Compare the market: high-yielding holiday lets or long-term tenants?

 

A new survey has come to light showing that holiday lettings generate higher returns than most other property assets, including buy-to-let – but having long-term tenants can provide some major advantages.

The yields generated by letting out a holiday home were 1.1 percentage points higher than those made by buy-to-let investors over the past year, according to research from Second Estates, topping the list of all other major real estate investments in terms of returns.

According to the statistics, the average owner of a holiday letting made £563 a week last year, while average buy-to-let landlords made £191, which is nearly three times more income even when considering factors such as off-season prices and occupancy.

Average net yields reached 6.1% for holiday homes over the last 12 months, followed by student accommodation which saw net yields of 5.25% on average. With forecasts showing an estimated total average return of 9.3% over the next five years for holiday lettings, the asset class is one of the strongest in the market.

Three top benefits of long-term tenants

As a general rule, property investment should be seen as a long-term project, rather than a way of making a lot of money in a short space of time. While the yields of holiday lettings may be enticing, there are a number of other factors to take into account that will affect the investment, and could mean that many investors are better off sticking with buy-to-let.

  1. One major consideration is void periods. While some holiday homes may prove popular all year round, the majority of those in the UK will be very seasonal, and may not even be filled during high season if they are not competitively priced and do not offer all the necessary amenities. By contrast, most tenants sign up to stay in a property for 12 months, meaning that as the tenancy draws to a close, the landlord can advertise early and minimise the length of time the property sits empty.
  2. Advertising is another benefit to buy-to-let. While a holiday home will need to be advertised continuously, buy-to-lets only need to be advertised when a new tenant is needed, and the cost of this could be set to fall as more people are beginning to opt for using cheaper online platforms as opposed to traditional agents.
  3. Another huge draw towards long-term letting is that tenancies are protected by credit checks and referencing. Furthermore, many landlords will actually get to know their tenants personally, and therefore build up a level of trust. Holiday lets, on the other hand, involve numerous different people coming and going from the property, who may or may not have been vetted, and this carries the increased risk of damage to the home needing to be repaired, as well as the addition of regular cleaning costs and checks.

In conclusion, when looking at yields in isolation, according to the latest figures, holiday lettings are a great choice for investors. However, taking everything into consideration, many property investors may still be wiser to stick to the tried and tested buy-to-let market.

CityGreens, Solihull, Birmingham

City-style apartments directly on Birmingham's largest park

  • Limited pre-launch prices.
  • ZERO ground rent
  • Excellent tenant demand

£182,000 - £419,000

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

Compare the market: high-yielding holiday lets or long-term tenants?

Compare the market: high-yielding holiday lets or long-term tenants?

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.