You might currently be fixated on securing a holiday let mortgage but let’s not forget that this is just the first step on your letting journey. To reap all the benefits of what has got the potential to be a great financial investment (and to keep up with your mortgage payments!), you need your holiday let to succeed.
We’ve spoken previously about making a business model for holiday letting, as well as sharing our top tips to create a wonderful experience for guests. The big question is, even in a thriving market, why do some holiday let owners fail to get their financial rewards?
The success or failure of your holiday let will fall into two basic categories:
- Your forward planning before you become a holiday home owner: finances, management, marketing and so on. Not forgetting the big thing: buying the right property in the right location!
- Your approach, expectations, and perseverance once you are running your holiday let: meeting guests’ expectations, maintaining good working relationships and so on.
Setting the right foundations
If you’ve found your dream property and are full of excitement about starting your holiday letting journey, it’s easy to make an impulse purchase and forget about the importance of planning. The problem is, to rush into things without a proper business plan will increase your chances of failure before you’ve even begun. Here’s why…
Weak financial planning
It’s vital to get your finances in check before you buy; finances not only for the mortgage deposit and monthly mortgage payments, but the real and substantial overheads involved in holiday letting.
A common mistake is to focus on getting together the lump sum of money for the mortgage deposit and stamp duty but thinking no further into the future whereas in reality, you’re likely to face numerous costs to get your letting business up and running. These vary from management fees and marketing costs to purchasing and replacing amenities for your holiday home, not to mention much heftier costs if the property requires any repairs, such as damp walls or timbers. So, it’s unadvisable to empty your bank completely to just buy the property; try to keep cash aside to fund getting your holiday let up and running to the right, high standard.
You’ll need to put a plan into place to ensure that your projected income (as checked by a reputable agent) is adequate to cover all of your outgoings and ideally, to make a good profit too. This leads us onto the issue of…
You need to do your market research and figure out what a reasonable charge is for guests. Sometimes, owners’ expectations are too high and because they love their home, they are swayed and can’t see it through the objective eyes of a business owner.
There’s a magic midpoint to find when it comes to price point; set it too high and you won’t get enough people booking a stay, but price it too low and you won’t make much money even with plenty of bookings. The best way to determine a pricing strategy is by working with a professional agent, who has the knowledge and experience to know how much guests will be willing to pay.
You should also remember that there can be additional fees on top of rent, such as booking fees, platform fees or damage deposit waivers. These can up the initial price of a stay and if that is already expensive, the additional cost could risk you losing potential bookings.
Wrong use of discounts
At the other end of the spectrum to overcharging is giving too much discount. You might be tempted to offer great value deals, with the hope of enticing guests during the quiet season or if you get a last-minute cancellation and don’t want your property to stand empty.
Again, the incorrect use of discounting can be detrimental. It depends on the size of the house, what season it is, what local events are going on, and so on. There’s little point in lowering the rental fee so much that even if you persuade someone to book, you aren’t making any money.
In today’s world, it’s easy to think that solely putting your holiday let property onto Airbnb is the ticket to success – it’s not! Professional marketing will undoubtedly get you the best results as it will consist of a variety of platforms, not just Airbnb. It’s understandable to be wary of the costs involved, but it’s important to see it as an investment in your business; not only is it a business expense so tax deductible, but it’s money that should (later down the line) pay for itself, in the sense that it will generate the highest possible number of bookings.
It’s advisable to do your research and find a holiday letting agency that has a good track record of success and whose ethos aligns with your holiday home. There’s no point going with the cheapest option if you’re hoping for a premium product and at the other end of the spectrum, there’s no point paying the top price to be on a luxury website if your holiday let is a more modest offering.
Whatever route you take, it’s essential to create a great website and ideally enlist the help of a professional to make you more visible online amongst the myriad of other holiday homes out there. Plus, don’t forget that social media is an ever-important aspect of marketing!
Owning a holiday home requires a lot more work than you might be prepared for, work that must be undertaken by yourself or someone else (which of course, involves a fee). We’re not just talking about regular cleaning and financial admin! The reality is, good management of a holiday let property encompasses everything from complicated booking systems and looking after a guest’s every need, to regular deep cleans and being accessible whenever an issue should arise.
If you’re questioning whether to buy a holiday let, the workload has to be considered. Imagine guests arriving and finding a door that won’t unlock, almost-empty jars of coffee, a kettle that’s on its last legs and patchy internet – they’re not going to be best pleased! Then factor in problems such as the risk of double bookings, last minute cancellations or phone calls at midnight because the lights have gone out. These are all very real scenarios which have to be expertly managed. To neglect to do so will result in bad reviews and far less bookings.
If such tasks seem beyond your realm of expertise, find a holiday letting agent who can recommend a suitable property manager to act as the middle man. It’s common that people buy a holiday let with the hopes of earning a generally ‘easy’ income once things have got up and running. Unfortunately, this isn’t the reality if you’re doing all of the day-to-day tasks yourself. Holiday let properties require a lot more general upkeep than buy-to-let properties because with the latter, there isn’t a high guest turnover.
The wrong property
A fundamental part of success is getting your mortgage on the right holiday home! It’s all too easy to be swayed by Instagram-worthy décor and stunning views but the most important thing is, is the property stable and suitable for letting. There are plenty of red flags that you might not be aware of, but the mortgage lenders most definitely will be.
The list of issues includes:
- Proximity to commercial operations that could spoil guests’ enjoyment such as noisy bars, smelly takeaways, or busy shops.
- A property that’s not in good condition and requires lots of renovations, or that isn’t structurally sound. Your property should essentially be habitable from day one of purchase.
- A property that’s not built to standard construction, so in other words, your standard brick house. Lenders will not provide a mortgage on trendy builds such as shepherds huts or wooden cabins.
Thinking more practically about guests and providing a comfortable stay, you don’t want to buy a holiday let that’s difficult to access, has no parking nearby, or that doesn’t have a good ratio of room space and use. For example, a house that sleeps ten people but only has one proper bathroom and a tiny living area is going to put a lot of people off.
The wrong location
You have to think not only about the holiday let property, but its location; there are some places you might set your heart on without realising that there are restrictions on holiday letting. More residents are protesting about people buying homes with the intent of renting it out and the area becoming too touristy. As a result, there are places that you aren’t allowed to buy a property and turn it into a holiday let.
It’s also a good idea to assess the amount of competition for your holiday home. Think of a small Cotswold village or seaside town in Devon. Then, imagine the amount of other holiday let properties in the area… it might be difficult to secure bookings when there are so many alternatives! You need to make sure that your coveted holiday let will be able to stand up against the rest and if it isn’t up to the task, that you have the plans and funds in place to make sure that it will be.
The same goes for the other extreme; if the area isn’t touristy at all, there won’t be much to encourage bookings, even if you own the most stunning property around. Note: the only exception here is where you own a large holiday let sleeping 12 or more, as those types of properties seem to do well, even in more rural or remote locations!
Running the business
So, you’ve found the perfect property in a dreamy location, and you’ve secured your mortgage – how can you now avoid failure? It’s all about turnover and guest satisfaction. Here are some things to think about…
A “professional” attitude
It’s natural to take things personally when it comes to your business and if you believe you own the perfect holiday home, you might not want to hear differently. But whether it’s unjustified harsh negative feedback or constructive criticism, you must present a professional and impartial front when dealing with guests – even if their attitude isn’t good!
If you see your guests in person, it’s a make-or-break situation where you can either end up with a happy or angry outcome, depending on your reaction. Ideally, diffuse any arguments and allow each side to present their case. It’s easier to deal with feedback online, where you have time to digest things, rather than respond in the heat of the moment. Where online reviews are concerned, always be polite as your responses will be available to the general public forever! Reading nasty owners’ messages on TripAdvisor is a quick way to put people off booking.
As we’ve mentioned, you cannot underestimate the amount of work involved with running a holiday let – at least, a successful one. You might think you’re adept at cleaning and ready for the task, but we’re talking a deep clean between every single guest. This involves washing and ironing linen, making beds, cleaning the bathrooms and kitchens until they’re sparkling, dusting, hoovering, removing cobwebs, the list goes on. If your holiday home has a garden that’s another job, plus less frequent tasks such as clearing drainpipes, repainting walls if they’re marked or getting shabby, and replacing worn towels and bedding.
It’s common to outsource the work, of course, but this incurs extra costs and don’t forget, the busier your turnover, the more work involved!
Don’t be tempted to go down the cheap route when it comes to decking out your new holiday home, especially if this doesn’t stand up to the impression you’ve created online. There’s nothing worse than guests being swayed by a wonderful website with stunning pictures, only to arrive to a bog-standard holiday home that’s sorely lacking.
Imagine you’re booking a holiday: what do you want to see? Here are some ideas that don’t cost the world, but will make all the difference:
- Nice crockery along with a selection of regular and herbal teas and a Nespresso machine.
- A good selection of cooking utensils in good condition. You don’t want old, scratched pans that everything sticks to, a few blunt knives that don’t do the job, or a toaster that takes an age to work. Don’t forget to provide instructions too! There’s nothing worse than spending ages trying to work out how to use an oven or just risking it and burning something.
- Useful products that people probably won’t bring but might want to use such as tinfoil, cling film, kitchen roll, salt and pepper, cooking oil.
- A good internet connection! Unless your holiday let is located in an exceptionally rural location, you should have the means to provide reliable, speedy internet. People will expect it and trust us, won’t be happy if they spend their stay frustrated when web pages won’t load.
All of the above sound like small things, but from personal experience make all the difference between convenience and annoyance.
Keeping things fresh
It’s not enough to replenish items once a year – with a high turnover of guests, items get worn and broken easily and you need to reinvest to keep your holiday let maintained to a top standard. You’ll need to check that glasses and crockery aren’t chipped, pans unburnt, beds aren’t threadbare, and so on. It’s amazing how easily things get tired over a short amount of time and a lick of paint or sparkling new set of cutlery goes a long way.
This leads us onto the use of security deposits. As mentioned previously, it can be a risk to add this onto the booking price but can work to ensure that guests look after your holiday home. Plus, if anything does get ruined, you don’t have to lose out.
A warm welcome
With more and more holiday homes out there, people are getting used to owners going the extra distance to ensure satisfaction. Gone are the days of instant coffee, a few measly teabags, and a basket of tourist leaflets; it’s common now for guests to get a thoughtful welcome pack and guide to local attractions, eateries and so on.
Plus, luxurious extras are often now part of a holiday home’s appeal. This could be a hot tub, pizza oven, or the welcome pack itself which could include deluxe mini toiletries and gourmet goodies.
It’s understandable that you’ll want to avoid certain bookings – hen and stag dos are a common concern, as is the question of pets. Be careful to strike the right balance. If you own a cosy three-bedroom cottage in a quiet village, it’s natural that you don’t want 10 rowdy partiers cramming into it when there isn’t space and there’s a high risk of disturbing neighbours. Likewise, if you’ve invested in state-of-the-art appliances and crisp white furniture, perhaps you won’t want dogs to stay.
Try to make sure that your offering complements the local area. If you are running a holiday let in a party town or city, it doesn’t make sense to ban party groups. If you own a holiday home that invites country folk and walkers, banning dogs might be a turnoff. The main thing is to cater to as wide an audience as possible, without causing yourself too much hassle.
Caring for neighbours
We’ve spoken at length about the guests but let’s not forget residents living close by. Noise disturbances will get you into trouble so try not to be antisocial when designing your holiday let. For example, if you have a connecting garden or one which overlooks the neighbours, you should check whether they mind you building a hot tub or barbecue area that will no doubt lead to guests staying out late.
If you have a property manager, make sure that your neighbours have their phone number so they can contact your manager if they feel annoyed by what’s happening next door. It’s better they speak to your professional service provider than ringing the doorbell and shouting at your guests!
So, what now?
If you’re confident that you’re prepared financially and mentally for buying a holiday home, it’s time to get started and the first thing is to secure your holiday let mortgage. Speak to one of our team here or click below to get your initial assessment request submitted.
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The information contained in this article is accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time and so please speak to one of our Consultants to confirm the most accurate up to date information. Nothing in this article constitutes financial advice. You understand that by clicking any external links on this page that you will be leaving the website of Holiday Cottage Mortgages and we cannot be held responsible for the content of this external website. Please always consult your accountant or solicitor for all financial, taxation or legal matters.