Landlords could increase their rental income by a massive 21% by targeting the short-term holiday let market over the traditional rental market, research by broker Revolution Brokers has found.
In England, the average monthly rent is currently £943, but the average for a holiday let is £1,137, a premium of 21%.
In the South West, for example, where you’ll find popular holiday destinations such as Cornwall and Devon, the holiday let premium is 35%, followed by the East Midlands (30%), North East (24%), and West Midlands (24%).
This big incentive to get into holiday lets explains why there’s concerns about there being too many holiday lets in tourist-heavy areas, taking away stock from local renters.
Almas Uddin, founding director of Revolution Brokers, said: “The rise of Airbnb and other similar platforms has brought holiday lets to the forefront of people’s minds when they’re travelling around the UK.
“No longer are hotels the first point of enquiry and while Airbnb has opened the door for non-professional landlords to earn money from their home – following strict guidelines in the process – the increased awareness has created a huge opportunity for professional investors who want to secure better yields than they may be able to do within the regular buy-to-let market.
“Location is obviously all important for a successful holiday let – the potential for extensive void periods means they’re best suited to cities and popular holiday destinations local coastal or historic towns where demand is going to be reliable for much of the year.
“We recently oversaw the financing of a short term let investment in Cornwall with a yield of 18.5% versus the average of 4% across the wider area, so they can be incredibly lucrative.”
While it may seem like a no brainer to get into holiday lets, Revolution Brokers said there are four challenges to overcome.
The risk of void periods is higher, the landlord is responsible for bills and utilities, while mortgage interest rates tend to be higher.
There’s also a rulebook to consider, as the property must be available to rent for at least 210 days a year and no single let can last for more than 31 continuous days.
Mortgage providers will often want to know that you intend to make the property available for holiday lets and existing providers may want to change the terms of your deal.
Government guidance on holiday lets is here.