If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
Newbie alert! After helping friends run their 5 cottage plus house business for many years, my OH and I are looking to start out own mini venture. We *think* we have our target audiences and the basics of how we will run things in mind (nice to read all the posts here to see how others are approaching things too). We have a few options of what to buy (raising capital from releasing capital on existing home and holiday let mortgage dependant), but would be interested to hear advice on locations. Is it better to have a small, family (2+2) 'bucket and spade holiday' style cottage 2mins walk from a popular beach, or a substantially bigger and cheaper to buy ground floor apartment in a converted barn about 1/2 mile from an equally beautiful but less popular beach? The cottage would be shabby-chic, beach themed hopefully attracting both families in peak times and those seeking romantic short breaks or weeks out of peak seasons. The apartment would be more sleek and open plan, and has less intrinsic character ( no woodburner etc which would be an appeal for winter visitors).
Any advice gladly received! We have agents advise that the resort where the more expensive property is will book for 20+ weeks a year, and will attract a good price, but the other one is running as a HC already with good reviews from past guests. We expect to run at a loss initially but hopefully break even in a year or two with more of a plan for long-term investment and a fun thing to run together rather than making a living from it. Hmmmm......what to do?!
A couple of things to consider - this is an investment property for you, and you will sell it at some point. It is possible that unforeseen circumstances could cause you to need to sell sooner or quicker than you currently think, so which property would be the better investment in terms of increase in price, and saleability?
Secondly, a holiday let needs to be maintained in tip top condition at all times. Which property would give you fewer headaches in terms of ongoing maintenance? What would need to be done to the property in terms of major expenditure in the next five years, when your other costs are high?
Thirdly, and rather cynically, in my opinion many agents will always say that a property would achieve around 20 weeks per year. (This may get changed to 20 bookings per year if you take short breaks and things are quiet.) It's a bit like estate agents, they want you to sign up with them and will sort out the detail later. I would suggest you make your decision on other criteria.
The agent may be correct, and I hope they are, but it would be your loss if they are not. Interview more agents and ask what people are looking for in your area. Work out your finances and allow a contingency fund every year for unexpected expenses.
Finally, if you buy the apartment, you will have to negotiate with the other owners re building repairs and any problems your guests might cause (eg noisy at night because they are on holiday but everyone else is at school or work). What do those neighbours currently think about the apartment being used as a holiday let?
Good luck, do let us know what you decide to do.
Personally, without a clue where you are based, I'd go with the beach cottage, but then that's my niche so I understand the market best. An apartment means a neighbour in the same building; that may work now, but when the neighbour moves? You may find one who isn't so amenable with a holiday let. Is it leasehold; if so are there any restrictions?
Ongoing costs and maintenance are a good one to factor in, after all that's what will eat into your profit. I doubt there's a right answer, clearly both could and do work, so buy something that you love. If you're marketing it and making sacrifices for it, then it's best to do it for a property you feel worthy of your time.
I have a tiny beach place with a view so I may be biased but here goes:
Based on the little you've said, I'd be inclined towards the smaller, more versatile property. As you say, good for a small family and if you make it super comfortable for a couple you'll probably have a good number of off-season retired people. Close proximity to a beach is fabulous. Is it a nice walk?
Think what could be the USP (unique selling point) in each property? Is there one? Imagine yourself as the holiday maker.
The bigger apartment: does this mean your market will be limited to bigger groups: families or whatever? does that then in turn mean that you'll be limited to school holidays? Bigger apartment - bigger running costs?
I don't know your area but when we started 5 years ago I was amazed just how much of a market there was in retired & working couples - year round. We originally planned to let to a small family but found we didn't need to, - so less work, less wear and tear, less laundry....etc.
Would you accept dogs? I believe there's a big year-round market for them in the UK.
P>S> edit: I also totally agree with Nemo buy the one you love - you'll enjoy it more and market it better.
Thanks zebedee and Nemo, all good food for thought. We are pretty sold on one of the beach cottage(s - we have two we are considering) and both are freehold, whereas the converted barn being part of a building certainly could cause issues...probably another reason for being cheap!
The maintenance issue is definitely a driving consideration, these are both older cottages on Cardigan Bay in West Wales, but their age and character are part of what we think will offer the attraction to visitors (when presented in the right way of course!). We will be hands on local owners which I suppose must help.
There is one main agent in our area, a dedicated local West Wales one, and looking at their website current bookings in the coastal village are definitely higher there at the moment than for places inland. I think we are planning on short breaks making up a fair amount of income; we are lucky to be in an area where visitors come in spring and Autumn too. My friends who are established locally are very happy with this agency so they will be a good start. Would definitely have our own website and presence on social media and possibly trip adviser. Got to get a house first!
Will have lots to think about after viewing houses next weekend! Thanks again for all your advice so far 😄
Tavi, I think you are echoing what we think about loving the older coastal properties, we definitely want to make something that we would love to stay in...cosy, romantic and yes, dog friendly! The local beach is split in half allowing dogs on one side and dog free on the other. Has pubs, ice cream shop, cafe, etc there too so ideal for all ages. Our USP will be a cute tucked away cottage a short stroll from the beach, It is a pretty walk too 😄 And I totally agree with the argument for reduced heating costs in smaller houses. Cheaper to furnish too...
As you say, retired and working couples without children want holidays, this is where the short breaks would be great out of season. There are plenty of long coastal walks too, it is on the Coastal Path which is fab for anyone with or without dogs any time of the year.
I think you've already answered this perhaps, but it's a question to ask again - which would YOU prefer to stay in? Next - are you typical of your target market - will they want what you want? If you can relate to them, you'll enjoy the process of giving them what they want and the response you get - and that enjoyment is a big plus in running the business. It's not as tangible as a balance sheet, but it may be even more important when it's your life as well as your business.
The maintenance issue is definitely a driving consideration, these are both older cottages on Cardigan Bay in West Wales, but their age and character are part of what we think will offer the attraction to visitors (when presented in the right way of course!). We will be hands on local owners which I suppose must help.
Are you used to older properties? There is always something that needs doing with them (home was built in 1802, holiday let somewhere around 1840 we think) and we are always playing catch up - if something can go wrong it will and I'm going to have to bite the bullet and have my own Welsh property drylined to tackle a problem that decided to raise it's ugly head this winter.
Much as I love older properties a newer build for the let would have been the easier choice!
