'We're using a holiday let to boost our retirement income'
As the UK Government makes life harder for buy-to-let landlords, people are looking elsewhere for income. We talk to Susan Hunt about her experiences of using a holiday let for income instead and explain what you need to know if you're looking at doing the same.
When Susan and Nick Hunt realised their pension was not going to be as substantial as they expected, they decided to get a holiday let to supplement their retirement income.
With a budget of £187,000, which included £140,000 in savings, the couple purchased a plot of land in Roy Bridge, Inverness-shire, to build their dream holiday let.
They moved from Bristol to the Scottish Highlands in 2015, along with their two children and Susan’s mother.
Susan says they looked for their ideal holiday let but couldn’t find something quite right – so they decided to build their own cottage to their specifications.
“We built the cottage from scratch, got planning permission and employed contractors,” said Susan, 59, who was keen to get a change of scenery since retiring after 40 years as a dental nurse.
Susan and her family met with an architect to discuss their budget and share their ideas on exactly what they wanted.
Then, in February 2016, they purchased the land for £50,000 and sought planning permission, before the builders got to work in April 2017.
Unfortunately, the whole process took time and there were delays at various stages of the process.
It took between three and four months to buy the land and the planning stage with the architect took around a month.
Planning permission took several months to get alongside structural calculations, and then work stopped over Christmas with further delays over the winter period due to problems with frost.
What are the benefits of a holiday let?
Hunt says the holiday let is an ideal investment as the capital is protected, due to the ability to sell the cottage if need be – although recouping the investment and any profits would obviously depend on whether it rises in value.
“Taking the leap and pumping our savings into Spinnyfield was a nail-biting experience, but it is a risk that has paid off,” said Susan.
“Holiday letting has changed our lives for the better and has enabled us to take on a new challenge after retirement.”
According to husband Nick’s estimates, the cottage is delivering a 7% return annually – around £13,000 a year – on the £187,000 investment.
He estimates it will take approximately 13 years for the total income to reach that level.
It’s vital to note these annual earnings are an average estimate as the cottage generated £24,000 before tax in 2018 based on 48 bookings.
During off-peak season, the cottage is available for approximately £450 for one week, but this can soar to over a grand during the peak season.
Aside from the financial benefits, Susan enjoys meeting the guests, many of whom return, and believes the business keeps the family on their feet.
Buying a holiday let: from finding a mortgage to getting insurance
What are the downsides?
There are a few cons to consider, including the amount of work that is required and costs.
Monthly costs for the holiday let by the Hunt's are £625 a month, which takes into account electricity bills, replacing stuff and repairs.
While you won't need to pay Council Tax, you will need to pay Business Rate Property Tax, so this needs to be factored in.
In terms of day-to-day running, Susan says the family takes on different responsibilities for the holiday let.
For example, she plans out what needs to be done between different bookings and does the necessary preparation, while Nick helps with bookkeeping and maintenance.
Their daughter Amy contributes her knowledge gleaned from her hospitality course at college.
Between the three of them, between nine and 12 hours a week are dedicated to the cottage, although Susan also reveals it can take up to five hours for her to prep for the next set of guests.
“I’m always adding new touches to the property to ensure their experience is the best it can be,” comments Susan.
“It’s the simple things that are always really appreciated by guests – baking cakes, leaving toiletries, eggs, milk and even wine always help visitors feel welcome.”
But it is a commitment, which is something anyone pondering getting a holiday let should consider.
The Hunt family are dedicated to their investment and only take four weeks off a year, leaving the cottage open for business for the remaining 48 weeks.
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During this time, they can go on holiday although the cottage also requires annual maintenance and on occasion, redecorating.
As this is the Hunt's first foray into holiday letting, they decided not to go it alone and appointed Sykes Cottages to deal with pricing, collecting payments, advertising, queries, complaints handling and offer a 24-hour helpline for guests.
Typically, Sykes charges 20% commission of the sales for managing a holiday let for the owner.
It’s worth noting this is only an estimate and is based on calendar availability the owner provides Sykes with and the amount of bookings both with Sykes and other companies.
So, it’s a good idea to shop around to make sure you get the best price.
Finally, while this isn't an issue for the Hunt's, it's worth stressing your holiday let needs to be available at least 210 days a year.
You can read more about the Government's requirements for holiday lets here. You should also have a read of this older guide of ours, which looks at the practicalities of setting one up for yourself.
Tips for letting out your holiday home
When considering a holiday let, Susan recommends choosing the area and location of the property carefully.
When she was conducting research, she discovered local attractions near the holiday let such as Ben Nevis would be a big draw, as well as outdoor sports.
She also recommends anticipating your guests’ needs to encourage them to return, by understanding what the local area has to offer, and getting in touch with guests before their stay.
Sykes Cottages also has a range of top tips, including:
- Research the booking value of the local area, as some locations can be extremely popular, and consider how often you need to access the property for maintenance;
- Make sure you have the right mortgage for a holiday let;
- Take advantage of any tax benefits;
- Get the right insurance policy for your holiday let;
- Consider any features that can boost your booking value, including welcoming pets or adding a log burner – but make sure these features are in demand in your local area;
- It’s the little things that count with guests – you could bake cakes for guests (like Susan does) but you could simply warm the holiday home prior to arrival during the winter months;
- Make a welcome pack so guests have all the information they need about the local area, such as recommended places to eat and reliable transport links;
- Consider accepting shorter and last-minute breaks to maximise sales;
- Listen to feedback and resolve any issues;
- If you are happy to do so, reinvesting some profits into the property can help keep it in tip-top condition.
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