Reasons to buy a holiday home in Cornwall
You may have already made up your mind. You may not need us to reiterate why this glorious county of Kernow is a great investment option. But if you’re still pondering the benefits of property investment in Cornwall, we hope to assist with some of your unanswered questions.
Why buy property in Cornwall?
Kernow’s climate, geography, coastline and rich panoply of attractions cumulate to make the Duchy Britain’s number one holiday destination. Once you’ve been, it’s likely you’ll return again and again. The idea of owning your very own home here tends to come from a longing to linger. Equally, the demand for staying in a Cornish holiday home continues to grow. As more visitors descend on the county, more accommodation is required. Whether you buy property to create a home away from home in Cornwall or to provide just that for paying guests, it’s typically a sound investment.
Cornish homes are not especially expensive
Certainly not when compared to urban environments or the South East. While house prices can fluctuate, if you’re looking at Cornwall property for a long term investment, this is less of a concern. Letting out your home when you aren’t using it for most of the year, can cover the cost of ownership and in many cases actually return a good profit.
Tourism is Cornwall’s main industry
There is certainly no lack of demand for holiday homes and the many attractions, natural or otherwise, that Kernow has to offer. The Cornish economy thrives on tourism. Visitor attractions large, small and artisan exist and grow across the county. With that, access to all parts of our diverse region is being improved all the time making it ever easier for tourists to reach the lesser known and often more sought after spots.
Cornwall is more accessible than the M5 would suggest
The already strong road network is improved each winter, which makes it ever easier for motorists to access every part of the county. Newquay International Airport brings visitors from London, the North of England and Scotland as well as Spain, Germany and Ireland. The mainline railway (from London, Bristol or the North) runs all the way down to Penzance with many branch lines to access the smaller coastal resorts. Perhaps these are some of the most pleasant, nay beautiful railway journeys in the world (link to railway journeys). The local bus services are surprisingly good.
The motivations of most holiday home investors can be divided into two broad categories. There are those who want to own a Cornish holiday home principally for pleasure while recognising that there can be other fiscal advantages to property ownership of this kind. The other group are those who are looking primarily for an investment and to maximise the rate of return. Those may or may not be interested in holidaying at the property as well. Here we break these categories down, illustrated by a few anecdotes that summarise some of our owners’ motivations and experiences.
Buying a holiday home primarily as an investment
In this case, the property could be monetised as a long-term let, a holiday let or a B&B. The decision is down to you based largely on affordability and the logistics of providing and maintaining the accommodation.
A long term let
Long lets are the slow-burn of property investment. Compared to the other options presented here, they raise the least money. That said, wear and tear (maintenance) will likely be less too. Depending on how you present the property for rental, you might not even have to furnish the house or deal with the utilities. Furthermore, there shouldn’t be much downtime when the property is standing empty and not paying its way. But long term lets in Cornwall do not tend to command high rents.
A Cornish B&B
Arguably, to run a B&B in Cornwall you need to based on-site or close by, or bring in a B&B manager to run it for you. It goes without saying that needs every room to be equipped to a high standard and that in doing so you’ll be duplicating facilities compared with letting the property as a whole house to one family or group at a time. There will also be downtime where none or some of the rooms lie empty in the quieter periods.
A holiday let
During peak season, a holiday let can command as much, if not more, rent per week than a comparative property available as a long let would in a month. The opportunity is the greatest to generate the highest income. The challenge is to buy and to present a property that fits and appeals to an audience that is visiting Cornwall often. Doing so increases your chances of filling more weeks across the year. What must be considered is that an increase turnover of guests typically increases wear and tear therefore impacting your budget for maintenance. But you will naturally have quieter periods in the year to attend to this.
The seasonality of Cornwall
The weekly rental rates that even an average property can return during school holidays offer healthy returns. But there are, on average, only 13 of those weeks and they’re tied to school holiday periods: 6 weeks’ summer holidays, 2 weeks at Easter and Christmas, 1 week in February, May and October.
Shoulder season and low season
The periods in between the peak weeks are referred to as shoulder and low season (or off peak) weeks. They naturally command a lower rent because there is less demand or competition for the properties. Roughly speaking, you’d need to fill 1-2 shoulder season weeks per month to be comparable to the income of a long let and roughly 3 weeks during low season. That said, the peak season is the time where you should look to, and expect, to make your profit and to take the pressure off filling the quieter weeks.
Financing a holiday let
The devil in the detail that will ultimately influence what you’re able to buy is money. Most importantly to be aware of is that if you require a mortgage to purchase a property in Cornwall, if it’s your second mortgage and/or a mortgage for a holiday let investment, the deposit requirement will be greater than that for a primary residential mortgage. You should expect to fund a deposit of around 25 per cent and be able to demonstrate the property’s ability to generate an income to support repayments.
Regarding the value of the investment, many draw the comparison with stocks and shares. Historically, there have been times when shares have outperformed property and vice versa, but there is no doubt that bricks and mortar represent an excellent return for what is a fairly low-risk strategy.
Buying a holiday home as a lifestyle choice
If you love Cornwall and keep coming back to the same favourite area, it may make sense to buy your own holiday property, if you’re able to. You’ll save on accommodation costs and over time you’re acquiring an asset that could be a valuable nest egg or a retirement home in the future.
Buy with your heart not your head
When you are certain that the property is wholly or largely for personal use, you can be pulled by your heart strings when it comes to choosing your dream Cornish home. Fall for the features and characteristics that you love most and make the home your own when decorating and furnishing it.
Test the water with friends
If you get itchy feet for some extra income or simply see the potential in your Cornish home as a holiday rental, you can always test drive it with friends and ask for their honest feedback. Get them to tell what they love about the house, what they’d like more of in the way of guest information or facilities. And you’ll find ways to de-personalise the property for non-family members, either by storing personal items in a lockable cupboard or going more minimalist on the decor (no family photos, fewer ornaments, etc.).
One strategy is to live in the house and then let it out while you are on holiday yourself. It would take a bit of planning, but it’s perfectly doable. The owners of Cassie’s Cottage (link) in St Mabyn jump into their camper van whenever they have a guest booking. They head off around Cornwall, dropping back in to do the changeovers.
Primary factors when buying a holiday home in Cornwall
Location, location, location. That’s what they say. But in reality, location is just one of three main factors that must be scrutinised to ensure the financial success of a holiday home venture.
Yes, yes, we know. But it’s not only about whether you like the location. It needs to be in an area where guests want to holiday and it needs to work well as a base for the activities guests want to enjoy.
Popular or undiscovered?
The honeypot locations like St Ives, Bude, Newquay or Padstow attract more visitors and command higher prices, but there are obvious pros and cons to buying there. Demand for housing and investment properties will likely reflect demand from holidaymakers therefore house prices will be higher in popular holiday spots.
Just because a location isn’t teeming with tourists today doesn’t make it an unviable investment opportunity. Consider its proximity to attractions – the quality of road and public transport access – as well as ease of access to amenities, beaches and the coastal path. Something as simple as being along the Camel Trail will increase the accessibility and appeal of a property to guests, because getting out and about will be easy (especially if you provide bikes for guests as one of your unique selling points).
Coastal or rural
Your research will likely reveal that the Cornish coastal towns attract more visitors in the height of summer than more rural localities. However, for shoulder and low seasons rentals, rural retreats carry huge appeal, especially with walkers, ramblers, cyclists and our second largest audience of guests: dog owners.
There are property attributes that make some holiday homes more appealing than others. Between basic amenities and well considered provisions, you can create a holiday home perfect for the audience you want to stay with you. Attributes that provide you with ‘stand out’ offerings are, in marketing terms, referred to as USPs (unique selling points).
These days connectivity is king. While it was once a USP, it’s now an expectation that WiFi and broadband of a decent speed will be available and free of charge. It’s only a USP to be off-grid if you’re actively promoting your property for digital detox holidays.
Real USPs need to demonstrate a unique offering that guests won’t find anywhere else. Even hot tub, these days, isn’t unique, but if it complements a series of other luxurious attributes it’s definitely worth a mention. Other considerations include whether you can offer particularly family or baby friendly accommodation, a swimming pool, or beachfront positioning, for example.
Pet friendly holiday homes
Consider whether or not you want to offer dog friendly accommodation. Pet owners are a good source of shoulder and low season bookings – when Cornwall beaches are more likely to be open to dogs. It’s also a bit of a no-brainer for rural properties or those close to the Coastal Path.
Cumulatively, these factors will contribute to helping you decide which property you buy, how you decorate and furnish it, what you create as your unique selling points for marketing purposes, what you’re able to charge for it throughout the year and what occupancy rate you can expect.
Quality, wear and tear
Long gone are the days of holiday homes being a rarely used and dusty family pad advertised through five lines in the classified section of a newspaper. We’re in an age of image-led, competitive holiday home marketing where guests expect to arrive to what was seen and described online.
Neutral with accents
In one’s own home, some classic furniture with a provenance and a string of nostalgic memories is perfectly acceptable. Holiday homes to more guests when the decor and furnishing is less personal and more neutral.
Decor, furnishing and cleanliness combine in the eyes of a guest entering the property for the first time and they expect simple clean lines with minimal fuss and plentiful attention to detail. Holiday homes are not necessarily the cheap holiday accommodation option these days, plus guest expectations are forever rising.
Clean and practical yet homely
Opting for hard wearing, mid-range furnishings that will last a season or two of changeovers, some maintenance and not cost the earth to replace, are a sound investment. Ensuring all the crockery and cutlery is matching and unchipped, is almost an unwritten rule these days.
How to buy a holiday home in Cornwall
Do your research
Dig beneath the surface of your favourite Cornish towns to understand the property market and tourist economy in the area. Monitor the property market for a few months, see which properties move and which stay on the market. Talk to holiday letting agents like us to understand which properties appeal most in which locations. Check out sold house prices online to get a feel for market valuations versus actual sale prices.
Get a feel for a place
Do your research: online, on foot, talking to locals and fellow tourists. Get a feel for a place and its prosperity as a holiday home destination. Then talk to some professionals. Approach any respectable estate agent in the county. Cornish Traditional Cottages can point you in the right direction and we usually have some homes on our books that are currently for sale – a great opportunity to buy into something that is already working and with an existing repeat client base.
Act like a holidaymaker
Remembering that that’s how this all started – because you were probably on holiday in Cornwall and thought it would be nice to have a permanent base here. So revert to holidaymaker mode and look at who your peers are – what demographic holidays in your chosen location at different times in the year, what is there to see and do in the area, what is it that’s drawing visitors to the location, how long are they typically staying and are they first time or repeat visitors.
Use a property finder service
If you are not able or inclined to source, search and visit holiday homes for sale in Cornwall, there are buying agents like Minerva and Cornwall Property Finders who specialise in doing this for you. They will often know of properties that are not yet on the market. But like any service, this will come at a cost. minervacompany.uk www.cornwallpropertyfinders.co.uk
Popular types of holiday homes in Cornwall
Whether you choose a mobile home, a lodge in a holiday park, a bungalow, semi-detached or detached house, folly, mansion, penthouse or castle – it’s very much up to your budget and then how you can make it appeal to tourists.
Quirky holiday homes
Unusual and interesting properties, even cabins or gypsy caravans, are all successfully deployed as holiday lets. In fact, they typically attract the most interest and book up the quickest. They’re not necessarily always the most expensive properties, but because they offer a unique experience for guests they are popular in and out of season.
Home away from home
On the flip side, there will always be holidaymakers looking for a more conventional home for their holiday, whether that’s a characterful cottage, smart townhouse, or sprawling farmhouse. Even quirky holiday homes have more appeal when they are able to provide all the mod cons and facilities while still retaining some interesting features and character.
As we’ve already touched on above, there are particularly popular holiday home investment spots in Cornwall and location is key, but you don’t have to be in the heart of the action to make a profitable business from your venture. Just be mindful that as much as properties by the seaside sell for a premium, they also rent for a premium. So what you pay and what you’ll be able to earn will have parallels.
Cost considerations when owning a holiday home in Cornwall
Beyond the headline figures of Cornish property prices there the associated mortgage, survey, stamp duty and solicitors fees to factor into your investment budget. As with buy-to-let, the mortgage repayments will eat into your revenue on an ongoing basis and you’ll need to be mindful of those costs in relation to occupancy and income targets.
Once the property is yours, buildings and contents insurance comes into play as does public liability cover. If you’re to host paying guests in your property, we do fervently recommend that you invest in public liability insurance. In the event that a guest injures themselves in your property, this will cover you for any claims against you.
Also consider that during the quietest weeks of the year it may be necessary to bring in a handy man to refresh parts of the property ahead of the new season. This could be just paintwork touch ups, but it may include a gardener, plumber, carpenter or other trades, depending on the repairs or enhancements you want done. It’s worth allocating some budget for ad hoc wear and tear repairs too. These might include small jobs like changing tap washers or replacing a doormat.
Factor these costs into your rental fees. No guest wants to be stung by extra fees at checkout and in general terms, guests like to pay an all-inclusive fee for their accommodation. This includes council tax, water, electricity, gas or oil and broadband or WiFi.
Costs related to each stay
If you’re close by, have the time and the inclination, you may want to handle guest changeovers, cleaning and laundry yourself. More than half of owners we work with do their own changeovers, but for those who can’t or aren’t inclined, we can put in touch with the varying levels of property management services to support owners.
You may find a local cleaner or cleaning company to handle property turnaround. This leads to the obvious point that you’ll need probably 3-4 sets of linen and towels. Guests should always have access to a spare set and you’ll need one for changeover and a spare.
The trick is to plan for these costs and have a rainy day fund to support them so that they don’t spring up when you’re least expecting them.
Calculating holiday lettings income
If the crux of your holiday home purchase is return on investment, you’ll want a fairly detailed spreadsheet to factor in the costs we’ve mentioned already. But to begin with, if you need to do some ‘back of a packet’ sums to assess whether this is a realistic opportunity for you, let’s consider the key research area:
- Average peak, shoulder and low season rental rates of comparable properties in your preferred location
- Average occupancy for each period
To take your numbers to the next level assess comparable properties based on:
- Number of bedrooms
- Property type
- Location / proximity to the nearest tourist attraction
- Special features (pool, hot tub, parking, etc.)
- Quality of decor and finish
- Any ‘luxury’ factor
- Minimum stay – 7 nights or 3 nights are most common
- Midweek short break price vs weekend short break price
- Restrictions on short breaks during peak season – so you maximise the income potential and limit the number of changeovers
Furnished Holiday Lettings tax obligations
Just a reminder that any income the property generates from paying guests isn’t all yours, even after you’ve covered your costs. And while tax is generally more taxing than we’d like it to be, both mentally and fiscally, short lets have specific tax arrangements for you to be aware of and to benefit from.
Furnished Holiday Lettings (FHLs)
FHLs benefit from specific (and, thankfully, not too complicated) tax rules. To qualify as a FHL the property must:
- be within the UK (or the European Economic Area if you own a holiday home overseas)
- be furnished sufficiently for occupation by guests
- be intended to generate a profit (i.e. managed as a commercial let)
- be available to let for 30 weeks (210 days) each year
- be actually let to paying guests for 15 weeks (105 days) each year
- not be let for 31 days or more, to one or more named guests, for more than 155 days in the year (i.e. limit the number of longer let requests you accept)
One UK FHL business
Irrespective of how many UK holiday homes you run for commercial gain, they are treated as one FHL business for tax purposes. The benefits include the ability to average the let occupancy, where one property lets for fewer than 105 days and another lets for more, to ensure you’re still eligible for FHL tax considerations.
Future proofing profits
It’s widely accepted that making a profit in year one of holiday lettings is hard work because of the upfront investment costs of property set-up, preparation and more heavily weighted marketing in year one.
You can offset losses against FHL profits generated in later years – another good reason to stick at it.
Tax benefits of FHLs
Yes, there are some:
- Capital Gains Tax relief for traders – e.g. Business Asset Rollover Relief if you sell and then buy another holiday home within a given period
- Capital allowances for many elements of fitting and furnishing the property
- FHLs profits count as earnings for pension purposes
Still going to invest in a Cornish holiday home?
Cornish Traditional Cottages offers holiday home owners support throughout the holiday letting process. We often attend viewings to offer a perspective on the rental potential of a property and we can hold the hand of holiday home owners as much or as little as they need.
From simply marketing and managing bookings through to full service property management and maintenance, we bring out 50+ years of cottage holiday experience to the table.
For new clients, we offer a five-year investment plan that creates a low entry point for your marketing budget, which increases slowly as your business grows.
If you are considering holiday home ownership in Cornwall now or in the future, we do hope you’ll get in touch with us. If you’d like advice or tips on any aspect of holiday letting, please call Alison, Charmian or George on +44 (0)1208 895 354, email firstname.lastname@example.org or just pop round and visit our offices in Wadebridge.