How To Finance a Holiday Let Business?

Everyone wants to relish every slice of life in the picturesque landscapes. However, owing a holiday letting is not easy, especially amid rising mortgages. If you are wondering whether a holiday let business is a good investment, then the blog is just for you.

The staycation thing is gaining popularity in the UK as of now. It implies the price of holiday lettings is soon to skyrocket.

What is a Holiday Letting?

It is a property rented out by the holidaymaker’s companies for a short duration. The property must be listed or occupied by holidaymakers to be known as a holiday let.

One can book it for weeks to days on an urgent basis taking payday loans with guaranteed approval by direct lenders directly approve it. As a holiday let owner, you must be seen as a profit maker. You must ensure the maintenance of the property, ensuring a furnished holiday letting for customers. The property must be available to rent for 210 days in a year. It must be open to allowing for 105 days.

Yes, having a holiday let business is profitable in generating income, supplementing your retirement savings, or saving the property for its future value.

Here are some reasons why holiday lettings are the best investment.

What makes Holiday Lettings a Profitable Investment?

2021 saw an increase in demand with peak summer occupancy. Google trends reveal a 50% rise in searches about holiday lettings for a staycation. With the research showing that this could be the right time to invest, individuals seeking to invest in holiday lettings could consider buying at the very moment. Here is how holiday letting could prove the best investment:

• Tax Advantages on Holiday Lettings

Letting your property as a furnished holiday let has multiple advantages. You can save council tax and other bills against your income. Check the HMRC guidelines for a clear idea of what costs and taxes you can save on a Holiday.

You may receive Capital Allowance, the profit you receive from running a holiday let business. The owner can claim this tax on moveable items like furniture, electrical appliances, and floorings.

You may receive other tax relief on holiday lettings – buy-to-let:

1. Inheritance tax relief
2. Mortgage interest rate relief
3. Capital Tax relief
4. Pension contributions

• High return on Investment

Holiday lettings in the short term provide potential earnings for the owner/ investors. As per recent research, a holiday letting earns above £21000 a year. These lettings benefit from flexible pricing instead of long-term lettings. If your holiday letting aligns with the expectations of the bookers and the customers, you may reap a high-income return than that of a long-term let.

Many customers utilize 12-month payday loans by direct lenders to ensure a memorable holiday. So, provide the best services to ensure their return to your holiday.

• Use Holiday Letting for Yourself

The best part of owning a holiday letting in a peaceful and stunning location is you can ensure a memorable holiday with your family. It is a dream come true to hold the very holiday letting and relishing the beautiful spots in your favorite place. The breathtaking costs and a lively town complement your holiday letting business.

What to Consider While Buying a Holiday Let in The UK?

Consider the below things before buying a holiday let:

1. Location: The most popular areas fit the rural curve
2. Lenders: get the right lender that could help you legally get the mortgage and buy the letting
3. Keep a check on new properties
4. Is the property accessible to essential facilities?
5. Are there any positive developments going on in that particular area? If yes, it could be profitable for your investment

What are Some Best Ways to Finance a Holiday Let Business?

Here are some ways to finance your holiday let business:

• Second Home Mortgage

A second home mortgage could be an ideal option if you wish to buy the property for your use and intend to let it only occasionally. The second mortgage implies another mortgage you want to take for another property.

The second mortgage implied strict mortgage checks.

Ensure you hold enough affordability and credit score to qualify for the mortgage.

Analyze whether you can comfortably arrange and manage first and second mortgage repayments. Some lenders provide relief on your second-holiday mortgage letting. ‘If your repayments on the first mortgage nearly end, it may be the best time to apply for a second mortgage.

• Buy-to-Let Mortgages

Landlords who want to rent out their properties obtain buy-to-let mortgages. Buy-to-let mortgages follow the same rules as other mortgages. You might get the buy-to-let mortgages in the following situations:

1. You invest in houses and flats.
2. Afford to take the risk of investing in the property
3. You already own a property with an outstanding mortgage.
4. You earn £25000 in a year. If you earn less than that, you may face challenges in securing a second mortgage for your ventures.
5. You do not have high-interest debts. But share flexibility to take payday loans on guaranteed approval for urgent renovations. You can fetch it at minimum income proof by direct lenders.

Lenders usually look for 25-30% higher income than your mortgage income. Ask the experts if you are unsure of the total rent you can charge over the property.

• Bridge Loans

It is one of the best solutions to fund your business without wasting any other moment. If you have finalized the location and legalities but fall short of a few cash, bridge loans can help. Bridge loans are the loans that lenders provide to real estate owners.

It is ideal for long-term financial solutions. Once you get the needed finance, you can buy the property and pay the repayments from the rental payments you receive. However, bridging loans can sometimes be risky if the value of the property you took the loan for falls in value.

• Property Refurbishment Loans

It is short-term business finance used by landlords, investors, and property buyers to refurbish the property. It aims at increasing the property value in sales preparation. One can use refurbishment loans to renovate a commercial or residential property.  You can renovate lettings, cafés, offices, and shops using the loan.  These are of 2 types- light and heavy refurbishment loans.

1. Light Refurbishment Loans

The light refurbishment will usually cost less than 15% of the property’s value. Work could be aesthetic improvements or minor renovations.

2. Heavy Refurbishment Loans

It costs more than 15% of the property value. Work, in this case, includes structural requiring adherence to UK property regulations and involvement of the planning commission.

• Large Loans

There is high demand for large loans to invest in property. The investment includes property purchase or renovation. Large loans are ideal for covering conversions or massive overhauls.

Conclusion

These are some ways to finance a holiday let business. Which of these do you find suitable for your dreams? Comment.

Emma Parker

Emma Parker is a financial counsellor at LondonLoansBank and has been serving for over 5 years. She is a psychology graduate from the University of Glasgow. Since she has keen interest in the finance field, she pursued a diploma course in banking and finance that led her to opt for her current career. She assists people choose the best loan based on their current financial situation and credit score. As Emma understands how people react to money problems, she gives them a helping hand to solve their financial complications.