tax benefits to having a holiday home mortgage, though as furnished holiday homes are classified as a business meaning you can offset any expenses (including mortgage interest) against your rental income.
How much deposit do I need for a holiday let mortgage?
As with the mortgage type, the amount of deposit you will need to stump up for a holiday let mortgage will differ to a usual one, with some suggesting a minimum of between 25% - 30%
. The average cost of a holiday home will depend on the size of the property. The average house price in the UK as of March 2019 stands at £226,798, according to the House Price Index
but prices may be substantially more in the most popular tourist locations like Cornwall or the Lake District.
Holiday let classification rules
There are some ‘rules’ you might need to consider for your second home to be considered a holiday let, especially if you want to reap the tax benefits:
1) The property must be available to book for at least 210 days of the year
2) It must be occupied by paying tenants for a minimum of 105 days a year
3) The property cannot be occupied by tenants for periods longer than 31 days a year (this constitutes a buy-to-let)
4) The property has to be fully furnished
5) In the first year, your property is considered under probation and should only be let to full paying tourists and holiday-makers
How do you buy a holiday home?
If you’re considering buying a holiday home you might be wondering where on earth to start. The key thing is a lot of initial research. There are a lot of things to consider from the right time to buy to the location, financial aspects and holiday home insurance. If you’re buying somewhere that you want to spend plenty of time in as well as letting it out, the look and affordability have to appeal to you and your loved ones, too.
An important part of buying a holiday home is understanding the rules around how long it needs to be let for and what it needs to include. Then you need to shop around for mortgages and holiday home insurance to make sure you’re covered financially and legally from any potential future damage and liability. Different lenders will likely offer you different amounts and in part, this can dictate which location you should be looking in as the average cost of a holiday home can fluctuate across the country.
Once you’ve found out a bit more about these aspects you can weigh up your options and consider the investment. For many, a holiday home is a great source of income and potential retirement solution for the future.
Why do you need to insure your holiday home?
As you’ve seen, holiday homes can be a great investment with a profitable return but there’s one last thing you need to make sure you’ve got sorted if you do decide to buy; and that’s holiday home insurance
. This can differ a bit compared to standard home insurance and rightly so; with a holiday property you’re not going to be there every day and a lot could happen, from accidental damage from guests to fire and theft.
Holiday homes are more likely to be left empty for long periods of time and things like weather and fire damage can escalate pretty quickly when not attended to. Unoccupied properties can be a little more susceptible to burst pipes, leaks and theft than your main home. That’s when specific holiday home insurance can come in handy, as most insurers won’t cover unoccupied homes (more than 30 days at a time) in a standard policy.
If your property is furnished then it’s important to consider insurance which covers both buildings and contents. This means you’ll have less to worry about if your property suffers from a flood or gets burgled, for example.
Look for holiday home insurance that covers:
- Accidental damage
- Theft and burglary
- Public liability (covers guests injured within your property)
- Legal cover (protects against the cost of being sued
- Storm Damage
Top tips for keeping your holiday home in top shape:
- Regular roof checks - in bad weather tiles can become a bit wobbly which can lead to costly damage if left unattended. Be sure to check in regularly or consider hiring someone local who can do this for you.
- Good security - unoccupied homes can become targets for burglars so be sure to get sturdy locks on your doors and windows. Think about setting up timers on your lights for the evening so it appears someone is home. A visible alarm on the front of your property is also a good deterrent.
- Keep your garden in check - if your holiday let has a garden it’s a good idea to check this regularly or hire a gardener, especially if there are trees on site. Unruly branches and roots can cause damage to the property which may be expensive to fix once discovered.
- Warm your pipes - burst pipes are a property owner’s worst nightmare, causing costly water damage. A great way to prevent this is by insulating your pipes, especially in the winter and setting your central heating on a timer during unoccupied periods.
Find out more about holiday home insurance
here and get a quote today to make sure you’re covered.