Getting the best holiday letting return on investment in Cornwall
According to a recent study, income from holiday lets in the UK in 2016 totalled £3.1 billion. This figure is due to increase by 23% by 2021. The same study also revealed that the average weekly price for a holiday let investment in Cornwall stood at £1,740, the highest in the country. And what’s more, holiday lets rose in the county by 14.5% in the year to June 2017.
Holiday lets can be a lucrative business and returns from Cornish holiday lets are undoubtedly high. Some estimates put the figure at double the return from long-term lets. But like all assets, holiday lets only provide solid returns if they’re successful. And to ensure success you need to invest time, money and energy into them.
Why holiday lets make better investment
Any type of property investment in the UK currently represents a low-risk transaction. Property is, after all, as safe as houses and with the odd short-lived exception, capital appreciation generally points upwards.
Returns on investment in Cornish holiday lets are potentially higher than many other types of assets. Ask yourself how much interest your savings are accruing in the bank. Or how much your bond is making every year. The answer is probably a very small amount. And with Bank of England interest rates so low, you might not even be making a single figure in terms of percentage returns.
Holiday lets on the other hand offer a tandem of safe investment and good returns. According to a study by Second Estates, rental income from a holiday let in the UK averages around £22,280 a year. This figure doubles the amount you could expect to earn from a long-term rental.
Tax breaks for holiday let investment
Another advantage of investing in a holiday let in Cornwall comes in the tax advantages. Unlike long-term rentals, repeatedly chastised in annual budgets, holiday lets (known as Furnished Holiday Lets/FHLs) benefit from a good list of tax perks.
At the top of the list is the fact that you can deduct all mortgage interest payments as part of your expenses. Add to this capital allowances for fittings and furnishings and you’ve got two significant tax advantages.
A holiday let is exempt from council tax since it’s classed as a business and therefore liable for business tax instead. However, properties with a rateable value below £12,000 are exempt from business tax too. This is the case with many properties in Cornwall so you may find your holiday let pays zero business and council tax.
High initial and running costs
It’s not all sweetness and light in the tax department, however. Second home purchases in the UK come with a hefty 3% stamp duty, which burdens your initial outlay. Holiday let mortgages are difficult to come by and require a high deposit. Expect to have to put down at least 25% of the price.
Kitting out a holiday home to appeal to high-end customers so you can charge premium rental prices also costs a considerable amount. And then there are the running costs, which don’t come cheap if you’re offering the best holiday accommodation. Many experts calculate that annual costs and expenses probably add up to half your income.
To qualify for holiday let tax breaks, HMRC has a series of strict conditions. Your holiday let must be available as holiday accommodation for at least 210 days a year. Within these 210 days (30 weeks), the property must be let for a minimum of 105 of them (15 weeks).
Long lets in a holiday let are tightly controlled too. You cannot let your property for longer than 31 days to one tenant and the total number of long lets (up to 31 days) cannot exceed 155 days in a year. On the other hand, you are allowed to use the property yourself for up to 20 weeks a year.
How to maximise your holiday let return
Unlike passive assets such as savings or gold, a holiday let investment in Cornwall requires considerable input from you (or your letting agent) to make returns. If you want to turn your holiday home into a successful business concern, you need to invest thought, time, money and energy.
Make it about location, location, location
First, spend as much time as possible giving careful thought to location. Holiday lets in Cornwall in the most appealing locations reap the highest returns.
Offer the best that’s available
To maximise your returns offer the best on the market. Install high-end fittings and furnishings throughout the property and include some extras. Hot tubs, swimming pools and real log fires rank high on holidaymakers’ wish lists.
Do your market research and compare letting rates for similar properties in your area. Price your holiday let accordingly. Remember to compare like with like and set your rates to reflect what you offer.
Make it about marketing
When you embark on a holiday letting business, you’re dependent on securing guests to generate the income you require for success. Marketing to those guests starts with getting the offering right (size, location, price) and dressing it well (neutral and practical fixtures, fittings and furnishings). Capturing the outcome of that part of the project through professional photography is the next step and really the first one in presenting the property to guests in an accessible and digestible fashion. In our digitally driven world, high resolution, well lit images of a welcoming home really do the best initial job at ‘selling’ your property to potential guests.
Keep a check on your expenses
Offering a high-end holiday let in Cornwall may earn high income, but providing the best can be expensive. One of your biggest expenses will be changeovers – cleaners, laundry, welcome hampers, pantry stocks and the like. Shop around and compare rates, and best of all seek recommendations from other holiday let owners, unless of course you’re taking a property management package from your chosen self-catering marketing agency.
Make life easy for yourself
If you don’t have the time or energy to manage the holiday let yourself, consider getting someone else to do it for you. A reputable holiday lettings agency takes care of everything for you including managing bookings, supervising changeovers and solving problems. Get in touch to see how we can help.