How Much Rental Income Can I Expect To Make?

 

Be realistic about the amount of holiday rental you can expect to get from your property. If you know of neighbours in the locality who also rent out their holiday home, ask them what level of income and how many week's bookings they achieve in an average season. Or do some research on the internet - pose as a holidaymaker yourself and look for self-catering properties that you can book direct with the owner with the same features, accommodation and location as you are able to offer.

Remember that the school holiday periods attract the highest demand and therefore premium rental prices - and so if you are looking to maximise your income in the shortest possible time, you will need to be prepared to forgo the most popular weeks for your own holidays.

Are you able to cater for short breaks - especially in keeping with local scheduled airline flights? UK holidaymakers are taking less two-week holidays and more short-breaks (2-4 days), weekends and one-week holidays than ever before - and they're often booking within just a few weeks of departure.

The demand for cleaning and organising the changeovers is more demanding, but the income to be made is far more lucrative if you are able to be flexible.

If you bought your property on the cheap because it needed renovation or updating - or have inherited a property that has been neglected, you need to consider very carefully what work needs to be done in order to bring it up to a suitable standard for rental.

Extensive research carried out by HolidayBank shows that holidaymakers demand clean, well maintained properties with comfortable, efficient facilities and modern safety features. Well equipped kitchens, bathrooms and bedrooms and efficient central heating or air conditioning systems are accepted as standard. Beds should be clean and in good condition with duvets and new bed linen.

There IS a holiday rentals market for older, more basic properties (for walkers, people with pets and children in tow, students and lower income families) but you may not be able to demand a high enough rental or attract the right quality of tenant to make it all worthwhile.

Do not expect holidaymakers to tolerate cheaper rental prices in return for staying on a virtual building site - get the major renovation and decorating work done to the property in between letting periods, not during them.

An easy way to get a professional opinion on the market state of your property is to invite a local estate agent to come and advise you what you could do to quickly update your property - such as furnishings and fittings in order to secure a quick sale should you decide to put it on the market.

This should give you the key areas that need attention. If you say that you are looking to appeal to the buy-to-let buyer, you'll be given an even better idea of what the market in your area demands.

Invite friends and family to stay in your property and ask them for a candid view of what needs updating or improving - both inside and outside the property.

Planning restrictions. Some countries limit property lettings in certain residential areas - so check with the agent/builder/developer if the property is new or the local council.

Changes in currency exchange rates. Whilst the introduction of the Euro has minimised the risk of lost income from currency exchanges, beware of how possible fluctuations might affect you in other countries.

i Calculating Typical Rents

If holiday rental from your holiday home will be the main means of funding the property purchase, then you need to ensure that your rentals cover your outgoing mortgage and all other overheads - and yet still be competitive with other similar properties in the local area. So do your sums BEFORE you purchase the property.

If you are renting out your holiday property simply to supplement your maintenance costs, then you can afford to be more choosy about the weeks that you keep for yourself and you can offer the property at a tempting rate to attract even more bookings.

Weekly rents vary according to Location (whether your property enjoys sea views, sits beside a lake or is in the centre of a popular city), Facilities (accommodation size, air-conditioning and whether it has a swimming pool, games room or other luxury features) and Convenience for travel. If you are close to a low-cost airline route or in a very popular part of the country - you will attract more bookings than if you are in the middle of nowhere.

Remember also that you can Charge for extras like airport pick-ups, accepting pets, changing the bed linen/towels daily, providing arrival hampers, beach-towels or extra cleaning/washing services. 

Finally, Time of year is important - holiday-rentals are always higher for peak periods, school holidays and other celebrations such as Christmas/New Year.

If your property is somewhere with year-round sun - like the Canaries or Madeira, you will find less fluctuation in seasonal letting rates - but the winter months in the UK will always attract more visitors to warmer climes and so command higher prices.

ii Summary of income and costs

To get an idea of the rental income you could get from your holiday property, work out how many weeks a year you can let, how much per week, your maximum and minimum letting charges - and then subtract the sum of your costs for the whole season.

Your costs will include mortgage repayments, country-specific taxes, ground rents, charges for water, gas and electricity, insurance, fees for shared utilities like pools or gardens, heating/air-con bills, repairs/renewals, maintenance, decorating, changeover costs (cleaning, laundry, linen etc), and contingencies.

If you use a managing/lettings agency expect to pay out at least 25-40% of your annual rental income for them to handle the management of your property. This usually includes promotion of your property to their own customer base, which may be quite limited. In addition to this, you may also need to allow for additional cleaning and maintenance costs.

If you let independently, you will need to allow a budget for cleaning, changeovers, repairs, key-handling, etc. if you are not able to manage this yourself.

Allow 10-15% of your rental income to organise these services if your property is overseas or even more in certain parts of the UK.

Put aside budget for advertising - but remember - more and more holidaymakers now book their holidays online and so local and national paper-based advertising is increasingly becoming less cost-effective. By subscribing to www.holidaybank.co.uk you can ensure that your property is seen online by thousands of holidaymakers 365 days a year, 24 hours a day, anywhere in the world.

A net rental income of 4-5% p.a. is considered viable, although returns can be up to 8% p.a. in Spain. Don't forget - the more selling points you have, the higher the rent you can charge.

iii The average length of booking season and how to extend it

In the UK, the average holiday letting season is 25-35 weeks per year if you are willing to accept weekend breaks (40-50 for more prestigious properties) and in France/Spain 20-30 weeks. But again this is variable - for instance, if your property is within reach of a major European city, you will attract tourists all year round.

Make the out-of-season possibilities more appealing by finding out what your guests could be doing in the local area - are there nature reserves, national gardens, good quality golf, walking, traditional festivals or annual fairs etc? What are the local highlights or places of entertainment that your guests might like to seek out when the season is less busy? The more ideas you give to your customers - the more they will want to experience it for themselves.

Offer discounted and short breaks for late bookings, four weeks before un-booked weeks.

 
 
 
Copyright 2006. Copyright protected by HolidayBank Ltd, Sunway House, Raglan Road, Lowestoft, Suffolk. NR32 2LW.

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