Lay My Hat

My husband and I have decided that we want to realise a long held dream and move nearer the coast and buy a first holiday let within the next 5 years or so.

We are just at the very start of coming up with a plan but are at a loss to know what steps we need to take to make this achievable rather than just a pipe dream!

I don't want to be rude but how do people finance buying their first property? Is it a normal mortgage or linked to the mortgage for our own home, or some sort of business mortgage, business loan or what?

We're not sure whether to buy a let and manage it from here/through an agent (probably about 2hrs drive from here but we don't even have a 100% decision on location yet!) before we move closer, move then look for a FHL property or try and buy them both at the same time.

So many decisions to make and we would appreciate any advice or just anecdotes on how you all started out. Thanks!

Because of the changes in recent years with regard to second home ownership, probably only people who have recently bought a holiday let can answer your question.

The government policy is now to charge additional stamp duty in property that is not your primary residence. This is in a political effort to ensure that young people have property that is available to them and affordable.

Some councils require you to have permission for change of use as your holiday let will come out if the housing stock and council tax and into business rates.

I don’t know anything about your ages or situation. Some people do release equity from their own homes, but personally I would not take this risk with the roof over my head. What sort of risk are you happy with??

I would suggest you try and Home in on a location or locations and see if there are any limitations (eg areas can have local occupancy clauses for certain properties).
Speak to at least one mortgage adviser to see what options are available to you, but remember that things will change if you cannot act immediately.

Also remember that your start up costs may be higher than you first think, so have a contingency fund, and you outgoings may be such that you don’t declare a profit on the early years (particularly if an agent is taking their percentage plus vat.
Good luck, and do live your dreams.

Good advice from Zebedee. I did not start my FHL business from scratch - we already had a family holiday home. Due to personal circumstances I had to change it into a FHL and make it pay its way.

Daydream believer - I can't therefore give you advice on starting from scratch but I can offer a few anecdotes on some issues that I've learnt:-

. If I had started from scratch I would not have bought my house (sleeps 7) as a FHL. The size of house is in the wrong location to get all year bookings. I have to work hard to get bookings outside of school holidays. Criteria I would have gone for would be
- sleep up to 4 or 5 ( to suit both families and just couples)
- reasonable cost of changeovers (mine cost around £200 which preclude short term stays)
- Less distance for visitors to get here (we are right at the end of Cornwall)
- walking distance to all year dog friendly beach
- walking distance to pubs which serve good food
- smaller, manageable grounds
- manageable distance for me to travel to check quality of maintenance and changeovers. I know that the House presentation is not as it should be all the time. If you are not able to regularly check then you run the risk of standards slipping and things going wrong.

Given my own experience the key things I would advise you to give priority to are:-
- establish what your market will be
- choose an area that will satisfy that market on an all year basis
- choose a property in that area that suits your market and is easily maintained (both house and garden)
- Investigate any planning/usage restrictions, either local or specific to property
- RESEARCH! REASEARCH! RESEARCH! the above to make sure you have a viable BUSINESS PLAN
- PLAN! PLAN! PLAN! Set up costs will be higher than you anticipate, outgoings will be higher than you anticipate, early years' bookings are likely to be be lower than you anticipate
- have an effective marketing plan, either DIY or use an agent.
- consult a good mortgage broker. You will need a mortgage that allows you to do holiday letting. I managed to get a good deal via my bank which I had been with for 40 years.

Good luck with your venture. Giraffe x

You will have to pay a higher stamp duty rate as FHLs count as second homes.

Because of this, if for whatever reason you need to sell (things happen), you'll end up losing a lot of money.

If interest rates go up, are you going to be able to generate enough income from the business? There is oversupply in many areas and most of your profit ends up in the hands of the agents.

There have been many good years in FHL, but it is becoming a popular thing for people to do - and the more people think it's a good thing to do, the less worthwhile it will be. There is finite demand!

My advise would be to buy your house where you want to live yourself and invest your money in something else. Less stress, less work and more profitable.

newtimber wrote: There have been many good years in FHL, but it is becoming a popular thing for people to do - and the more people think it's a good thing to do, the less worthwhile it will be. There is finite demand!

My advice would be to buy your house where you want to live yourself and invest your money in something else. Less stress, less work and more profitable.

Plus 1
Mols

newtimber wrote:You will have to pay a higher stamp duty rate as FHLs count as second homes.

Because of this, if for whatever reason you need to sell (things happen), you'll end up losing a lot of money.

If interest rates go up, are you going to be able to generate enough income from the business? There is oversupply in many areas and most of your profit ends up in the hands of the agents.

There have been many good years in FHL, but it is becoming a popular thing for people to do - and the more people think it's a good thing to do, the less worthwhile it will be. There is finite demand!

My advise would be to buy your house where you want to live yourself and invest your money in something else. Less stress, less work and more profitable.

+1

Thank you all so much for your replies - even if they weren't exactly what I had hoped to hear!
Great advice from you all and definitely food for thought, though not quite enough to put us off yet...

We're hoping to move to the south coast, somewhere from Eastbourne to Weymouth - a good excuse for a fair few research weekends!
We have a great financial advisor who we will be chatting with next week- we have lots of questions!

Anyone else with thoughts, please feel free to share! 😉

we bought a house with a detached annex, which we are about to let out.
As the tax rules stand, subject to certain rules (advice required), you can apply for multiple dwelling stamp duty relief.
So, effectively you are buying 2 dwellings (not 2 properties) for less stamp duty than you would pay on one dwelling.

Best.
John & karen

We also bought a house with a detached 'granny annexe'. The previous owner had got planning permission to use it as a holiday let after the death of his parents. No additional stamp duty was payable because the annexe does not have residential planning permission so it isn't a separate "dwelling" (it couldn't be let out on a long term lease, for example, or be sold separately from the main house) and it's classed as a business premises. This means that it's subject to business rates rather than council tax, and a 100% small business exemption applies, so nothing is payable. It also meant that the whole property was classed as 'mixed use' and the stamp duty was slightly less that it would have been for a purely residential purchase.

However... Granny annexes almost always have only 1 bedroom, so you have a more limited market and cannot charge as much as a family cottage. There are a lot of other similar sized properties in our area (we rent through Airbnb), so it really needs to be special if you want to get top price/high occupancy. Luckily we're not so reliant on it - covering its costs (insurance, heating, wifi etc) and just giving us a small income is OK for us. Oh, and we have no mortgage which makes a big difference.