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staycation boom: funding a holiday let

Foreign holidays are off the cards for most of us this summer as the prospect of pricey testing and quarantine when we get home proves to be a significant deterrent. And with yet another staycation summer on the cards, demand for holiday lets has soared in traditional locations such as the Cotswolds and Cornwall but also in Blackpool, Redcar and Cleveland, Carlisle and Calderdale, where property prices are lower.

Most holiday cottages are booked up months in advance – if you haven’t been organised and booked already, you will be lucky to find availability before October – and the cost of a staycation no longer looks like a ‘cheap’ option.

savvy investors

Savvy investors have cottoned onto the obvious opportunities available and are going in search of decent returns. Many buy-to-let investors are still opting for office conversions and the like but a growing number are also considering diversifying into the holiday let market. With holiday lets also enjoying more generous tax allowances than buy-to-let properties, as owners are able to offset their mortgage interest against their tax bill, there is another reason to attract investors.

a potentially lucrative option

While a holiday let requires a different level of management than a buy-to-let, with more work involved during the turnaround between lets, cleaning etc, once investors understand those running costs and how the model works, it can be a potentially lucrative option. For many, the added appeal is that it is dual purpose – it is not just for investment but something that can also be used by the family when it is not being let. For at least some of the year you can enjoy your own staycation, while renting your property out during peak holiday season.

As the market is still relatively new, lending options are fairly limited and it remains quite niche, just as the buy-to-let market was before it took off in the 1990s. More lenders are dipping a toe in the water to meet increased demand from investors looking for increased returns but really there is only a handful who are prepared to lend. Rates can therefore be higher than on standard mortgage products as a result (although, of course, this is also true of buy-to-let pricing compared with residential mortgages).

The bridging loan solution – how MT Finance can help

Bridging finance is proving to be a popular option, particularly for those purchasing a property in need of work and/or who wish to get it ready to let out in time to attract this summer’s holidaymakers.

One of the big advantages of a bridging loan is its speed, with bridging loans usually arranged relatively quickly- typically within 2-3 weeks. There is still time to purchase a property, renovate it (if required), and have it ready to rent in time for the holiday season, after which time you can remortgage onto a term product. If the value of the property has increased during that time, you can also refinance at the new price and lower loan-to-value.

Some may be concerned that all this is a flash in the pan and once air travel opens up again, we will all be on the next plane to the nearest sunshine destination. Are we in a bubble because of Covid and travel restrictions? Possibly, although once people have rediscovered the UK’s countryside and realised how much less hassle holidaying at home is than jumping on a plane, it is entirely possible that more of us will seriously consider a homegrown holiday in future.

For investors looking for both capital appreciation and income, a holiday let may therefore be the answer. Get in touch to find out how MT Finance can provide you with a faster solution to your funding requirements on 0203 051 2331 or fill in our quick enquiry form, and someone will be in touch with you shortly.

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