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Avanti Travel Insurance blog

7 Dec

Is A Holiday Home The Perfect Investment?

A holiday homeWhy Holiday Homes Are Becoming Popular Investment Options

Holiday homes are attracting interest from all quarters as an exciting way to invest for the future.

For many people, investing can seem a little dull. However, there is a new trend emerging that allows those with a little excess capital an opportunity to mix both business and pleasure, despite what the old adage may say. The amount of people investing in holiday homes is on the increase and many investors are getting a great deal more than just financial rewards from the deal.

Purchasing a property within a highly sought-after tourist region – either in the UK or abroad – will give you an opportunity to enjoy regular holidays and gain a decent return on investment too. And, the range of people taking advantage of this type of investment is just as varied as the locations you can choose from for your holiday home.

Young couples with some cash to spare are seeing this style of investing as a great way to secure their money and get a beautiful property in a part of the world that they love. Those approaching retirement age are also tempted by the prospect, and dipping into their pension pot to buy a holiday home is often too tempting to resist.

Better Than Buy-to-Let?

One of the main reasons for this upsurge of interest in UK based holiday homes is the fact that they escape the chancellor’s crackdown on buy-to-let tax relief. Starting in 2017, landlords will see the amount that they can claim on their mortgage interest as tax relief change, and this is leading to investors trying to find other ways of making the most of their money.

Holiday homes also have the added advantage of attracting a far higher weekly rental fee, but it is worth bearing in mind that your property will probably not be filled for 52 weeks of the year. Property in desirable parts of Britain, such as Devon and the Lake District, can demand rent of over £1,000 per week, but it may be difficult to rent out such a property for more than 20 to 30 weeks each year.

However, for those who wish to escape out of season, the times when your holiday home is left empty offers you the ideal opportunity to get away from it all. This is often the most compelling reason for many to invest.

Is It All Good News?

While the prospect of owning a holiday home that you can rent out to others may seem like the perfect investment, there are one or two considerations to bear in mind before you jump straight in.

Unlike standard buy-to-let properties, the turnover of tenants is far higher as the maximum rental period is only around two weeks, rather than a minimum of six months. This means that maintaining a holiday home entails a lot more work than a residential rental, and things such as cleaning costs can add up quickly.

You can, of course, hire the services of a management company to handle your property. However, these can prove to be hugely expensive, with some demanding at least 25% of your rental income excluding VAT.

As with any investment, doing your homework is key to success. Weighing up the pros and cons is vital before committing to anything, but if you feel that this type of investment is right for you it can be a greatly rewarding way to make your money work for you.