How To Successfully Start A Holiday Let Property Business In The UK
Owning and managing a holiday let property can be an incredibly rewarding venture.
Not only does it provide you with an additional source of income, but it also allows you to share your love for travel and hospitality with others.
However, starting a successful holiday let property goes beyond just providing a place for guests to stay. It requires careful planning, excellent customer service, and effective marketing strategies.
In this article, we will explore the essential tips and techniques for successfully starting a holiday let property business.
From setting up your property to attracting guests, we'll discuss everything you need to know to ensure your guests have a memorable stay and recommend your property to others.
What is a holiday let ?
A holiday let, also known as a vacation rental, is a property that is rented out to guests for a short-term period, typically for leisure or holiday purposes.
What types of properties are holiday let properties ?
These properties can range from apartments and cottages to larger villas and country houses, and they provide an alternative to traditional hotel accommodations for guests seeking a more authentic and personalised experience.
The benefit for UK Landlords
Holiday lets offer a unique opportunity for property owners to generate high additional income by leveraging their available space and catering to the growing demand for unique and immersive travel experiences.
Unlike long-term rentals, holiday lets are designed to accommodate the needs of short-term visitors, with amenities and services tailored to their specific requirements.
The key distinguishing feature of a holiday let is its primary purpose of providing temporary accommodation for tourists and vacationers, rather than serving as a permanent residence.
This distinction is important for legal and tax considerations, as well as for the marketing and management strategies employed by holiday let property owners.
Is Holiday Letting A Business ?
Yes, holiday letting can be considered a legitimate business venture.
While it may start as a side hustle or a way to generate additional income, managing a successful holiday let property often requires a professional and business-like approach.
When you own and operate a holiday let, you are essentially running a small hospitality business. This involves tasks such as:
Property management.
Marketing.
Customer service.
Financial record-keeping.
all of which are essential components of a well-run business.
Why you should start
Furthermore, holiday letting can provide a significant source of income, with the potential to generate substantial profits if managed effectively. Many property owners view their holiday let as a primary or secondary source of income, and treat it as a fully-fledged business venture.
How to succeed
To ensure the success and sustainability of your holiday let business, it's crucial to approach it with the same level of professionalism and attention to detail as you would any other commercial enterprise.
This includes:
Developing a comprehensive business plan.
Implementing effective marketing strategies.
Maintaining high standards of cleanliness and guest satisfaction.
Staying up-to-date with relevant laws and regulations.
Is Holiday Letting Profitable ?
The profitability of a holiday let property can vary considerably, depending on a range of factors. However, when done right, holiday letting can be a highly lucrative business venture, but in short yes if done correctly holiday letting is very profitable.
However, it's important to note that running a successful holiday let business also comes with its own set of expenses and considerations. These can include:
Property maintenance,
Cleaning,
Utilities.
Insurance.
Marketing.
as well as the potential for periods of low occupancy or unexpected vacancies.
To ensure profitability, holiday let property owners need to carefully plan and manage their operations, monitor market trends, and optimise their pricing and marketing strategies. By doing so, they can maximize their rental income and achieve a healthy return on their investment.
If you want more direct estimation we have a free Holiday profit calculator you can use here.
How to buy a holiday let property
Purchasing a property specifically for the purpose of holiday letting can be a smart investment, but it requires careful planning and consideration. Here are some key steps to follow when buying a holiday let property:
Research the market: Thoroughly research the holiday let market in your desired location, including average rental rates, occupancy rates, and the level of competition. This will help you identify the most profitable and in-demand areas for vacation rentals you can do this using our calculator here.
Assess the property: Carefully evaluate the property's suitability for holiday letting. Consider factors such as the number of bedrooms, amenities, accessibility, and the overall appeal to potential guests. Ensure the property is in good condition and requires minimal renovation.
Understand the legal and regulatory requirements: Familiarise yourself with the local laws and regulations governing holiday lets in your area. This may include zoning laws, licensing requirements, and any tax implications, in the UK their currently is no laws around Airbnb but that could always change.
Secure appropriate financing: Depending on your financial situation, you need to obtain a specialised holiday let mortgage or consider alternative financing options.
Develop a comprehensive business plan: Create a detailed business plan that outlines your strategy for managing the holiday let, including marketing, pricing, and operational considerations, we cover this later.
Invest in property management: Consider partnering with a professional property management company to handle the day-to-day operations of the holiday let, such as guest communication, cleaning, and maintenance Stayful cover this for 15%.
Optimise for online bookings: Ensure that your property is listed on popular vacation rental platforms, such as Airbnb, Vrbo, or Booking.com, and that your online presence is optimised to attract potential guests.
By following these steps, you can increase your chances of finding and purchasing a successful holiday let property that aligns with your investment goals and provides a reliable source of income.
Can you holiday let on a residential mortgage ?
The short answer is no, it is not possible to holiday let on a residential mortgage, but there are some important considerations to keep in mind.
Traditionally, residential mortgages were not designed for properties that are intended for short-term holiday rentals. These mortgages are typically structured for owner-occupied or long-term rental properties and they may not provide the necessary flexibility or financial arrangements for holiday letting, what you need is a holiday let mortgage.
These "holiday let mortgages" often come with different terms and conditions compared to standard residential mortgages, such as:
Higher interest rates: Holiday let mortgages may have slightly higher interest rates than traditional residential mortgages, reflecting the increased risk and complexity of the holiday letting business.
Stricter lending criteria: Lenders may have more stringent requirements, such as higher minimum deposits, proof of rental income, or a track record of successful holiday letting.
Restrictions on occupancy: Some lenders may impose limits on the number of days per year the property can be used for holiday letting, or require the property to be available for rental for a certain period.
How to set up your limited company for a holiday let property
Setting up a limited company for your holiday let property can offer several advantages, including tax benefits, liability protection, and a more professional business structure. Here's a step-by-step guide to help you establish your limited company:
Choose a company name: Select a unique and memorable name for your holiday let company that aligns with your brand and vision, remember that a registered company name does not have to be your trading company name, this name is purely for HMRC.
Incorporate your company: Register your company with the appropriate government agency, such as Companies House in the UK. This process is done online is very easy and cheap to do and often same day turn around.
Determine your company structure: Decide on the most suitable company structure, such as a private limited company (Ltd) or a limited liability partnership (LLP) we recommend a Ltd.
Appoint directors and shareholders: Identify the key individuals who will be responsible for managing and owning the company, and ensure that the ownership structure is clearly defined.
Set up your company's financial accounts: Establish a dedicated business bank account and accounting system to manage the financial aspects of your holiday let operations, we advise having an accountant advise on this.
Develop a comprehensive business plan: Create a detailed business plan that outlines your holiday let strategy, including your target market, pricing, marketing, and operational plans, we cover this more later
Holiday let business plan template
A comprehensive business plan is essential for the success of any holiday let property. Here's a template to help you create a well-structured and effective business plan:
Executive Summary
Brief overview of your holiday let business, including your unique value proposition, target market, and key objectives.
Company Overview
Detailed information about your holiday let property, including its location, size, amenities, and unique features.
Your vision, mission, and core values for the holiday let business.
Market Analysis
In-depth research and analysis of the holiday let market in your target location, including demand, competition, and industry trends.
Identification of your target customer segments and their preferences.
Marketing and Sales Strategy
Your plan for promoting and marketing your holiday let property, including online channels, partnerships, and local initiatives.
Pricing strategy and revenue projections based on market research and industry benchmarks.
Operations Plan
Details on how you will manage the day-to-day operations of your holiday let, including cleaning, maintenance, guest communication, and bookings.
Roles and responsibilities of your management team and any outsourced service providers.
Financial Plan
Comprehensive financial projections, including start-up costs, ongoing expenses, and expected revenue.
Funding sources and financing options for your holiday let business.
Risk Assessment and Mitigation
Identification of potential risks and challenges, such as seasonality, competition, or legal/regulatory changes.
Strategies for mitigating these risks and ensuring the long-term sustainability of your holiday let business.
Implementation and Timeline
A detailed action plan outlining the key milestones, timelines, and responsibilities for launching and growing your holiday let business.
Remember, a well-crafted business plan not only serves as a roadmap for your holiday let operations but also demonstrates your professionalism and commitment to potential investors, lenders, or partners.
New rules for holiday lets in the UK
The UK government has introduced several new rules and regulations that impact the holiday let industry.
As a holiday let property owner, it's essential to be aware of these changes and ensure your business remains compliant. Here are some of the key new rules to consider, do note that these rules are not enforced yet but are being planned":
Mandatory business rates for holiday lets: In 2023, the UK government announced that all holiday let properties in England will be subject to business rates, rather than council tax. This change aims to create a more level playing field between holiday lets and traditional businesses.
Minimum number of days let requirement: To qualify for business rates, holiday let properties in England must be made available for let for a minimum of 140 days per year and actually let for at least 70 days.
Tighter planning regulations: Some local authorities in the UK have introduced stricter planning regulations for holiday lets, including the need for planning permission or the imposition of limits on the number of days a property can be used for short-term rentals.
Licensing and registration schemes: Several UK regions, such as Wales and Scotland, have implemented mandatory licensing or registration schemes for holiday let properties. These schemes often require owners to meet specific safety and quality standards.
Tax changes: The UK government has made changes to the tax treatment of holiday let properties, including the introduction of a new Stamp Duty surcharge and the phasing out of mortgage interest tax relief.
To ensure compliance with these new rules and regulations, holiday let property owners should:
Stay informed about the latest changes in their local area and across the UK.
Seek professional advice from accountants, lawyers, or industry associations to understand the implications for their business.
Adapt their operations and business plans to meet the new requirements, such as ensuring their property is available for let for the minimum number of days.
Maintain thorough records and documentation to demonstrate compliance with the relevant regulations.
How much is holiday let insurance ?
The cost of holiday let insurance can vary significantly depending on a range of factors, such as the location, size, and value of the property, as well as the level of coverage required.
However, as a general guideline, you can expect to pay anywhere from £200 to £1,000 or more per year for a comprehensive holiday let insurance policy.
Here are some of the key factors that can influence the cost of holiday let insurance:
Property value: The higher the value of your holiday let property, the more it will cost to insure. Insurers will typically base the premium on the rebuild cost of the property.
Geographical location: Properties in high-risk areas, such as flood zones or areas with a higher crime rate, may incur higher insurance premiums.
Occupancy levels: Properties with higher occupancy rates or longer rental periods may be more expensive to insure, as they present a higher risk of potential claims.
Amenities and facilities: Holiday lets with additional features, such as swimming pools, hot tubs, or other high-value amenities, may require more specialised and costlier insurance coverage.
Claims history: If your holiday let property has a history of claims, whether related to damage, theft, or liability issues, your insurance premiums may be higher.
Level of coverage: The more comprehensive the insurance coverage you require, the higher the overall cost. This can include buildings insurance, contents insurance, public liability insurance, and any additional add-ons.
It's important to note that the cheapest option may not always be the best choice for your holiday let business. It's essential to carefully evaluate the coverage offered by different insurers and choose a policy that provides the necessary protection, while also considering the long-term cost-effectiveness.
To get an accurate estimate of the insurance costs for your holiday let property, it's recommended to obtain quotes from multiple insurance providers that specialise in the vacation rental market. This will help you find the most suitable and cost-effective insurance solution for your business.