Advising clients on holiday and short-term lets

There has always been a huge amount of talk over the value of advice across all areas of the mortgage market. When it comes to the buy-to-let sector, this value is rising sharply as competition is heating up from a product perspective – especially from specialist lenders whose products are only available through intermediary channels. Changes have been made to criteria/lending policy and some lenders have even introduced limited windows of opportunity for borrowers to secure certain product types.

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Cat Armstrong | Dynamo for Intermediaries
5th November 2021
Cat Armstrong Dynamo
"52% of adults said they were not willing to invest in a holiday let property due to the perceived ‘hassle’ of taking one on."

All in all, this has led to an increasingly complex marketplace which is placing an even greater emphasis on good, professional advice and this is apparent for first-time landlords through to seasoned investors who have been around the property game for generations. The key to this added value is spotting areas where potential investors can make the most of any available capital, especially from a tax perspective. And one area worth further investigation is holiday lets.

This was evident in research from Hodge which suggested that an estimated 52% of adults said they were not willing to invest in a holiday let property due to the perceived ‘hassle’ of taking one on. Only a third of those questioned by Hodge said they would consider investing in a holiday let property, with the vast majority admitting to not even knowing there were tax breaks involved.

Eight out of 10 people (84%) said they were not aware of the financial benefits, and a further 8% said they were not sure. The top five reasons listed by those not willing to consider a holiday let, apart from the hassle, were that they did not think their finances would allow it (48%), they did not want to go to the same place every time (41%), they felt too old to do it (35%), they would worry about visitors breaking things (24%), and they would worry about their finances if empty for too long (21.53%).

It’s important to point out that mortgage advisers are not tax experts and nor should they claim to be. However, any adviser with strong knowledge of the buy-to-let sector should be able to offer an overview of tax related pros and cons when it comes to owning a holiday let, as well as sourcing the right product to meet individual client needs if this was a road they wanted to travel down.

Here at Dynamo, we have certainly experienced a rise in the number of enquiries regarding holiday and short-term lets over the course of 2021. During this time, the number of product options have increased and, as we head into the winter months, it will be interesting to see how this market will perform in 2022 as international travel restrictions (hopefully) continue to lessen and how a range of landlords and potential investors use this time to assess the validity of such a purchase going forward.

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