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Are there any 'hidden costs' of holiday letting? 

In any year, South Devon and East Cornwall are full to capacity when it comes to holiday lettings, and since the start of the pandemic the demand for staycations in the sunny South West has only increased, but are there any holiday let hidden costs that you need to know about? 

The net result of rising demand is more individuals seeking to capitalise on renting out second homes, and even primary residences for the summer and seasonal months, seeing large revenues in return. One property, which we began marketing in December 2020, had filled 80% of its revenue target for the year ahead by the end of January 2021 with more than £75,000 worth of bookings.

Guillemot, Hallsands

Those figures are understandably enticing, especially with the vast majority ending up in the pocket of the homeowner when using the minimal commission model of an online travel agent like VRBO or Airbnb along with a professional hosting service like HolidayHost. (Total 13-14% commission, as opposed to more traditional letting models, which charge 16% to 32% commission). 

However, having a full understanding of the costs, as well as the likely return on your property, is integral to making the process financially worthwhile. While some costs are clear, others are not so obvious or may not make themselves evident for a little while (like VAT). While we wrote recently about pricing your property as effectively as possible, here are a few of the less obvious costs of letting your holiday home, that you should be aware of to make the most of the experience. 

Maintenance and gardening costs: wear and tear, year on year 

The maintenance costs of your property depend on a variety of factors, not least the condition it’s in when you begin letting. As with any property, year-on-year there will be some wear and tear, whether it’s from the weather or simply living in the property. If we talk about maintenance in terms of fixed items (painting, scratches, gardening, pressure washing the patio in the spring, repainting the exterior etc.), what type of costs can you expect?  

Typically, gardening is between £15 and £25 per hour. If your property has outside space (or even just hanging baskets), it’s best to have someone come in at least once a month (maybe a little more in the height of summer if the grass is growing quickly). If you seek the support of a contract gardening service that’s equipped to cater for holiday homes, they will likely give you the option to scale your service for the summer and winter months to help keep costs down. 

We recommend that small scuffs to paintwork are handled on a regular basis after guests leave. If you paint walls in one main colour throughout the house, then this will keep work light, easy and cost-effective. However, if you factor in an annual maintenance plan as well for attending to any cracks, more serious scuffs or scratches, any silicone that has shrunk and doing a general spring refresh of the property, then you should find that costs stay comparatively low over time, as well as keeping your holiday home looking and feeling looked after. Items like broken glasses should be taken from deposits where relevant. 

In addition, it’s worth remembering that as with all things, sometimes unexpected costs occur for larger items such as boilers, storm damage and malfunctioning appliances can  occur as well. 

Annual health and safety checks 

One of the most important things that need to be done at a letting holiday home is health and safety checks. Most letting and marketing agents will not act on your behalf until these are done. However, in case you’re managing the let yourself, it’s important to be aware. 

The key items are:  

  • Gas certificate: £80 to £120? 
  • PAT testing electronics: £50 to £150? 
  • Fire Risk Assessment: around £80 to £200? 

Holiday letting property, contents and liability insurance 

Insurance is never an exciting topic for anyone, but for holiday letting it’s important to make sure all eventualities are suitably covered. When speaking to your broker or provider, make sure that you are clear on what the property is being used for, and that the policy covers anything that regular contents and buildings insurance would not.  

For example, third party injuries, accidental damage and liability insurance. All of that said, you want to be covered but you don’t want to have unnecessary additions that simply add to the cost.  That’s something that our experienced hosts will be able to provide guidance on.  

Waste removal for commercial premises 

You may not have realised it, but as you’re letting your holiday home it classes the property as a business. As a result, you may need to pay for waste collection in addition to the regular domestic collection so that the bins are collected more frequently.  

Prices can vary on this depending on where your property is, how much and how often it’s being collected, but on balance we would suggest bins are collected weekly. After all, no one wants to arrive to find someone else’s rubbish building up, and we can offer advice on who to speak to for this. 

Tax and VAT 

There’s a variety of taxes to pay on all things property related, but when you let your holiday home, there are a few extra things to consider. The first thing is that you do have to pay your council tax - it’s something we get asked often. However, if you are letting it for 20 weeks (140 days) or more, then it should be registered for a business rate property tax rather than council tax.  

When it comes to income tax, you have to pay Class 2 National Insurance if your profits are £6,515 a year or more and what you do counts as running a business. Finally, don’t forget that your property income may be eligible for VAT. Holiday lets are charged at the standard VAT rate of 20% if it breaks the VAT registration threshold, which is currently £85,000, in any 12 month period.  

To check the status of your property and to make sure you’re paying appropriately, it’s best to speak to an accountant and ensure everything is set up correctly. HolidayHost can also offer guidance.  

Your time! 

The final ‘hidden’ cost to consider from holiday letting is a comparatively intangible one. The great benefit of letting on a self-managed platform like Airbnb is that with commission rates as low as 3%, there’s a far greater percentage of the profit that ends up in your pocket than when you use a traditional letting agency.  

However, the cost comes in the form of your time. Setting up the listing, managing guest enquiries, and sometimes even complaints, keeping an eye on the market, managing the administration and finances - the list goes on. All of this is completely within your capabilities. However, the question is whether it’s cost effective for your time to be taken up by it, or would those hours be better spent at your day job or enjoying time with your family? This is where the middle ground costs of an experienced host, combined with the online travel agent is the best of all worlds. 

Contact HolidayHost to find out more about cost-effective holiday home letting.