3 pros and cons of holiday buy-to-let properties

3 pros and cons of holiday buy-to-let properties

Including a holiday buy-to-let (BTL) as part of a property portfolio can be a highly effective choice for professional footballers.

The money you can receive in rent from those seeking a few days of R&R can be especially useful, particularly if you’re nearing or have finished your career and you’re looking to generate an income from your properties.

However, although it’s possible to produce an income by holding and renting out a property for holidaymakers, doing so can also come with some drawbacks.

Read three pros and three cons of holiday BTLs right here.

3 pros of holiday BTL properties

1. Rental yields tend to be attractive

Firstly, the average rental yields of holiday BTLs tend to be fairly attractive compared to the broader BTL market.

Property development firm SevenCapital states that the average UK rental yield is currently 3.63%, with some postcodes reaching as high as 6%. So, using these figures as a benchmark, let’s take a look at what you might be able to achieve with a holiday let.

According to Property Investor Today, hotel room search site hoo measured average annual holiday rental yields in 2021 in the UK to be:

  • 6% for city properties, with the best cities including Glasgow, Belfast, and Newcastle
  • 5% for countryside properties
  • 3.3% for seaside properties.

Surprisingly, while countryside and seaside properties lie just under the average, city holiday lets comfortably surpass it.

Meanwhile, insurance provider Schofields suggest that holiday lets can provide returns as high as 8%, and have the potential to generate as much income in a week during the busy holiday season as a standard BTL property can return in a month.

Based on these figures, you can see that holiday rental yields have the potential to be lucrative – provided you invest sensibly and carefully.

So, if you’re at a stage of your career when you’re more interested in rental yield than capital growth, a holiday let could be a viable option.

2. Shorter terms means troubling tenants will be out sooner

You’ve no doubt heard some of the horror stories that come from being a BTL landlord. Whether it’s late or even missed rent payments, damages and repairs, or unhappy neighbours complaining about noise, troublesome tenants can make your life far more difficult.

Meanwhile, the shorter terms when renting a holiday property mean you’re less likely to become stuck with difficult occupants.

All these dangers still exist with a holiday BTL, but at least you’ll have the peace of mind that they’ll only be there for a shorter period of perhaps just a couple of weeks.

3. There may be tax advantages to a holiday BTL

Crucially, compared to other BTL properties, you may be able to pay less tax by investing in holiday lets.

Under HMRC rules, properties that are considered to be “furnished holiday lettings” (FHLs) can benefit from some key tax advantages, including:

  • Capital Gains Tax (CGT) reliefs for business owners, such as Business Asset Rollover Relief and Business Asset Disposal Relief (formerly known as Entrepreneur’s Relief)
  • Plant and machinery capital allowances for items such as furniture, equipment, and fixtures
  • Eligibility for business rates and exemptions such as Small Business Rate Relief, meaning you wouldn’t owe Council Tax on your property.

These allowances and exemptions can make it more tax-efficient to own holiday lets than standard BTL properties.

As a footballer, you will likely be concerned about tax. So, buying a holiday BTL could offer you a way to reduce your tax bill.

3 cons of holiday BTL properties

1. Desirable holiday home prices may be high

The first and most notable downside to holiday homes is that average house prices are currently high, especially in popular holiday locations.

According to the UK House Price Index, the average cost of a property in March 2022 was £278,000, meaning you’ll need a fair amount of capital to get started.

Prices in more popular holiday locations were recorded to be even higher, with London coming in at £523,666 and south-east England at £384,966.

High prices may make it more difficult for you to get into the market without taking out a mortgage. And, even if you are able to buy, a higher price could mean a lower yield if you aren’t able to recoup the value in rent payments.

This might make a holiday BTL less appropriate for you if you’re seeking income at the end of your playing career.

2. Upkeep can be expensive and time-consuming

While it may be a benefit to know that troublesome tenants will pack their bags and be on their way shortly, the higher footfall of holiday properties can also come as a downside.

There is a huge range of extra considerations when dealing with holiday properties, including:

  • Regular cleaning. With shorter terms and more turnover, you’ll need to have your property regularly cleaned.
  • Likely to be more repairs required. As well as needing to be cleaned more often, the higher footfall of holiday properties increases the chances of things breaking, especially as some tenants might not treat the property as they would their own home.
  • More administration. With the tenants regularly changing, that means more time and expense on admin, such as paperwork and collecting rents.

Obviously, you have the option of employing individuals to carry out these responsibilities on your behalf. But this will also come with costs, reducing the amount of income you’re able to generate. This may not be ideal if you’re intending to live on in this income once you’ve hung up your boots.

3. There may be periods of downtime

Perhaps the biggest downside to a holiday BTL is that there will likely be periods of downtime in the off season.

The summer period from around June to September tends to be when most people go on holiday, especially for families with school-aged children waiting for the end of term.

However, outside of these three months or so, the likelihood of anyone choosing to stay in your property could dramatically decrease.

In fact, you may find yourself unable to find tenants during the height of holiday seasons if you’re particularly unlucky and don’t receive any bookings.

This could be an issue if you’re using rent money to support yourself as you approach the end of your career.

You might not draw an income from a holiday BTL for as long as nine months of the year. So, make sure you can afford to live your lifestyle without this money between holiday seasons.

Work with us

Want to work with an expert to help you manage your money? Speak to us at ProSport.

Email enquiries@prosportwealth.co.uk or call 01204 602909 to find out how we can help you.

Please note

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.

Think carefully before securing other debts against your home.