Forget location, location, location, the new mantra for property investors is staycation, staycation, staycation. Just ask Mathew Rees. He and his family own around 220 buy-to-let houses and flats in Greater Manchester and Cheshire, but they are so certain that the pandemic has ushered in a new golden era for UK breaks that they have started buying holiday homes in Cornwall. In the past year they have spent over £5 million acquiring four properties and are in the process of buying a fifth.
“At the peak of the pandemic, I was trying to book a holiday home in Cornwall and couldn’t as everyone else was doing the same thing,” says Rees, 42, who lives in Wilmslow, Cheshire, and is the chief executive of the mortgage company Beneficial Estates. “Although they are seasonal, holiday lets can make two to three times more than a conventional long-term let and they look like a very good prospect. Moving forward, I only plan to buy holiday lets.”
Rees is not alone. Almost two years of on-off travel bans, labyrinthine quarantine rules and continued Covid uncertainty have boosted demand for British holidays — and investors have been quick to pile in, both during and after the stamp duty holiday. Cornish estate agency John Bray and Partners has seen a 60 per cent increase in sales of holiday lets since March 2020, while luxury holiday lettings company Unique Homestays reports a 176 per cent rise in the number of inquiries for its property finding service this year compared to 2019.
Even with lockdowns and changing regulations, many holiday let landlords are making 30 per cent more than they were before Covid, while some are earning up to 50 per cent more. Demand for out-of-season lets is increasing — in January 2021, holiday lettings companies were reporting an increase of up to 30 per cent in bookings in Wales (that’s right, Wales, in January) compared with pre-Covid years, according to Carol Peett, managing director of West Wales Property Finders.
The appetite for high-end homes is particularly healthy: 35 per cent of homes listed on Unique Homestays have made more than £100,000 in gross income this year, while five properties have earned over £300,000.
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Rees is hoping to tap into this demand for luxe UK stays. His family’s new properties are in key waterfront locations in St Mawes and St Ives — one even has its own private quay — and they have already spent about £26,000 getting two of them ready to rent through holiday company Cornish Gems. They plan on investing a substantial six-figure sum on refurbishing the others and hope the portfolio will earn them a gross income of over £450,000 a year.
Although the pandemic and the stamp duty holiday were the catalysts for Rees to invest in holiday lets, they’re not the only reasons people have been piling in. “For landlords, holiday lets had begun to grow in popularity well before coronavirus, mainly due to the significant tax advantages,” says Matt Kelly, senior product manager at the specialist lender Together.
Owners of conventional buy-to-lets can now only claim a 20 per cent tax credit on mortgage interest, whereas there is no limit on the amount of mortgage interest that the owner of a holiday let can offset against their rental income. In order to qualify as a furnished holiday let the home must be available to let for at least 210 days and lettings must be in place for 105 days, though you can use it for up to 155 days a year without losing your tax perks.
Other people are making the most of what they have and are converting outbuildings and annexes into rich income streams. Henry and Jo Barnes own a 500-acre farm near Cheltenham, in Gloucestershire, and sensitively restored a set of 18th-century barns to create Anthology Farm, a stunning holiday let that sleeps up to 18 and costs from £7,695 a week through Unique Homestays.
“We only started letting the property in December 2019 and though restrictions meant everything went a bit crazy for a while — with people cancelling, postponing, re-booking and booking — we were very lucky that, as a holiday let, we were able to operate much sooner than other leisure businesses,” says Jo, 37. “When we were allowed to open, we were fully booked. We are also always thinking about how to improve, to maintain our popularity beyond the current staycation boom, should this wave be short-lived.”
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Others think the staycation is here to, well, stay — pointing to long-term trends such as increased awareness of climate change and a backlash against flying. John Slade has been buying holiday properties on the Lizard, in Cornwall, since 2012. By the start of the first lockdown, in March 2020, he owned eight stone barns, ranging from one-bedders to four-bedders, which are let through Cornwalls Cottages.
This year, Slade, who is in his sixties, sold four of the barns through Savills estate agency and bought two new properties: a farm he is planning to renovate for rental and an old Victorian hotel with stunning views of Kynance Cove. He aims to turn the latter into two separate holiday lets, one with five bedrooms and one with two.
“Business has been booming since Covid — it has been exceptional,” says Slade. “Demand was such that, in mid-August, properties that would normally let for about £3,500 a week were being priced by rental companies at £5,200. People even said to me that they would have been prepared to pay double that because they were so pleased to get away on holiday.”
Slade’s top tip for maximising returns is to be as hands-on as possible. “If you’re not careful, property management fees can eat up all your profits. While I love what I do, I dread the moment on Friday night when you’ve just poured a gin and tonic and you get the call to go and fix something.”
How to get the best returns
● Pick your location carefully: Devon, Cornwall, the Lake District, the Peak District, Yorkshire, Norfolk and the Cotswolds get the most bookings. Cottages.com also suggests buying in beauty spots by the coast, historic towns, Areas of Outstanding Natural Beauty or those less than an hour from a popular destination.
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● Larger houses make more money in peak weeks but the best option for year-round lets is a property with at least three bedrooms and a bathroom for each bedroom, says Josephine Ashby, managing partner of John Bray and Partners.
● You will need to factor in a lettings agent fee, typically 20-25 per cent plus VAT of the booking amount. If you need their help with cleaning, laundry and maintenance, outlays will be even greater. Factor in void periods as well as the fact that a high turnover of guests will mean more wear and tear.
● If your turnover exceeds £85,000 you must register for VAT and pay the standard rate of 20 per cent on the full income.
● Interest rates on holiday let mortgages are generally higher than those for second homes or buy-to-let properties. “There is a limited number of lenders available and they seem to prefer established holiday let properties with credible track records,” says Adrian Anderson, director at mortgage broker Anderson Harris.
● Good cleanliness is paramount, especially with Covid. Cleaners in popular areas will expect £15 to £20 an hour.
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● Fast wi-fi is non-negotiable and you should include charging facilities for electric cars, suggests the holiday home insurer Schofields.
● Allow shorter stays of two to four days — Sykes Holiday Cottages says doing so means you can expect 58 per cent more revenue, while making outside space as appealing as possible can boost income by 15 per cent.
● Dog-friendly properties generate higher incomes as they appeal to people all year round — over 30 per cent of all Unique Homestays’ bookings for 2021 included pets.
● Love them or loathe them, hot tubs are big business — Sykes says properties that include them can earn up to 66 per cent more. Features that appeal on a rainy day — such as a pool table, cinema den or games room — will also boost year-round earnings.
● Be exacting and make a home from home, says the interior designer Sarah Ward, who has owned a successful two-bedroom holiday cottage in Aldeburgh, Suffolk, since 2017. “I take the approach that if I lived there, I’d be happy.”
Homes for sale
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Suffolk, £174,995
A two-bedroom luxury lodge at the Azure Seas Holiday Village, in the seaside village of Corton, two miles north of Lowestoft, could earn an estimated £38,000 a year in gross rental income. The park is set in woodland and has won a conservation award. Lovat Holiday Parks
Somerset, £650,000
This three-bedroom former chapel, dating from 1869, makes a quirky holiday let. There are stained glass windows, a courtyard garden and countryside views; the property isn’t listed, which is a bonus when it comes to renovation works. It’s in a village six miles from the centre of Bath. Knight Frank
Gloucestershire, £1.5 million
This terrace of four Cotswold stone cottages is only a mile and half from Daylesford Organic farm shop. If these properties were made available to let all year, lettings company StayCotswold estimates they could generate total gross annual rental income of about £100,000. Knight Frank
Dorset, £2.5 million
Become a holiday lettings mogul with this 16th-century, four-bedroom farmhouse set in 2.4 acres three miles from the Jurassic Coast. It has a well-established holiday business with eight recently renovated cottages rated 4* by the AA and an indoor pool. It’s open eight months of the year and turnover in the 12 months to the end of September was £350,125. Carter Jonas
