Holiday Lets: What Should I Know?

It’s no secret that short-term rentals like Airbnb are becoming a more popular investment for landlords. The impact of the pandemic left our world much smaller, allowing the great British staycation to become a popular option for holiday makers. With new technology and many companies offering short term rental management, it has never been easier for a landlord to operate a short term let. There is lots to consider before renting your property on this basis and we'll walk you through any questions you might have.

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Do I need any permission to operate a “Holiday let”?

In most scenarios, there will not be any restrictions on operating as a short-term let from a legislation perspective. However be sure to double check as certain properties can be an exception. Flats can typically have clauses not allowing for “sub-letting” as this can be disruptive to other neighbours in the block.

In most scenarios if there is an existing mortgage on the property (even a buy-to-let mortgage) you may not be permitted to let the property on a short-term let basis. It's always worth asking your existing lender for permission but keep in mind that most lenders won't be able to accommodate this. This means you may need to re-finance to a new lender.

Planning permission is usually required if you operate the business as a “Bed & Breakfast” where food is also served, this usually requires “change of usage” so the correct permissions will be required.

Location, Location, Location!

When it comes to holiday lets, location can be everything. Places of tourism and city centres are often good places to start looking for a potential property.

Unique Selling Points

Nobody wants to stay in a bland, regular three bed terraced house on holiday. Pleasant aesthetics draw people into deciding on where they holiday. Studies have shown quirky, historic or luxury properties have more demand on the market.

Health and Safety Standards

As a landlord, you are still bound to ensure appliances are maintained, as well as fire risk assessments. If you’re unsure about your responsibilities regarding health and safety, consult your local authority. Typical requirements are things like CO2 and fire detectors, extinguishers, and fire blankets.

Fixtures and Furnishings

A beautifully designed home doesn't have to be expensive, bearing in mind the items inside will be subject to years of wear and tear. Appealing to the masses should be a top priority when it comes to décor, neutral colours and general aesthetic will help with the marketability.

Can I use my holiday let property?

In most circumstances, mortgage lenders may allow you to reside in the property for your own use for up to a few weeks, this can vary between lender so be sure check. Some lenders may not allow you to reside within the property at all.

How do mortgage lenders treat holiday lets?

As this is a more specialised area of the market, there are very few lenders who operate in the short-term rental markets. This segment has been steadily growing over the last few years, so in recent years more lenders have started to show up but bear in mind that this is still a significantly small portion of lenders.

Lenders will usually calculate affordability based on low, medium and peak season rental estimates whilst some can simply calculate the affordability based on a normal rental property.

How does HMRC treat holiday let properties?

Do some research online or perhaps speak to a tax consultant as you won’t be subject to the same rules as a normal property let which runs on an AST basis, there are certain tax benefits to owning a holiday lets but be sure to be aware of the pitfalls.

Do I need special building insurance for a holiday let property?

In most scenarios yes, the majority of standard insurance products will not allow you to let your property on a short-term basis and often have clauses regarding the occupancy of the property. Be sure to check with your adviser and make sure you're not breaching the terms of your building insurance.

Should I invest in a short-term rental property?

Like with anything, there’s benefits and drawbacks to this option, just be sure to do your research and speak to your adviser as everyone’s circumstances are different.