No idea

[dinara]

Hi, I'm new to the forum and know nothing about what is involved in renting out a holiday home. My Mum was left a house 8 years ago and has been renting it out through an agency, which has given her an annual income of about £6,500 a year. The house is on a very busy road and recently property developers have approached us saying they wish to pull 5 of the houses down to build flats there. If she sells it, she will be able to buy something in a better location, as the developers are offering more than the current market value. She has had the idea of buying a house in or near the Christchurch area in Dorset, to rent out as a holiday home. We would do all the bookings, cleaning, website etc ourselves and run it as a kind of family business. However, at present we know nothing about how or where to advertise, how much to charge, or how profitable it would be, considering all the extra work that it would involve. Therefore any advice would be greatly appreciated!!!

[cromercrabholiday]

You need to have a look at the local competition to get an idea of rates. Just google holiday cottage Dorset and you will get lots of hits. Make up a table of location, number of bedrooms and low/medium/high rates.

Our experience, now on our fifth season, is that we get about around 180 days let. High season and half-terms go every year and other months are more variable - in 2006, June was a disaster but other months were good. Our cottage is very good for families as it can cope with three generations with a downstairs bedroom and bathroom. The first couple of seasons are likely to be lower occupancy as you build up and you will have to budget more for marketing.

Obviously, carrying out all the handover tasks will cut down your costs, but don't forget the tie that this is. Your busiest period will be in the summer, when you might want to go on holiday.

Have some serious discussions before you commit. From an income side, if you "paid" the family the minimum wage for the hours they put in, I suspect that your mother might do better putting the cash in a high income account. The win is the capital appreciation on the property, which currently needs a crystal ball!

I think that there are tax advantages in a holiday house in that capital appreciation after five years is taxed at one quarter of the marginal tax rate - you'll need to check this out with an accountant if this is still in force. I also think that there may be some mileage in passing the asset on after you've run it as a business for some years and claiming retirement relief; that may help with Inheritence Tax (if that is an issue). However, that is more in hope than expectation.

John

[dinara]

Thanks for your advice. Sounds a good idea to have a bedroom downstairs for elderly/disabled people! Also wondered about fire regulations - does all the furniture, doors etc have to be checked before you are able to rent it out?