Tips to maximise your return on investment when buying a holiday let

Get to know how to ensure a return on your investment when buying a new holiday let and make sure you are investing your money in the right place.

There are many factors that go into what makes a good holiday cottage, some are really obvious like location but not everyone can afford a 4 bed house by the beach. Anyone buying a property with a view to renting and looking for a good return on their investment should consider the following factors;

  1. Location
  2. Size
  3. Condition
  4. Unique
  5. Renovation
  6. Upkeep
  7. Management
  1. Location

Even in the UK most people looking for a holiday prefer to be near the sea/beach, so any potential holiday cottage that is within walking distance to a beach is usually a good investment, but even then if it is too remote and not near a town or village, where people can shop and dine out, that will lesson it’s appeal.

So, the general rule is the best location will be near a beach and within walking distance of shops, pubs and restaurants. The appeal will literally be a sliding scale the further away from this utopia your property is located.

However, not everyone wants a beach holiday, so then you should consider locations that offer specific appeal, like near a river or lake, near a forest, in a National Park with great walks. If you intend to run your holiday cottage as a business and hope to rent as many weeks as possible, it’s about appealing to the largest group of people who will be looking for a holiday cottage. Having a beautiful cottage in the middle of nowhere will appeal to a few people but maybe tough to rent the lucrative Peak weeks, as children probably won’t be that keen. The higher the demand, the greater the price you can charge and as such the quicker you are likely to see a return on your investment.

  1. Size

Again, this will depend on your budget, but it’s always true that the larger the house the better it rents, and the larger the property the greater the renovation and upkeep costs will be. The largest demographic group looking to holiday in self-catering in the UK is “families”, so any property that sleeps 6 to 10 is ideal. Remember, if you have bedrooms/beds for 6 or 8 people you must have a living space to accommodate  that many people comfortably, so 6 chairs at the table and seating for 6 in the lounge. Having a decent garden is good and as many guests will want to bring the family pet, having a good size, enclosed garden is another big selling point. The cottage needs a minimum of 2 parking spaces for anything over 6 people. A bigger property may not always result in a better return on investment as it will require great financial investment to purchase the property which means a longer duration before you see your profits. Finding the right property at a good price that’ll rent well is hard and a balancing act that few get right. 

  1. Condition

As with everything there are many options to consider, a new property without any work needed will cost more but you won’t have to spend a fortune renovating it. Whereas you could pick up a bargain if you are then able and happy to do it up.

The standard of self-catering properties in the UK has gone a little crazy and guests expect the place they rent to be pristine and provide all the modern facilities available. It’s a big mistake to think you can cut corners and fill the cottage with “grannies” left over furniture, it won’t work and all you will get is complaints and bad reviews. Conversely the more you add to the property the more you can charge and the more bookings you will get improving your return on investment overall.

  1. Unique

The obvious best ways to ensure your investment will deliver a good return is adding value, like a hot tub, play room with games, somewhere to store bikes or surf-boards. Offer discounts at local shops, like surf-lessons or bike hire or horse-riding. Make the most of your location, if you're by the sea provide body-boards and a bucket and spade or if near a lake or river provide fishing tackle. If the property is large and will be booked by groups, they will want to have large dinner-parties so offer catering and a chef, which you can charge extra for. All of these booking extras add value items are not hugely expensive but will help you get a premium price and maximum bookings for your holiday cottage.

  1. Renovation

The beauty of renovating a property is that you can start with a clean sheet and make it exactly how you want it and right for holiday letting. What people look for is the classic “chocolate-box” cottage with state-of-the-art interiors with new equipment like kitchen ovens, fridges, dish-washer and washing machine etc. If you have the eye for design and even better the ability to do the work yourself, renovating a property will deliver the best return on investment and get positive reviews which will encourage return guests and more bookings. 

  1. Upkeep

When buying a potential holiday home, whether from new or a renovation, always consider what you will need to do when you rent the property; is the house easy to clean, what is the energy status because in future holiday cottages, will need to comply with energy standards. You will need a cleaner and a gardener so you will need to keep those costs down and have an easy to maintain house and garden will help. There are some costs you can manage but ensuring the upkeep on your property is vital to ensure it is guest ready and unfortunately this will negatively affect your return in the short run but the positive impact upon the guests will improve your return in the long run. 

  1. Management 

Once you have found your perfect holiday house, how can you be sure you have made the right investment choice. Here is where My Favourite Cottages can help. We are very happy to view potential properties with you or simply look at Estate Agent particulars, we will know from these if the property is worth considering as a holiday let and what will be required to bring it up to scratch.

We can do an “Income Estimator” which involves providing a price recommendation for each rental period throughout the year and an approximation of how many weeks the property should get, minus our commission will give you an end figure of what the property should generate each year. Then you need to factor in maintenance and cleaning plus bills and from all this you will know if the property is a good investment.

There are various ways of managing the process of renting a holiday cottage but it usually comes down to “doing it yourself” or hiring an agency, like My Favourite Cottages. Although an agency will charge commission on every booking they get (18% in our case), which means that you will keep 82% of all the revenue from your cottage and an agency will usually provide and pay for all the Marketing, which could easily amount to 18%. An agent will also handle everything after the property has been purchased and advertised, dealing with enquiries, bookings and the money so you do nothing, it must be the best investment you will ever make.