You have your favourite holiday destination where you find yourself visiting year by year. So you decide to buy a vacation home which also gives you a sense of belonging. Now you want to share your fantastic holiday paradise with other holidaymakers when you entirely not use it. This idea of sharing it will also help you pay for it.
This could lead you to turn your vacation home into vacation rentals. If you have a potential holiday letting with the “wow factor”, then you’ll love reading the gushing online reviews, receiving personal thanks and repeat bookings. Renting out your vacation home can yield significant financial benefits – but only if you do it right.
Also, if you own your holiday home in the UK, you are exempt from the new tax law under section 24 of buy-to-let property which has hit many landlords hard. Under the old rules, landlords could claim tax relief on their mortgage payments at their marginal rate – so higher-rate earners could claim 40 percent. The change to a flat rate of 20 percent means that many landlords have seen their profits slashed.
However, as a vacation homeowner, you can still obtain higher and top-rate tax relief on mortgage interest repayments, and the returns from holiday letting can be impressive: between £12,000 and £15,000 a year for the average two-bedroomed cottage in the UK. Learn more on how a furnished holiday let could be better than long term buy to let property.
Here are 10 things you need to know and do before you rent out your vacation home:
Make Initial Analysis: Create a spreadsheet to analyse what it will cost you to rent out your home versus the income you can expect to generate making it a vacation rental. Expenses will include maintenance, utilities, taxes, insurance, repairs and amenities. Make sure you budget for preventive maintenance and wear and tear.
Claim any allowances you're entitled to: Letting out a holiday home counts as a trade rather than an investment, which gives you more favourable tax treatment. You may be able to claim various allowances and reliefs, including:
- Capital allowances on furnishings and equipment
- Capital gains tax reliefs, e.g. business asset rollover relief.
To qualify for these allowances, your holiday home must meet specific criteria, including being available at least 210 days per year and let for more than 105 days a year. Also, no single guest may stay for more than 31 days, and you must charge market value rent.
Get proper insurance: Ask your agent what type of policy you need for short-term rentals home.
Furnish, decorate and equip your home: Amenities typically depend on the market and the price, but people often expect most of what they would get at a hotel. A fast Wi-Fi connection, extensive cable package and other entertainment options are recommended, while a hot tub, pool table, board games and other recreation options can be a draw for some guests. Check out this tips to do it right.
Get professional-quality photographs and write an excellent, detailed description: People will choose your home based on the pictures and the description of the property. That first photo is incredibly important because that’s what people see. Be very thorough in your description. List every amenity, down to balconies, cribs and pool noodles. This tips might become handy.
Find a dependable cleaning crew and other maintenance personnel: If your home is popular, you will have one set of guests checking out in the morning and a second set arriving that afternoon. That makes it imperative that the cleaning crew show up on time. If you don't live nearby, your cleaning crew is also your eyes and ears. You may also need pool service, lawn service and a handyman, plus know whom to call if the toilet quits working.
Be ready to respond quickly: Most travellers will send inquiries to several homes at a time. The first suitable home to reply is likely to get their business.
Create a guest screening process: Screen your guests by asking the number of guests, their ages,their plans in the city. If they book, get their full names, addresses and phone numbers. You get a lot more information and a feel for people by talking to them. Or, get it done by a property management company.
Offer a personal touch: Anything you offer to make your home stand out and to make their vacation easier is likely to yield more income. You can store useful things such as beach equipments and toys for children in the property and allow their use, and leave tips for holidaymakers based on your own experience. Anything you've learnt, pass it on. This gesture will help your guests feel at home and will significantly increase the chance of recommendations and re-bookings, leading to a steady annual income.
Hire a property management company: Consider hiring a property management company if you don't have the time or desire to run your vacation rental yourself successfully. They can manage every aspect of renting your home, from managing bookings, to creating your listing. Leading Short-Term Management Company and Airbnb co-host, Pass the Keys, can make your vacation rental experience much easier and hassle-free.