Investing In Property: Which Business Model?

If you’re looking to invest your money, you might be thinking of buying property, such as a holiday let, buy-to-let, or maybe just a second home for your personal use. It’s no surprise that it’s a popular option for those in such a fortunate financial position; poor interest rates make it almost pointless to keep your money sitting stagnant in a savings account, whereas owning and renting property can generate a good income.

The question is, which route do you want to go down: do you see yourself as a classic buy-to-let landlord or maybe as a host, running a stylish holiday let? If you’re undecided, here are some things to think about when it comes to investing in property.

What do you want to buy?

It might be that you’ve got your eye on a property already and if you don’t, it’s time to peruse the market! Different properties will serve different purposes – a cosy countryside cottage works perfectly as a holiday let, whereas a practical new build close to a town centre will attract long-term renters.

Where do you want to buy?

The location of your second home will have an impact on its business potential. If want to buy in a tourist hotspot such as the Cotswolds, Lake District or Cornwall, joining the thriving holiday let market might be the best option. On the other hand, if you’re looking to buy in a quiet town or commuter village which isn’t in a particularly touristy location, it might be better to go down the buy-to-let route.

Who do you want to rent to?

Before you set your heart on a specific property, it’s important to consider the occupants that it’s likely to appeal to. Let’s say you buy and rent out a house within walking distance to Cheltenham Racecourse or Ascot, or one in a university and party city which is popular with stag and hen groups, such as Bath or Swansea. In both cases, there’s the chance of attracting party goers which poses bigger risks and might not be to your liking.

In the same vein, you’ll want to decide whether you want to find one long-term tenant or are happy with a high turnaround of different guests. The former buy-to-let model should incur far less admin throughout the year, but also poses a bigger risk. A buy-to-let tenant is a legally recognised status and as such, eviction is not simple, should you find yourself landlord of an unreliable or troublesome occupant.

How much do you want to be involved?

There’s the option to outsource regardless of whether you choose a buy-to-let or holiday let property, letting a professional take care of marketing, general management, and maintenance. As mentioned above, buy-to-lets don’t require a lot of upkeep week to week – if things go well, you might not be involved at all throughout your tenant’s lease period! However, there is the possibility that you’ll walk into the property after 12 months and find damage.

There’s no question that holiday lets require much more maintenance. This includes everything from housekeeping between each guest, to general repairs, to replenishment of necessities such as toilet roll and cleaning products.

How much income can you make?

Buying a second property has all the potential for great financial gain but the question is, how stable do you want your income to be?

Holiday let properties are more seasonal and you’ll find that your profits will vary throughout the year. Summer and Christmas holidays, weekends and popular local events will be busier in terms of bookings, whereas a random midweek in January probably won’t garner as much interest. That being said, so long as your property is well maintained and professionally marketed, you should still be able to generate revenue consistently and avoid any major panics!

Buy-to-let properties appear more stable, with the same income earned each month. But there is the possibility that your tenant leaves and you struggle to find a quick replacement (this is known as a ‘void’ period) or worse still, they default on their contract and leave you in a tough position – especially if it takes you a while to collect payment or evict them through the courts!  

Do you want to use the home yourself?

One of the benefits of owning a holiday let is, of course, the option to enjoy fuss-free getaways for yourself. Though your usage must be monitored (HMRC has specific rules in place for furnished holiday lets although this is set to change from April 2025), this is a huge benefit of choosing to holiday let, as there will be free periods during which you can utilise your home from home.

How easy is it to get a mortgage?

With second properties which are intended for letting, mortgage providers will want assurance that your projected rental income is enough to cover your monthly payments. If you’re hoping to find a buy-to-let mortgage, you’ll be able to find plenty of lenders out there.

Holiday let mortgages are a more specialist area of finance and you might find it more difficult to find a lender, especially as many don’t actively promote their services. If you’re hoping to secure a mortgage and don’t know where to start, HCM are here to help! We have an expert understanding of the market and those active mortgage providers who lend for holiday homes.

To conclude…

The holiday let versus buy-to-let debate raises many issues you’ll want to consider before you invest in a second property. With pros and cons on both sides, it’s up to you whether you want to join the holiday let industry, which is only growing in popularity, or go for the long-term, lower maintenance solution with a buy-to-let.