Following a period of adjustment after government-driven tax and legislative changes, the UK holiday let sector has not only stabilised but, in many regions, continues to perform well.
A combination of domestic tourism demand and reducing interest rates has created a perfect window for buyers with a keen eye for opportunity.
Location, location, location: Which places are best for your holiday let?
Evidence from the latest Sykes Holiday Let Report confirms the average annual income for a holiday let owner in the UK stands at around £24,000, with hotspots like the Lake District, Cornwall, and the Cotswolds delivering even greater returns.
Properties in Cumbria, for example, regularly achieve average incomes upwards of £28,000, and strategic investment choices can significantly enhance profitability.
To help maximise investment returns, purchasing a good-value property and undertaking a well thought through refurbishment plan can help buyers secure affordable properties and then push up the expected rental income and potentially the property value over time.
Areas to focus on include regions where property prices are more accessible, but tourist demand remains high. Listings that attract the highest levels of bookings typically offer standout features such as cosy outdoor spaces, log burners, dog-friendly facilities and high-end kitchens.
These desirable touches often lead to higher rental rates and help create memorable stays.
Local research is equally vital. Speak to lettings agents to gain market insight and assess the attractions that could drive bookings. Proximity to walking trails, beaches, historic towns or family-friendly activities can add to the property’s appeal.
Before committing to a purchase, take the time to visit the area to assess its year-round tourist potential and the local amenities that could make it a winning choice for holidaymakers.
How to choose the right mortgage for your holiday let
Financing the purchase correctly is another cornerstone of a successful holiday let strategy.
Always speak to a specialist holiday let mortgage adviser early in the process. Unlike residential mortgages, which are assessed on personal income alone, holiday let mortgages are assessed based on the actual or potential letting returns. If the letting income alone does not cover the mortgage, some lenders allow buyers to factor in personal income as part of the affordability assessment.
Although you can approach lenders directly, expert holiday let brokers understand how to navigate the market to find the best mortgage rates from lenders that support both new and experienced investors, so this should also be considered.
It is also worth noting that some lenders may have a cap on the number of properties within your portfolio, so if you are looking at growing your portfolio partnering with a provider that can support your investment for the long term is crucial.
With over twenty-five years’ experience in this market, The Cumberland can support holiday let landlords. Its range includes a remortgage product with a £299 fee in the Core product range, for example.
Whether the goal is to purchase your next property by releasing equity, funding for refurbishments or consolidating existing borrowing, refinancing offers essential flexibility.
It also provides a valuable opportunity to review affordability following recent changes to the furnished holiday let tax regime and to secure a more manageable repayment structure.
Seek advice on holiday let rules and regulations
Whether you are a new buyer or an existing operator, it is always important to seek professional tax advice following any legislative changes.
Recent changes to income tax relief rules, council tax classifications and the introduction of licensing schemes in parts of the UK add new layers of complexity.
Careful financial planning is essential to ensure these costs are factored into investment models. Working with a qualified accountant or financial adviser who understands short-term letting is key to protecting profits and ensuring regulatory compliance
Holiday letting agencies can also guide investors towards tactics that enhance profitability. Releasing extra financing to fund improvements, such as driveway extensions in rural locations or additional parking, can boost rental returns. Features like hot tubs, pet-friendly policies and the flexibility to accept short mid-week stays help listings stand out and drive higher occupancy rates.
Upgrading interiors, improving energy efficiency or adding popular amenities can help justify higher nightly charges. The Cumberland will consider lending for non-structural home improvements subject to criteria.
A secure future
No investment decisions should ever be taken lightly, but the fundamentals of the holiday-let sector remain attractive. With a growing domestic tourism market, an undersupply of quality short-term rental properties and a strong pipeline of travellers keen to holiday at home, conditions continue to favour entrepreneurial investors.
The best outcomes are reserved for those who treat holiday lets not simply as a sideline but as a serious investment strategy and a commitment to delivering a high-quality guest experience.
A final word on holiday lets…
Lisa Hodgson
Talking to a professional mortgage adviser, with expertise both in the local property market and the holiday let sector, is the best way to find the right lender for your needs.
With the right financial guidance, it’s possible to turn the dream of property ownership into a thriving and profitable business.
You can find out more about The Cumberland Building Society’s holiday let mortgages here.
Lisa Hodgson is senior sales manager at The Cumberland Building Society