Helping holiday let owners to review their sums and expectations
Ashley Pearson, National BDM at The Loughborough for Intermediaries
Back in February, I wrote a piece about the first few months of the year presenting an ideal time for landlords to weigh up any potential renovation work and diligently plan ahead to ensure their holiday lets are in full working order prior to the onset of the summer season.
Well, the summer season is now firmly upon us and holiday let owners up and down the country are working harder than ever to maximise occupancy rates and profitability whilst maintaining those all important five star reviews. I know that as I’m one of these holiday let owners and, not only that, but a holiday let owner who is nearing the end of my mortgage term and having to assess my options accordingly in light of current market conditions.
Which made me think – what might I be looking for from an adviser to support me in this decision making process?
The first one is obvious, what kind of rate could I get and for how long. Working for a lender who is active in the holiday let product arena, it’s my job to know what else is on offer from a pricing and criteria perspective across the market. Meaning I have a little bit of a head start here. Although, despite this still being a relatively small proportion of the overall mortgage market, recent levels of product-related activity have really made me appreciate just how tough it is for advisers to keep track of the huge swathe of changes experienced across all sectors.
However, while pricing has risen, it’s prudent to remember that lenders maintain different approaches to policy and criteria and incorporate unique features which have largely been retained despite the market turbulence. For example, here at The Loughborough, we can use the rental income yield rather than the number of weeks occupied as part of our affordability assessment.
Beyond the products, criteria and policy, I hope that an adviser would also take the opportunity to explore their clients experience or, lack of, when it came to such an investment. Of course, this is a delicate balancing act. Advisers shouldn’t be expected to undertake due diligence on behalf of their clients but ascertaining what kind of research their clients have done in regard to their understanding of the holiday let market, especially in the area in which they’re planning to purchase, is a pertinent question.
After all, factors such as location, income potential, outgoings (both in terms of committed costs and variable costs), maintenance, how to market the property and the importance of reviews are all important considerations.
Even for the most experienced of landlords, engaging with an independent mortgage broker should always be their first port of call when it comes to generating any kind of funding, and exploring their options.
My personal experience of being a holiday let owner over the past few years has largely been a positive one although, despite purchasing this with an already established client base, this still involves spending far more time than I anticipated on it and certainly more than it would on a traditional buy-to-let.
Inevitably the margins can be bigger but with increasing fixed costs to take into account then I, like all holiday let owners who are nearing the end of their mortgage terms, need to carefully reevaluate the pros and cons of continuing from a time and financial perspective. And the intermediary community will play a key role in the decision-making of all those people who purchased a holiday let over the course of the pandemic and are now having to review their sums and expectations accordingly.