Top Tips on Short Term Holiday Lets
When you say the words ‘rental property’, most people generally think of a traditional Buy to Let arrangement – but there is an alternative rental strategy for property investors. The market for short term or holiday lets has caused some landlords over the years to switch from an AST let to short term – and due to an increase in independent travel, there is a huge demand for self-catering flats, apartments and cottages for holiday rental or short term let purposes.
What you can charge for a weekly let in a holiday property is greater than what you could charge in a comparable property on a long term let – however, it is highly unlikely that you will get 52 weeks of the year rented out and so it is unrealistic to compare income in this way. There are also other costs associated with short term or holiday lets, so it’s important to work out net yields rather than just headline returns.
Of course, there is also the lifestyle attraction of owning a property in an area where you like to go on holiday yourself. Essentially this can mean ‘free holidays’. However, if you are going to be using the property yourself during peak weeks this will have a detrimental impact on your overall return.
There are a number of other important considerations to work through when you are considering holiday lets:
Location, location, location
This primary rule doesn’t change when you are looking at short term holiday lets. If your target market is tourists and holiday makers, then clearly you need to buy property that is in a popular tourism location, otherwise you’ll struggle to get the required level of bookings to justify it.
Property Management and ‘Meet & Greet’
The chances are your rental property won’t be in the same vicinity as where you live, so you will need to employ the services of a local lettings company to manage the property for you. They will be responsible for checking over the property, ensuring that all appliances etc are in working order, do a full inventory check and report to you any breakages or damage. Sometimes a property management company will also sub-contract out cleaning and laundry services so you can deal with this aspect at the same time.
Another important role of the property management company will be offering a key holding facility and a meet and greet service, ensuring that there are clear directions for your arriving guests of how to gain entry to the property.
You can expect to pay anything from 20 – 40% of your rent away depending on the level of service that is being provided. At the upper end of this scale you would expect the Property Management company to also handle bookings for you and be responsible for finding customers.
Cleaning and Laundry
You shouldn’t cut corners on this aspect of your offering – a well presented property that is spotlessly clean will create a good first impression, and rental guests will be quick to criticize if they find anything that is not up to standard. If you are providing laundry such as bedding and towels, choose high quality products. Keep in simple and opt for plain white linens – they are easier to replace and match up and create a crisp, clean image.
If laundry is being done within the property, you will need to invest in a good quality washer and dryer. The people doing this work will have a lot to do to turn your property around for the next rental (sometimes just a few hours) and so they will need for linens to be able to be washed and dried quickly.
Advertising for Rentals
Some property management companies will offer an advertising and booking service. If you pass your property over to a tour operator, then they may take on the whole service from inspecting your property prior to letting and grading it accordingly, to advertising for rentals, handling the booking, sending out necessary paperwork to guests, meet and greet, cleaning and laundry and all property management. The charges are high, but it gives you a true armchair investment. If you can make it work financially, this option is attractive, as getting involved in the marketing of your property can be time consuming and may not be playing to your strengths.
However, if you do decide to take on the marketing and advertising yourself, then there are many and varied ways that you can generate bookings. These could include:
Listing your property with one of the Accommodation Only internet portal sites. Here you will pay an annual fee to have your property listed and the website will then generate traffic. Usually there are no guarantees of the number of enquiries, but you don’t have to pay for each enquiry that comes to you. You will be responsible for all aspects of servicing the booking such as Meet and Greet, cleaning and laundry etc.
Developing your own website. The costs of building and hosting your own website have come down considerably and there are web site design and build packages that you can use to create extremely professional looking sites free of charge. You will, however need to invest a certain amount of resource in driving traffic to your site.
Placing advertisements in national papers and/or relevant. A small advert in a well chosen magazine, newspaper or website needn’t cost a lot but could generate significant booking enquiries. If you know the kind of people who are likely to rent out your property, target magazines, website or newspapers that they are likely to read.
Friends and Family. It’s a good idea to produce some form of simple brochure that friends and family can see and also hand out to their own circle of friends. Make sure that the pictures in particular, are very attractive. It may be worth investing in professional photography of your property so that it is shown in the best possible light.
Placing advertisements at local sports clubs etc. Sometimes the simplest strategies are the best. If you are a member of a gym, sports club or social club then it is worth putting together an advert for your property and displaying it in a prominent location.
Featuring your property on a large employer’s intranet site. If you work for a large organisation or are close to someone who does, this can give access to a very captive market of possible tenants.
You will need to have adequate buildings and contents insurance cover, plus insurance that covers you for any claims that are made against you for any negligence or injury incurred when the client is in your property. It is vital that your insurance company is aware that the property is being used for short term lets. You will probably have to take out a specialist policy and it is therefore worth consulting a specialist insurance broker.
Tax and Corporate Structure
You will be required to pay tax on rental income – but you will able to offset costs, such as maintenance and management charges, plus 10% of any rental income to allow for wear and tear. It is therefore important to keep good book keeping records and accounts.
For tax and liability reasons, it might be advisable to operate your holiday lets through a limited company that you set up. You will then be personally protected in case of any legal or liability claims against you. It could also help create a more professional appearance to your business.