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Are you helping your clients to future proof their holiday let investment?

Rob Oliver | Castle Trust Bank
|
4th May 2021
Rob Oliver
"The greater the supply of holiday let properties in the market the more likely it is that prices, and therefore margins, are going to be driven down."

The rise of the staycation has shone a spotlight on the benefits of investing in a holiday let. Buying the right property in the right location can reap significant rewards in a ‘normal’ environment, and in a global pandemic where overseas travel is restricted in the near term and likely to be off-putting to many in the medium term, the financials look even more attractive.

So, it’s unsurprising that so many property investors have thought beyond traditional buy-to-let to buy property to be let out on a short-term basis. However, the popularity of holiday lets as an investment poses a challenge to investors. The greater the supply of holiday let properties in the market the more likely it is that prices, and therefore margins, are going to be driven down. This may not be too much of a concern over the next couple of years when demand from holidaymakers for property within the UK is likely to remain historically high. But what happens if foreign travel returns to pre-pandemic levels? If customer demand drops, the glut of holiday rentals that have flooded the market could lead to over-supply, and this could see some investors out of pocket.

It makes sense then, that your clients who are thinking of investing in a holiday let now also consider how they future proof their investment. With this in mind, for holidays lets even more than traditional rental property, quality always wins. If supply does start to exceed demand, it’s the well-equipped, most attractive properties that will be booked first. There will always be demand for best-in-class properties that people would choose to stay at even if they weren’t forced to holiday in the UK.

For investors this means not only buying the right property in the right location, but also refurbishing that property so that it offers upgraded facilities and décor. This is certainly something worth discussing with your clients and, if it is a route they would like to take, they could use bridging to buy the property and carry out the renovations, before refinancing onto a term mortgage at the new property value, which is likely to be higher following the work. They could even make this process more streamlined and straightforward with bridge-to-let.

The benefit of bridge-to-let is that it offers the flexibility of bridging combined with a guaranteed exit onto a term loan at the outset, which can be agreed at the new value, and therefore a lower LTV. This removes any uncertainty from the bridging finance, giving investors peace of mind that they are controlling their costs while they future proof their holiday let investment.

 

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