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Why Invest?

Is Holiday Let a better investment than Buy-to-Let?

We often speak to individuals who are keen to invest in property, but unsure which way to go. Investing in a holiday home can bring wonderful lifestyle rewards – but how does the financial side compare?

Let’s look at an example. In Torquay, where we manage numerous properties, a top-end, premium 3-bed property on the residential letting market may command up to £1,500 in rent per calendar month. Based on our pricing structures here at Blue Chip Holidays, the same standard of property could earn an average of £4,442 per month as a holiday let, reaching up to £53,300 in annual revenue.

In the current market we commonly see three-year net yields ranging from 6% to 12%. Average Buy-to-Let yields vary across the UK, but in 2015 the average ranged from just 5 to 8%. Combined with the lifestyle benefits of owning a holiday home, it’s easy to see why so many people are exploring Holiday Let investment.

Of course, you must weigh up the comparative costs of running a holiday home vs a residential property. But with an accurate income projection, you can make your decision with confidence.

It’s also useful to consider that Holiday Let income is exempt from the recent tax relief changes affecting Buy-to-Let landlords operating above the 20% basic rate. Up until recently, both Holiday Let and Buy-to-Let landlords have been able to claim tax relief on their mortgage interest at their marginal rate of tax. When the changes come into force in 2017, Buy-to-Let landlords in the 40% bracket and above will only be able to claim tax relieve at a flat rate of 20% – meaning they’ll lose a lot more in mortgage payments. As yet, Holiday Let owners are exempt from this change, making this sort of investment more desirable for those seeking high return on their investment.

How reliable will my bookings be?  Will I rely on peak holiday periods?

At Blue Chip we believe the best, most consistent booking levels are achieved by targeting the right holidaymakers. If you set high standards for your property (4 or 5*) and market effectively to the right audience, it’s possible to achieve high value bookings throughout the year.

So who is the right audience? At Blue Chip, we know that there is huge demand for a premium holiday let experience. Gone are the days when self catering was a budget option – today, it’s the discerning holidaymakers choice.

We market to an affluent, discerning audience who mostly take two or more holidays a year. They’re happy to pay more for properties in our portfolio because they know they’ll have a great experience every time.

Our ‘premium’ market includes a wide range of guests who book at different times throughout the year. Couples and families, across a range of age groups. At this level of the market, bookings are less reliant on peak seasons. Get your marketing right, and you can attract premium-paying guests all year round.

What do I need to know about funding my holiday home investment?

If a cash purchase could be an option for you, it’s worth considering that holiday letting currently outperforms the FTSE 100 and many other savings products. The right property can provide a regular stream of income right away, as well as potential for both short-term and long-term capital appreciation.

If you need a loan to fund your holiday home investment, a range of tailored mortgages are now available. Naturally, there are differences in interest rates, and at least a 30% deposit is usually required.

Your property’s income projection will play a key role in securing your mortgage. Rather than using their own valuation teams (as they do for buy-to-let mortgages), Holiday Let mortgage providers lend based on an income projection from your letting agency – outlining your property’s potential annual revenue. Lenders typically look for a minimum annual income of £40,000 – but they’ll consider overall affordability too, to account for any unexpected gaps in bookings. So expect to be asked questions about your personal income and outgoings, alongside your income projection.

Got a property in mind? To find out how much your property could earn, request your income projection today

Holiday Home Advice

The rewards of owning a holiday home can go way beyond typical revenue. Here’s some advice from one of our Portfolio Development Managers, Gary Jolliffe, to help you make the most of your holiday home investment.

Be discerning

At Blue Chip, there’s a reason we only let 4 & 5* properties, in the UK’s finest locations. We stick to this high standard, because we know the demand exists for a premium self catering experience. We’ve seen owners who meet this demand reap fantastic financial rewards.

Try to find a property with 4/5* potential – even if there’s some work to be done to get there. We’ll guide you on the improvements that will maximise your income projection, and if you’re planning to use your holiday home for your own quality time, focus on popular features that you’ll enjoy, too.

Find a prime location that suits you, too

It’s easy for us to recommend the best places to buy a holiday home for letting. But location is an important factor for you, too. If you market your property with Blue Chip Holidays, you’ll have a generous allocation of ‘owner weeks’. But you’ll also be able to take advantage of our Last Minute Licence – your opportunity to snap up an owner stay if your property is available last minute. So pick a prime location that you’ll enjoy travelling to, so you can savour every opportunity to enjoy your property.

When considering the best places to buy, it’s wise to consider up-and-coming areas as well as established holiday hotspots. Properties in less long-established holiday let locations are likely to be more affordably priced, giving you a higher return on your investment and greater potential for capital appreciation. We’ve plenty of knowledge to share about the UK’s holiday hotspots, but if you’re looking to find a bargain that will pay off long term, let’s be strategic – there are many up-and-coming areas where property remains relatively affordable.

Think long-term – how could your property serve your future?

It’s fine to see a holiday home investment as a smart financial move for today – but why not consider how your investment could serve you in the future? We’ve worked with many property owners who have invested in a holiday property with long-term goals in mind – and we’re always impressed by what they can achieve.

If you dream of relocating in your retirement, investing in a holiday home now can help fund this move. If you’re looking to move to a popular area where property prices are on the rise, securing that retirement property sooner rather than later can be a very smart move.

Perhaps you’re investing purely for profit, or searching for an asset that will increase in value? Focus on prime locations where prices are consistent or on the rise, and let us guide you through the improvements and maintenance that will not only increase your property’s rental income, but protect its market value long-term.

Aim to enjoy the process

The job of any holiday letting agency is to remove the hard work and worry from letting a holiday property. But at Blue Chip, we also encourage owners to enjoy the process – even from a distance. It can be hugely rewarding to read your guest reviews, observe your property’s performance and even interact with guests if you wish to do so. That’s why we’ve developed our Owner Portal – to give you instant online access to your property’s performance, bookings, information and even guest reviews wherever you are in the world. Holiday letting is all about quality time – so take pride in your holiday home and enjoy your success!

Got a property in mind? To find out how much your property could earn, request your income projection today

Best Places to Buy

“Where should I buy?” It’s one of the questions that we’re asked most often here at Blue Chip Holidays. Our Revenue and Yield Manager, Luke McCaughan, explains the thinking behind a few of his top holiday let locations – showing it sometimes pays to think outside the long-established holiday hotspots.

Paignton in South Devon

2-bed yield: 8.89%

With lower prices for well-located holiday homes than Torquay, yet with access to all the services and attractions of its ‘wealthier’ cousin, Paignton looks like a good buy for investors interested in a property on the English Riviera, without the price tag of Torquay. Over time, you could well see both an excellent rental yield and positive capital appreciation as the area’s popularity continues to thrive.

Weymouth and Portland in Dorset

1-bed yield: 9.66%

Less than two hours from London by car, both Weymouth and Portland offer an attractive long weekend destination, and with relatively low prices, they remain appealing to investors looking to make their cash stretch as far as possible.

Brixham in South Devon

3-bed yield: 8.72%

Brixham is a fascinating fishing port with a rich history and range of attractions – including the beaches. The good news here is that there are plenty of properties available to buy at a reasonable price with a view to improvement. Look out for a reasonably priced property in need of some ‘TLC’, and use our guidance to turn it into a lucrative, premium holiday home.

Newquay in North Cornwall

Renowned for its pet-friendly beaches, its barrelling surf and wide range of water sports, Newquay has year-round appeal to visitors.

The town’s popularity with discerning holidaymakers is increasing all the time. In terms of property, quality really is becoming ‘king’ as the number of developments also grow. You’ll need to make sure your property stands out from the crowd – but the number of developers trying to sell also means you’re in a great position to haggle for the right price.

Plymouth in Devon

Plymouth is a surprisingly high-performing holiday home destination, with one and two-bedroom properties performing particularly well in recent years.

The volume of high-quality apartments and houses remains relatively low in the city – meaning there are opportunities to buy well-priced, well-situated properties with a view to improvement to reach that premium revenue.

An interesting point to note about Plymouth is its tendency to attract regular corporate bookings in the city – sometimes for multiple weeks back-to-back. Professionals working on contracts often look at self catering apartments as a comfortable, cost-effective alternative to hotels – meeting this corporate demand can result in solid bookings outside of peak periods to balance out your annual revenue.

Got a property in mind? To find out how much your property could earn, request your income projection today

What type of property

Once you’ve chosen your location, you’ll need to think carefully about the type of property you choose. Our Head of Product Development, Sam Wrigglesworth, explains the advantages of individual holiday homes and development properties.

Premium holiday homes tend to fall into two groups – individual properties (such as traditional cottages and houses in residential areas) and development properties (such as apartments in a complex, sometimes built with holiday home use in mind). There are upsides to both types of property – your best move will come down to the potential of each property, and of course, what feels right for you. Here are some perks to look out for when you’re viewing.

Advantages of individual properties

  • Privacy is appealing to many holidaymakers – individual properties tend to have more options in terms of private gardens, outdoor space and privacy between neighbouring properties.
  • New developments are often limited in popular tourist areas – meaning there are options to buy traditional properties that will keep their value.
  • Community facilities such as local pubs and amenities are popular with many guests – such amenities are sometimes harder to reach from out-of-the-way developments.
  • Elegant architecture and traditional character properties are widely popular – meaning some individual properties have a broader appeal than those in large developments.

Advantages of development properties

  • Developments are always built to impress, meaning some of the work is done for you. You’ll often find a wow-factor that will appeal to your discerning target audience.
  • Maintenance costs tend to be lower in new or recent developments than in older, or individual properties.
  • Developments tend to be modern with high specifications such as good security, entertainment systems and WI-FI – all these perks go down well in the premium market.
  • Hot tubs are hugely popular – some developments will incorporate these, and the difference to your revenue can be great.
  • A low-maintenance development property will retain its appeal more easily over time – great for capital appreciation without expensive upkeep.

Got a property in mind? To find out how much your property could earn, request your income projection today

How to be premium

At Blue Chip Holidays, we’ve always recognised the enormous demand for premium holiday lettings, and the high revenue these properties can earn for their owners. That’s why we mainly market 4 & 5* properties, in the UK’s finest locations. Leanne Jones, our Quality Grading Manager, explains some features that will push your property to the top of the market.

By entering our premium level in the market, you’ll increase your potential revenue and reach a broad audience who holiday more than once a year, and place bookings all year round – not just in peak seasons.

Naturally, holidaymakers’ tastes vary greatly – but our booking data shows us that certain features will push your property to the top of the premium market.

Two bedrooms are best

We constantly analyse the behaviour of visitors to our website. In 2015, two bedroom properties were our most searched for properties – showing a strong demand for this size of holiday home. Consider this when choosing your property – if your holiday home has two bedrooms, it can accommodate a wider range of guests.

Can you see the sea?

Naturally, properties in the UK’s coastal destinations are popular all year round. But find a property with its own view of the sea, and you’ve got something really special. Our data shows that on average, properties with a sea view receive four more bookings every year than properties that don’t.

Hot tubs are golden

It’s no surprise that holidaymakers love the luxury of a hot tub – it’s an extra special touch that can make any holiday home more memorable. But hot tubs don’t just drive bookings. Our data shows that properties with hot tubs earn, on average, £250 more per booking than properties without.  The cost of installing a hot tub might be intimidating, but you can see that this investment may soon pay for itself and boost your revenue into the future.

Parking is important

Parking might not seem like an exciting holiday home feature, but we’ve seen how important it is to the UK’s discerning holidaymakers. Our data shows that on average, properties with parking earn £237 more per booking than properties without. That’s certainly something to consider when choosing your holiday home – it’s not always possible to add parking later on.

Our guests love to swim

Do you dream of a holiday home with a swimming pool? Well, the extra investment might just be worthwhile. Our data shows that properties with a swimming pool, on average, earn £228 more per booking than properties without. So if that swimming pool feels like a luxury you don’t need, consider the extra income it could bring before you make up your mind.

Got a property in mind? To find out how much your property could earn, request your income projection today.