One in ten British adults now owns a second home. But have you considered making your holiday home an investment property? The buy-to-let market has suffered in recent times due to changes in tax legislation, but for many budding landlords property is still seen as an attractive investment.
Many people who consider buying a holiday home do so in order to fulfil their own desires to have a ‘place in the country’. There is something whimsical and romantic about being able to up sticks, throw a bag in the car and disappear into the peace and quiet of the countryside each Friday to Monday.
But what about the days and weeks that your holiday home remains empty? Log Cabins Lakeland has looked into the benefits of owning a log cabin holiday home, and how renting out your property to holidaymakers could be beneficial to you and your finances.
Buy to let property with no planning permission
One thing to consider when buying a holiday home for the first time is planning permission. It is important to think about the location of your log cabin home. If you are considering renting out your building on a regular basis, you may wish to consider the amenities nearby for holidaymakers. Or the proximity of your log cabin home to yourself, should your guests need to contact you at any point.
When researching land for your holiday home, always contact the relevant council body to ensure you comply with any planning restrictions. Also remember that as a landlord, you will be responsible for providing warm and comfortable surroundings and abiding by various health and safety laws. Furnished homes do come with some tax benefits for landlords, which we will cover later.
If you’re wondering what planning permissions you might need for a log cabin home, the answer is: not necessarily any. If you own your own land – perhaps you are from a farming background or happen to have a generous sized garden with private access – you may consider building a log cabin holiday home on your own property.
To facilitate this, Log Cabins Lakeland provides a range of log cabins in various styles and sizes, which all comply with planning compliant legislations. This means that planning permission is not required for these structures, because they adhere to the recommended size restrictions and are built across one level.
Maximise the ROI on your log cabin holiday home
When considering a UK holiday home investment, it is important to do your maths before anything else is finalised. This is a big purchase and one that you need to be sure of, financially, before you start.
Whether you’re a cash buyer, or you have chosen to take out a buy to let mortgage for your holiday home, your return on investment must be calculated before rushing any major decisions.
On average, UK holiday homes are occupied for 30 weeks of the year, so they can certainly offer a healthy return. To work out the ROI on your holiday home investment, first write down the cost of any log cabin homes you particularly fancy, then research rent prices of similar holiday homes in the area you are considering.
When comparing your holiday home to those already on the market, also consider ‘extras’ that might affect the amount of rent you are able to charge; such as breakfast, tea and coffee making facilities, a log burner fire or Jacuzzi bath. All of these options should be factored into your hire cost.
Typically, buy to let mortgage lenders want rent costs to cover 125% of the mortgage repayments, so consider this when working out your costs. Sit down and work out your marketing costs – you can’t expect holidaymakers to know your property exists unless you tell them. However, property listing sites such as AirBnb do provide a free service.
You should also factor in maintenance costs and amenities. And make sure you will be financially comfortable even if the property sits empty for a month or two. Once you’re happy with the sums on paper, do them again – just to be sure!
Financing a buy-to-let log cabin home
Now that you have worked out the ROI on your UK holiday home investment, it’s time to confirm how best to finance your purchase. If you are looking to take out a loan or mortgage, there are a few options available to you.
- Construction Loans. This type of financial assistance will basically pay the down payment on your log cabin for you. As a general rule, buyers are advised to pay a large down payment in order to have a much smaller mortgage payment month-on-month. When paying the log home equity, you should secure at least 20%, so that you can skip the private mortgage insurance (PMI). In case you’re wondering, PMI is something that protects the lender on the off-chance that you ever stop making payments on your loan.
- Log Home Lenders. There are many financial service providers on the market who specialise in loans for log cabin homes, mobile homes and caravans. Some lenders will ask for a pre-qualification phase – an opportunity to discuss your goals and particular needs – especially if your loan is a sizeable one. But making your own relationships with these lenders is the best method, as requirements will differ from lender to lender.
Remember, your personal circumstances should be taken into account when buying a holiday home. What works for one buyer may not work for another, so always ask any questions of your log home provider first and foremost.
Reap the rewards by covering your holiday home expenses
If you are considering buying a holiday home for personal use, there are some expenses that naturally should be taken into account. These include mortgage rates, water and heating bills and, in some cases, ground rent. It makes sense then to cover these expenses through the letting out of your property to holidaymakers and solo travellers.
When letting out your holiday home, there are some tax advantages you can also benefit from. Furnished Holiday Lettings (FHLs) allow you to claim Capital Gains Tax relief. Under this legislation, you are also entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures. And, most importantly, any profits count as earnings for pension purposes.
To qualify for this useful tax loophole, your UK holiday home must be available to the public for at least 210 days of the year and must be let for at least 105 days a year. If you can achieve this, you’re certainly onto a winner.
If you’d like to speak to Log Cabins Lakeland about planning compliant log cabin homes, or you’d simply like to get in touch to discuss your options, contact a member of the team today on: 01931 712 044. We’re passionate about log cabin homes in all shapes and sizes, and we’re confident we can help you find the right structure to suit your needs.