Lay My Hat

Hi all

A newbie question if I may!

We are still considering whether or not to go the holiday let route on our house in the UK (Devon) once some major structural work is completed. I asked in the past about number of beds etc. as we had been supplied information from a local rental agency (which turned out to be Sykes) which was far from realistic, but in any case of course everything has been delayed by Covid and now we are looking at most at four full seasons until we return to the UK, possibly fewer.

Given everyone’s valuable experience, is four seasons enough to make trying to establish a holiday let worthwhile and what kind of percentages go towards maintenance, wear and tear, theft etc., on top of management and turnover fees? We would use a local independent agency, I could of course ask their opinion, but would prefer to hear the bad as well as the good.

I know these are uncertain times all round, but any insights would be appreciated. Thanks so much in advance.

Hi Wongle, and welcome to the forum.

I think we could do with a bit more information about your property and the standard to which it is finished and furnished. People will pay for location, facilities within (and outside) a property, and a view.

For example, two identical houses in the same road /Lane. One is finished with top quality decor, fixtures, high end kitchen, smart appliances all over the place and plenty of space to move around.
The other has one basic small tv, no dishwasher, small fridge with an icebox rather than a freezer.....see what I mean? The percentages for profit can be much bigger with the higher end property. Tell us a bit about who you are targeting in terms of guests.
It can take a bit of time to get established, but to be honest, there is a big attraction for many guests in staying in a property that has had a full makeover and everything is new in it.

A deal breaker for many guests can be safe off road parking and another whether you will accept their dog

Ok, here goes.

House with three double bedrooms, three bathrooms, two of which are brand new and top class. Garden, roof terrace, covered deck, conservatory, newish kitchen with all the usual modern fittings, three reception rooms, off road parking for two cars, amazing river view, minimal brand new carpets and furniture so far, mostly West Elm; we probably need to decide whether to rent or not before purchasing further. Broadband, usual media etc. The house has a lot of internal stairs and is unsuitable for small children. My husband is allergic to pets although it’s good dog walking country. Pubs are nearby and Dartmouth is 20 minutes at most on foot.

https://www.laymyhat.com/forum/viewtopic.php?t=28633

This is a start.

This is a rough rule of thumb, but holds up reasonably well over around 12 years of letting. It doesn’t quite answer your specific question, but a good guide for profit/revenue, with no agency fees and no loans to service, is around 50%.
There’s a BUT here of course, which is that Covid has had one of (at least) two negative effects: if owners leave minimum 3 day gaps between guests there is a slight increase in cleaning/changeover costs, and a very significant reduction in revenue as those 3 day gaps effectively halve the availability. If owners aim for back to back bookings with same day changeovers, the cleaning/changeover time and costs are near enough double (assuming it’s done to the official guidelines), and the stress factor is very high; if you’re relying on 3rd party cleaners, who probably have a massively increased workload elsewhere, it’s going to be even higher. It’s probably best to work on the basis that the situation will be the same for most of next year, particularly the peak months. After that, who knows?
Have you considered the alternative route of an AST?

Ok, thanks both, that would tend to suggest that the profit margin is around 30% once agency fees etc. are factored in, rather less with Covid to consider.

Presumably Covid has impacted the AST market as well, if lockdown is reestablished it could be difficult to budge a troublemaker and the tax model is not favourable for ex-pats.

Don’t forget the agency fees are quoted, but then liable for vat. Make sure you calculate that in.

Also, negotiate at the outset for unlimited owner bookings. You may not be interested in doing that at first, but over time circumstances may change. You may come across people you are happy to have stay who prefer to deal direct with you. You can split the agent fee and both benefit.

I think you will have to have someone you trust locally to look after things if you go the holiday let route. The agent is going to have to organise cleaning, maintenance and will also need to look after and inspect the property during the winter months when you don't have guests.
What happens if the local agent goes bust?