If you want to make sure that a holiday let is financially viable – and you should do so before committing to a purchase and at regular intervals after buying – it is important to keep a close eye on your running costs. While the mortgage payments may account for the bulk of your costs, things such as the price of utilities, council tax and maintenance soon add up. Plus, these can fluctuate over time.
Here is a brief rundown of the costs you need to take into account with a holiday let:
- Your mortgage repayments
- Council Tax. Varying discounts of up to 50 per cent are offered by local authorities for holiday lets.
- Service charge. Does your property have a leasehold which requires a payment towards servicing of communal areas?
- Insurance. You need both buildings and contents cover for a holiday let, and a tailored policy to cover extended empty periods and damage caused by burst pipes is advisable for a holiday home.
- TV license
- Telephone and internet connection. These are not essential, but a property with Wi-Fi connectivity will be much more attractive to tenants. However, it is worth finding out in advance what the property’s broadband capability is in advance – properties in remote locations often struggle for performance, so it might not be worth committing to a contract in these circumstances.
- Utilities. Water rates are usually fixed – unless the property uses a meter – but gas and electricity prices depend on consumption. For an idea of what the cost will be, spend a trial week in the property and measure the usage – but remember that tenants will probably use more, as they’re not paying the bills!
- Management. If you live far away from the holiday let, it may be worth finding a local management agent to deal with tenants and the general up-keep of the property.
- Maintenance. General wear and tear leaves fixtures and furnishings looking jaded after a while, but to create a good impression you need to make sure that the property always looks presentable, so a fresh lick of paint or replacement of furniture may be in order. Other larger maintenance projects, such as structural issues, should also be factored in.
- Electrical goods. If your property advertises the use of Wi-Fi, a television or air conditioning, you need to make sure that these are in working order at all times, which could require expensive replacement from time to time.
- Soft furnishings. Providing plenty of towels and bedding is important, and while these last a long time, it can be a significant up-front cost when you first buy the property.