Lake District experiencing spike in holiday lets

The Lake District has seen the number of holiday lets rise by a third (33%) in a single year, research from Octane Capital has found.

There are now 7,591 active rentals in the region, up from 5,693 just a year ago.

There’s also been spikes in the Peak District (25.2%), the Cotswolds (25%), Cornwall (24.1%), Devon (21.1%), Brighton (13.1%), and Liverpool (10.8%).

The Lake District

Major cities have experienced an annual decline in the number of active rentals – in London (-17.1%), Newcastle (-11.6%), and Manchester (-1.7%).

Jonathan Samuels, chief executive of Octane Capital, said: “Holiday lets offer a much more private and self-sufficient holiday experience than hotels provide. They provide more space and more freedom. So, it’s little wonder that the market is booming so much in most parts of the country.

“Because holiday lets are now the first choice for a huge swathe of the population, more and more people are thinking about ways to make money off the sector. Some people are simply opening up a spare room in their home, but others are buying new properties with the sole purpose of putting them on the holiday let market.

“While it’s an attractive idea, it’s one that requires careful consideration. The old idiom of location, location, location has never been more appropriate. If you can’t buy a property in a high demand short-term rental location, you’re going to really struggle to make any sort of profitable income in this sector.

“It’s about finding locations that offer the perfect balance between affordable purchase price and strong, reliable rental income. This is often easier said than done.”

Octane Capital championed the use of holiday let mortgages, which are designed to deal with the fluctuating income you get from holiday let compared to buy-to-let.

You typically need a deposit of between 25-30% to use them, with lenders looking at the property and its location to determine how much income you are likely to generate.

Typically the income required is 125-145% of the interest payable on the mortgage.

They might also request that you demonstrate your ability to afford the mortgage repayments during those months when rental income is at its lowest or the property is completely vacant. Can you, for example, afford to pay with your savings or other income if needs be?

If your holiday let property costs £250,000, a deposit of 30% or £75,000 will leave you with a mortgage of £175,000. If the interest rate is an average of 5%, your interest-only payment will be £729.17/month or £8,750 per year.

This means, to meet the aforementioned criteria of 145% of interest, you’ll need to demonstrate you’ll be able to generate an annual rental income of £12,688 in order to secure a holiday let mortgage.

When using holiday lets there are tax benefits, as you can deduct your expenses from your rental income before submitting your numbers to the tax man.

As well as the running costs, this means you can also deduct the interest you’re paying on your mortgage.

The HMRC has a series of criteria the landlord must meet to qualify for these benefits.

The property must be available to let for at least 210 days a year, and must be occupied for at least 105 days a year.

However, each tenancy can be no longer than 31 consecutive days. Any stays that last longer than 31 days do not count towards that 105-day minimum.

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