It is a complex sector to navigate, mortgage broker says
Choosing to target the short-term holiday let market over the traditional rental market could increase a landlord’s rental income by 21%, research by Revolution Brokers has shown.
However, the mortgage broker said strict rules and regulations can make it a complex sector to navigate.
A short-term or holiday let is a property that people will rent out for short periods of time, usually between one night and one month. For buy-to-let investors, it’s a sector that promises very strong rental premiums when compared to expected earnings on the traditional long-term rental market.
In England, the average monthly rent is currently £943, but the average for a holiday let is £1,137, a premium of 21%.
Regionally, this premium can be much higher. In the South West, for example, where popular holiday destinations such as Cornwall and Devon are located, the holiday let premium is 35%, followed by the East Midlands (30%), North East (24%), and West Midlands (24%).
“The rise of Airbnb and other similar platforms has brought holiday lets to the forefront of people’s minds when they’re travelling around the UK,” Almas Uddin, founding director of Revolution Brokers, commented. “The increased awareness has created a huge opportunity for professional investors who want to secure better yields than they may be able to do within the regular buy-to-let market.”
Read more: Holiday-let lending rising.
But the short-term let is a rental sector that comes with a fair share of complexity which potential investors should consider.
A big consideration when contemplating investing in a holiday let is the rulebook. First, the property must be available to rent for at least 210 days a year and no single let can last for more than 31 continuous days.
Revolution Brokers said mortgage providers will often want to know if the property will be made available for holiday lets, and existing providers may want to change the terms of the deal.
Furthermore, different local authorities have different rules about holiday lets, with some requiring a proper licence and others even insisting that landlords apply for planning permission.
As the holiday let rulebook is extensive, Revolution Brokers advises landlords to take a look at the full government guidance before jumping to take advantage of the premiums on offer.
