Homeowners keen to explore Holiday let as investment | moneyfacts.co.uk

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Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 30/09/2021

This article has been sponsored by Original Cottages.

Interest rates on cash savings accounts fell to record lows on average during 2021 and whilst some are starting to recover, it would be understandable for savers to be considering alternative ways to invest. The latest research from Original Cottages revealed that almost three quarters (71%) of homeowners were keen to explore other ways of investing away from a traditional bank savings account and two thirds (63%) considered holiday let as a good investment opportunity.
Property has been an enticing investment opportunity in recent years due to rental demand and not only has the buy-to-let arena overall bloomed, but there has also been a rise in mortgage options for those exploring holiday let. According to Moneyfacts.co.uk data, there were just 74 deals from 14 lenders available to investors in August 2020, but this has more than doubled to 186 deals from 25 lenders this month. The expansion in choice within this niche market comes at a time when demand for staycations is surging. 
UK staycations have thrived during 2021 at a time where the uncertainties surrounding international travel have been prevalent and the recent study from Original Cottages revealed 73% of respondents were more likely to consider investing their savings into a holiday let now compared to five years ago. There has been considerable growth in the holiday let market during 2021, according to Hamptons International . They recorded more holiday let incorporations in England, Scotland and Wales between January and June 2021 than the whole of 2020 and is the highest number (1,404) since records began in 2007. 
Investors exploring the prospect of having a holiday let of their own may feel the prospect is daunting, so seeking the expertise of a company in tune with the ever-growing market for guidance is wise. Hannah Cooper, Regional Head   of Property Recruitment for Original Cottages said, “Staycations have driven demand for holiday lets as more people than ever are holidaying closer to home, presenting a great investment opportunity. Whilst our research revealed there is an appetite to invest in a holiday let, well over a third (39%) are worried about not having enough time to manage the property and over a fifth (29%) are concerned by the level of admin work required. Whether you have a second property or are considering purchasing a property to transform into a holiday let, we help make holiday lettings stress free and profitable. We provide legal advice and property management by a team of local experts, helping you make the most of your investment.”

Alternative investments

Consumers looking for alternative investments can find various options out there, which could appreciate more than a cash savings account. As the value for assets can go down as well as up, it is important consumers seek advice before they invest. The below list is a selection of alternative investment options we have drawn together that consumers may be keen to explore: 
  • Investing in real estate via Buy-to-let may be a good alternative for those either looking to start out with one property – or those looking to build a portfolio. Some borrowers may even wish to consider setting up a limited company and whilst rental income may seem enticing, seeking advice into the tax impact and how to arrange an overseer of the tenant is wise.
  • Holiday-let works similarly to a buy-to-let mortgage, except there are additional criteria for these loans which allow borrowers to let out the property to holiday makers. As there has been a rise in UK vacations due to the pandemic, it’s understandable to see the potential to invest in a holiday home. Undertaking thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of utility bills can feel daunting, so seeking advice before entering an arrangement is wise.
  • Commodities can be an attractive alternative investment as part of a balanced portfolio and consumers could invest in gold. It is possible to buy physical gold through the Royal Mint or invest in gold stocks through exchange-traded funds (ETFs). Past performance value should not be presumed as an indication of the future but during times of stock market turmoil, gold can go down as well as up in value.
  • There are other ways to invest in a physical item away from real estate or gold bars, such as in antiques, art, wine, whisky, stamps, or coins which have been worthwhile considerations over the years, as alternatives to grow in value. However, seeking out an expert before purchasing would be wise, not just at the point of selling off these assets. Someone may have an interest in each area but it’s important they choose wisely if considering the item as an investment to appreciate over time.
  • Crowdfunding may be an interesting investment alternative to those looking to support start-up businesses. Some may be keen to invest considering how the pandemic impacted those looking to get their business off the ground and even those who struggled through lockdown. There are various websites listing opportunities, but its important consumers read up on the terms of their investment, the risks involved, and what they might receive for doing so.
  • During a low interest rate environment, savers may wish to consider stocks and shares as an alternative, but they must be mindful that fund values can fall as well as rise. Seeking independent advice could be a good move to ensure they pick the most appropriate funds for their attitude to risk and ideals. Climate change remains a key issue in the media and consumers may be considering sustainable investments. Ethical funds have surpassed non-ethical over the past couple of years and this may not just entice those keen to invest more responsibly but also those chasing good returns.
  • Cryptocurrency has been a notable investment trend in the media, but it can be volatile and is not regulated. Buying and selling at the right time is crucial, and if consumers are interested in investing, they would be wise to monitor the fluctuations online, as they would need to with any type of investment where the value can go up as well as down. 
More information on holiday let as a potential investment can be found in our holiday let guide. 
Moneyfacts.co.uk has also written some useful investment guides including how to invest money, the best ethical investments, and how to invest in property.

 

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