Learn how to navigate property taxation and identify prime investment locations for optimal returns.
Holiday lets have become an appealing and financially rewarding change from traditional buy-to-let ventures. Amid the pandemic, this sector experienced a surge as travel limitations spurred a rise in "staycations," rendering properties in Britain's picturesque tourist spots highly coveted.
Moreover, stringent regulations on long-term rentals have amplified the appeal of owning a weekend retreat that can generate income during idle periods. However, concerns regarding affordable housing shortages and local resistance to investors have prompted certain regions to impose constraints on second homes.
Nevertheless, lucrative opportunities persist, offering both potential profits and personal enjoyment when properties aren't leased out. Despite Brexit, prospects also exist in Europe and beyond.
At Guested we're here to assist at every stage, whether it's your first venture into holiday lets, navigating tax obligations, or selecting the optimal location for purchasing and budgeting effectively to maximise returns.
Before diving in, it's crucial to calculate expenses, encompassing cleaning fees, platform commissions, and projected rental earnings, as well as determining the ideal property furnishings for efficiency. Notably, amenities such as hot tubs can substantially enhance a property's earning potential, up to as much as a 40% increase.
Choosing the right location for your holiday home
While purchasing a holiday let near your current residence offers convenience and potential cost savings on cleaning services, there are many good reasons why this approach may not be ideal.
Avoiding the proliferation of local regulations on holiday lets and prioritising affordable properties with high yields are paramount. While you may be familiar with buy-to-let investing, there are nuances with holiday let loans.
Additionally, considerations regarding potential capital gains should be weighed, albeit less crucial if you intend to utilise the holiday let yourself and refrain from selling it.
While Cornwall is renowned for its profitability in holiday let, it may not necessarily be the top-earning region in Britain.
Strategies for legitimately reducing stamp duty on your second home in Falmouth, Cornwall
Second homes are subject to a stamp duty surcharge, a higher rate applicable to properties other than primary residences. Introduced by former chancellor George Osborne, this surcharge can result in substantial fees.
For example, an £800,000 second home could incur £51,500 in stamp duty, compared to £27,500 for a primary residence.
Although options for circumventing this charge are limited, the "three-year rule" could offer relief if you plan to sell your primary residence.
Encouragingly, investment opportunities in Cornwall, particularly St Ives, endure despite regulatory challenges. Bans in certain areas primarily affect new properties, sparing the typical Cornish boltholes.
However, impending changes to council tax rates on second homes, slated for 2025, may pose significant challenges. Exploring lesser-known locales beyond tourist hubs could yield favorable deals.
Get in touch with Guested if you would like some more insight or assistance as you're about to embark on your first holiday let venture in Falmouth. We offer a fully managed service, so you can sit back, relax, and let us do all the hard work for you.