COVID has brought many closer to home for holiday destinations and Sarah Tucker, founder and managing director of The Mortgage Mum, believes holiday rentals have restored people’s love for the UK.
She explained that the vacation rental market has seen a drastic increase since COVID, but she believes that once the world returns to normal, demand will continue.
Tucker said: “I think people have fallen in love with the UK all over again, and it’s going to be a long time before everyone is comfortable going overseas.
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“There are so many areas of the UK that are beautiful tourist hotspots and many are already fully booked for next year. This must be a good space for an investor’s money.
Due to the surge in demand, Tucker said vacation rentals have come to the minds of investors. When looking at return on investment (ROI), there are many factors to consider, but generally a good vacation rental can earn you as much in a week as you could earn in a month from a buy-to. – let.
A vacation rental owner earns on average up to 30% more return than their rental counterparts, and it is estimated that they will deliver an 8% return per year, while rental investors are aiming for a return of around 6 %. , Tucker explained.
The average occupancy of a seasonal rental is between 20 and 24 weeks per year. But high-performing properties in popular locations can reach over 40 weeks booked.
Tucker added: “A good profit target if you don’t have a mortgage or rental costs is 50%, but most people will use a mortgage and have rental costs deducted, in which case you could aim for 30%.”
Looking at the best approach, Tucker said buying a vacation rental in an area with an expected investment is a wise move.
“The big payoff is buying a property in an area that’s becoming popular. At the moment, for example, there is an area in Wales that is being tipped for the next big Center Parcs-style resort,” Tucker added.
Investing in properties around this area could potentially give you huge appreciation, especially if you buy a run-down house in an area that is starting to attract people in the future.
Overall, Tucker thinks an investor’s primary goal for a vacation rental is to be clear about the appeal to the people staying there.
She explained, “Why would people visit this area for one week rather than another? You should also consider the competition if it’s a tourist hotspot – don’t get into a price war.
Moving on to the downsides of vacation rental property, Tucker went on to say that a vacation rental is generally more expensive to purchase than a long-term rental property, and that mortgage rates are also generally more expensive. students.
Additionally, it is common for the down payment for vacation rental properties to be large, especially if there are renovations planned.
However, the more you invest in fixtures, accessories, and other touches, the more your guests will be willing to pay.
Tucker said investors also need to think about housekeepers and those responsible for managing the property.
“You might also need a rental agent, who will typically charge you 20% to 30%, compared to 13% for rental purchases,” Tucker said.
There will also be an initial delay while the property is furnished and the managing agent collects all photos and advertises them. Also, building a good reputation can take some time, so initial demand may not be where it is expected. Because of this, returns aren’t necessarily going to come right away. An investor can also expect more wear and tear on a vacation property than a buy-to-let.
There are currently 29 lenders for short-term rentals, according to Tucker, so she said it’s getting better and more popular than before. However, there are not as many lenders to choose from as for a buy-to-let.
Tucker went on to point out that managing a vacation rental can be time consuming compared to owning it.
She concluded: “You have to make sure you get good reviews and make sure it’s cleaned and prepared properly for customers.
“Running your vacation rental business can sometimes be a full-time job if you don’t have an agent to answer inquiries, do marketing, adjust prices, register, cancel, make complaints, respond to negative customer feedback etc.
“Overall, I think this area of the market has promise and we should talk about it.”