Financial Planning Tips for Buying a Furnished Holiday Let…

First of all, many thanks to Zoe Taylor MSc Cert CII (ER, MP) EFA FPFS LLAA.

She’s an expert in financial planning, and we learned so much from talking to her on our podcast The Holiday Let Mortgages Podcast.

Holiday lets (HLs) can be a great way to generate income and build equity.

However, financial planning before you buy is wise.

What you need to know…

A furnished HL is a property rented out to guests for short-term stays, typically a week or less.

Find out more about the difference between a holiday let and a buy to let mortgage here.

HLs must meet certain occupancy requirements in order to qualify for tax breaks…

Tax benefits of a Holiday let

Here are some:

Capital allowances: HL owners can claim capital allowances on the cost of certain assets, such as furniture and equipment.

Mortgage interest relief: HL owners can claim mortgage interest relief on the interest paid on their mortgage.

Business rates: HLs are typically subject to business rates rather than council tax.

Capital gains tax: HL owners may benefit from favorable capital gains tax treatment when they sell their property.

More Financial Planning Aspects

There are some other important financial planning aspects to think about:

The cost of the property: The purchase price of the property will be a major factor in your decision.

The cost of running the HL:

The cost of running an HL includes things like mortgage payments, property taxes, utilities, and maintenance.

The potential income from the HL:

The amount of income you can expect to generate from the HL will depend on a number of factors, such as the location of the property, the size of the property, and the time of year.

Your personal financial situation:

You should make sure that you can afford the upfront costs of buying an HL and the ongoing costs of running it.

So whether you’re thinking about buying a furnished holiday let, or you’re already in the process of buying one, good planning is a must.

Yes, a furnished HL can be a great way to generate income and build equity.

However, it’s really important to dig deep, spending time researching every angle, and understanding fully the financial planning considerations and implications relevant to you, every step of the way.

Here are some basic tips for financial planning when buying a furnished holiday let:

Get professional advice:

It is important to get professional advice from a financial planner or accountant who can help you assess your individual circumstances and help you make informed decisions.

Consider your goals:

What are your goals for buying an HL?

  • Are you looking to generate income?
  • Build equity?
  • Or both?

Get an overview:

Make sure you understand the occupancy requirements for HLs in your area…

…and dive into the potential income and expenses associated with HLs.

Be prepared to put in the work:

HLs can be a lot of work.

You’ll need to be prepared to market your property, clean it, and maintain it.

By following these tips, you’re well on the way to ensuring you’re making a sound financial decision when buying a furnished holiday let.