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Advice for Holiday Home Owners - Choosing a Holiday
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holidaylets.net - The No. 1 place
to advertise your holiday property on the web |
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 Having
made the decision to buy a holiday let, you'll
now have a few things to consider if you're
going to make a success of it. Our team has
come up with this useful set of notes, based
on our experience in the holiday let business.
We hope to show you why the time could be right
for you to buy and what factors have combined
to encourage so many holidaymakers to rent a
holiday property rather than use an hotel.
holidaylets.net
promotes listings from all over Europe, as well
as diverse locations such as the USA and the
UAE and exotic destinations like Mauritius and
Costa Rica. We are able to help advise where
to find the latest hotspots and forecast trends.
We've put together some notes on how to finance
your undertaking; which mortgages to consider
and which to avoid; and some details on tax
implications and legislature relevant to holiday
homeowners.
We are also constantly in touch with our clients
and welcome any suggestions and tips they can
recommend. So feel free to add any of those
little ideas which have brought you personal
success and which you think your fellow homeowner
might use.
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Why buy a
holiday home to let?
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 Putting
your money into bricks and mortar
has never been as popular as it
is now. Many people are choosing
the option of the relatively ‘safe’
investment of a holiday home with
the hope of future security through
capital appreciation and rental
income. The property market has
undergone a steady upward trend
over the past ten years and many
homeowners have profited by releasing
equity from their main residence
to fund the purchase of their dream
holiday home. This, combined with
favourable exchange rates and comparatively
low prices abroad has helped drive
the market.
Having a second home abroad was
once seen as an improvement in lifestyle,
allowing the owner an escape to
a warmer clime for a few weeks each
year. Some even chose to retire
abroad to benefit from a slower
pace of life that comes from being
permanently ‘on holiday’.
Then there were those who realised
the potential of putting their investments
into holiday lets and providing
a solution for the armies of tourists
looking for comfortable, secure
holiday accommodation that didn’t
involve the restrictions of hotels
or the discomfort of campsites and
caravan parks. The income derived
from letting a property could cover
the mortgage, and of course there
was also the added benefit of having
somewhere free to go on holiday
each year.
Two other important factors have
influenced the success of buying-to-let;
both have seen a dramatic upturn
in recent years. The first was the
growth in the use of the Internet
to find and book a holiday, with
many more buyers experiencing the
efficacy and immediacy of a tool
that put the location of the property,
its views, its environs and its
price in front of them at the touch
of a button. Never before had potential
buyers been able to access such
enormous amounts of information
so quickly and simply. The benefits
for the property owner are also
huge. Imagine, for instance how
long it would take to update, say
a summer and a winter view of your
chalet, in a brochure. Or to take
advantage of currency fluctuations
and amend your pricing structure?
Today it is simplicity itself, and
it puts you, the owner, in direct
competition with hotels and the
campsite holiday market.
Second, was the emergence of the
no-frills, low-cost airlines. Companies
such as easyJet and RyanAir started
flying travellers to holiday hotspots
for the price of an intercity train
ticket. Then, as the competition
heated up, prices fell to a few
pounds, then a few pence. Granted,
some of the airport destinations
were not exactly city centres, and
onward travel was an extra cost,
but the combination of a cheap flight
and comfortable accommodation was
irresistible. Holidaymakers loved
the idea of being able to package
up their own cheap flights with
accommodation of their choice, often
found on self catering portals such
as holidaylets.net. Consequently,
the numbers of people taking European
package holidays started to fall
and the popularity of the DIY holiday
began to gather pace. Today, the
DIY flight/accommodation option
is more popular than ever and shows
no sign of relaxing as people use
the new tools and services available
to exercise choice and package their
own holiday.
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Where should
you buy?
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 British
buy-to-letters have traditionally
seen Spain and in particular, the
Costa del Sol as their home from
home, and have bought properties
by the thousands. Five years ago
£40,000 would have bought
you a tidy holiday apartment in
a desireable seafront location.
Today, property inflation in Spain
means the same property would now
be worth five times as much! Similar
growth is being forecast for Bulgaria,
especially the mountains, where
the government has been spending
money upgrading lift-systems in
the ski resorts ready to deal with
expected influx of winter tourists.
Holiday letters have been quick
to realise the potential and a building
boom is well underway. The same
£45,000 would have bought
you a characterful old two-bedroom
apartment a couple of years ago
and today will give you ownership
of a modern centrally-heated one
bedroom apartment with balcony and
mountain views, with sleeping for
four and all conveniences.
Cyprus is perhaps not so well
known to the majority of investors,
but is fast becoming the place
to buy, offering a year-round
climate and ample opportunities
to buy off-plan. The main resorts
of Ayia Napa, Limassol and Larnaca
probably have the most investment
potential. Investment property
in Turkey is currently centred
around the new apartment blocks
in resorts like Bodrum, Marmaris,
Altinkum, and Kusadasi but not
forgetting the good real-estate
opportunities that still exist
in and around Istanbul. France
has never really been out of favour
and neither has Italy, with Umbria
and Tuscany being perennial favourites.
Canada and the USA, and in particular,
Florida, have seen a shift from
being a holiday resorts to places
with quite high ‘resident
foreigner’ populations.
However, Florida is also evidence
the property market doesn't always
inexorably continue to climb.
In recent months we've seen the
market stutter and fall for the
first time in more than a decade.
A timely reminder for us all that
investments carry a risk.
So much for choosing a country,
but what would be the best location?
It is no coincidence that large
developments spring up around
golf courses or adjacent to marinas.
Your own preferred leisure pursuits
should guide you, especially if
you intend spending much time
at your holiday let yourself.
Anywhere with a beach nearby should
be popular, since research shows
that is the number one priority
for British holidaymakers, but
local infrastructure is also important.
Having good local transport ,
airport access, and a range of
shops and entertainment within
easy reach is also highly desirable
to many holidaymakers.
holidaylets.net has used its experience
in compiling a simple summary
which we hope will help you. Before
you begin, ask yourself the following
questions:
Do you prefer to live in the country
or in a town?
Do you prefer the coast or more
inland?
How far are you from the airport?
How close is the beach?
How close are your neighbours;
what are they like and how often
do you want to see them?
Do you want to be in the centre
of things or do you prefer isolation?
How close do you want to be to
shops or restaurants?
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How you should
pay for it?
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 An
estimated 900,000 Britons own
a holiday home abroad with some
of the newer hotspots being Dubai,
Latvia, Croatia, Czech Republic
and even Thailand. Finding the
place of your dreams at the right
price is relatively simple, but
how do you go about paying for
it? Many people merely dig into
their savings or remortgage their
existing home and pay for the
new one in cash. As long as you
are mindful of exchange rates
and currency conversion costs,
and as long as you have sufficient
equity in your British home, this
is by far the cheapest option.
Large deposits are often required,
sometimes up to 40% of the total.
One idea might be to remortgage
to fund the deposit, and then
take out a loan to cover the balance.
Many lenders offer a buy-to-let
mortgage which is able to take
your earnings potential into account
when calculating the sum available
for borrowing. Two other types
of mortgages are relevant to second-home
buyers. An interest-only mortgage
allows you borrow the sum required,
and your repayments cover only
the interest accrued each month
on the loan, not the loan itself.
At the end of the fixed term you
would usually sell the property
and settle the balance. This is
one to choose if you are looking
for fairly short-term gain. Your
rentals obviously must be enough
to cover the repayments, maintenance
and outgoings and still leave
you in profit.
The last type of mortgage is the
repayment mortgage where you pay
off all the monthly-accrued interest
and some of the loan. This system
is flexible enough to allow you
to add in extra lump sums to shorten
the term or to take into account
fluctuations in your salary.
But what if you want to take
out a mortgage in the foreign
country? There are quite a few
High Street lenders; Halifax,
HSBC, Lloyds TSB, Royal Bank of
Scotland, Woolwich who provide
loans on overseas properties through
their international divisions.
Most specialise in key eurozone
areas like Spain and France and
not all will loan you in the currency
of the country. The argument for
a loan in euros is that it allows
you to offset your rentals (in
euros) against your euro loan
repayments. Many people borrow
in stirling if they are earning
in stirling.
We would offer a couple of notes
of caution here however. Unlike
in the UK, if you are purchasing
a buy-to-let property in France,
lenders will ignore the rental
income when considering your application
and expect your own income to
cover repayments. You will also
need life insurance to back a
loan, although sometimes this
is included in the deal for a
first-time borrower. In Spain
there is a minimum purchase amount
of €100,000 and in Portugal
the loan will be agreed on the
valuation price and not the purchase
price.
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