The rise in so-called ‘staycation’ breaks since the COVID outbreak began has pushed many investors to consider buying Holiday Let property, instead of traditional Buy to Let properties, according to one leading specialist mortgage broker.
Professional Contractor Mortgages, headed up by Andy McBride, have decades of experience in helping clients to purchase both residential and investment property. Recently, however, they have seen a shift in enquiries towards short term Holiday Lets, instead of traditional rental properties.
“For many contractors, particularly those with Limited Companies, buy to let investing has been a staple part of the financial picture for over a decade” says McBride. “Now, however, we are seeing a marked increase in those looking at alternative, outside the box investments such as Holiday Lets.”
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Mortgages for Holiday Let properties have traditionally only been available from specialist lenders, due to the longer periods in which the property is empty being seen as higher risk, compared to more mainstream Buy to Let lenders where the expectation is that the property will be occupied all year round.
Now, though, options for those looking at holiday cottages or Airbnb letting are becoming more freely available, even to those working on fixed term contracts or through Limited Companies.
“Because of the relationship that we have with many lenders, we are able to feed back directly the sort of enquiries that we are dealing with, to help with their own market research” adds McBride. “The added benefit of that for our contractor clients is that we can directly influence lending policy and help to build new lines of funding which in turn greater increase the options for our clients.”
This shift in focus has led to a change in the way that Holiday Let mortgages are calculated, with the ability to consider differing weekly rental figures depending on whether high or low season, especially useful when considering the various areas of the country that have a defined holiday season.
“Lenders stress testing on Buy to Let mortgages have always been somewhat subjective with notional rates, taking into account the vast differences in rental income up and down the country” concludes McBride. “With Holiday Lets, there are generally three figures considered, for high, medium and low season weekly rates. The additional figures help to create a more realistic average income and help with affordability with lenders.”
“This means the return on investment for Holiday Let property is far greater than a traditionally let house, with over 10,000 active listings in Cornwall alone on Airbnb last month.”
A Holiday Let purchase is often seen as a win-win, not just with huge seasonal income – estimated to see a 50% increase year on year following COVID lockdowns – but also looking further afield for the owners themselves.
“Many clients are looking long term, with holiday cottage locations being seen as ideal retirement homes for the future” concludes McBride. “Why not make the money within your business work for you long term, as options even exist to purchase through establish, trading companies.”