Holiday-Let vs. Buy-to-Let: Which Is a Better Investment?

Key Takeaways:

• Go through the factors that can help you choose between holiday-let vs. buy-to-let properties.
• Choose the right property sourcing agency to help you make a better investment decision.

Are you looking to invest in rental residential properties?

Are you looking for an answer between two top investment options: holiday-let vs. buy-to-let (BTL)?

According to research from PropertyData.co.uk, the estimated average rental yield in the UK is 4.75%.

There’s no doubt that rental residential properties can be great for diversifying your portfolio and generating cash flow.

But while investing in buy-to-let generates stable income, holiday-lets promise a higher but non-stable income.

So, let’s settle the debate about which is better for you.

The Face-Off: Buy-to-Let vs. Holiday Rentals 

Both buy-to-let and holiday rental offer multiple benefits for property investors, but different factors can help you finalise one for your next investment.

Let’s compare the basic components of both the investment options:

1. Income potential

When you compare the income potential offered by these two top investing strategies, holiday rental generates more income than a buy-to-let.

But you might wonder how that is possible.

Being a holiday rental property, guests choose to stay at vacation rentals for a short time, unlike a buy-to-let property. It enables the landlords to charge them higher nightly fees.

So, what’s the result?

Once you maintain a stable influx of guests, holiday rentals can generate more profit than a buy-to-let property in the long run.

Holiday and short-term rentals are better than standard BTL for income potential criteria.

2. Stability of income

As you know, tenants usually rent buy-to-let properties for at least 6 months. So, the property is leased, and it will generate a steady income flow. But in the case of holiday-let property, it’s hard to maintain a steady flow of income.

Your overall income can be impacted by off-season or weeks without a steady influx of guests. Also, now you might be aware of how drastically the travel and vacation industry can suffer because of unforeseen disasters like the pandemic.

Although the holiday-lets can recover fast compared to other real estate asset classes, you cannot rely on a holiday-let for stability.

Many property investors have converted their vacation rentals to BTL properties for better stability during times of turbulence.

So, it’s clear that investing in a BTL property can provide a steady passive income throughout the year.

3. Adjustment of inflation

Real estate investment offers a natural hedge against inflation. 

But with BTL property investments, because the property is leased for longer periods and the rent you charge tenants remains fixed, you can only increase the tenants’ rent when the contract expires.

On the contrary, with holiday rentals, you can adjust rates when required based on the market conditions.

You can increase your rental fees quickly and counter the rising inflation. However, recent tenant protection initiatives like eviction bans and rent caps from different governments limit the landlords’ ability to change their income potential.

You can adjust the rental prices of both properties, but a holiday offers better flexibility with inflation adjustment.

4. Maintenance and additional expenses

Investing in a holiday can expose you to more effort in general repairs and upkeep. Once a guest checks out from your property, you have to ensure your property is ready for the next guest.

You must resolve all the small issues hindering your guest’s experience. If you neglect the issues, you can lose the footfall gradually, and it can lower your income flow.

You can hire a professional property maintenance company to handle the laundry, clearing, and regular holiday property checks. It can also minimise the chances of heavy repairs and renovation, saving you time and money.

On the contrary, BTL properties are not cleaned or maintained regularly. You don’t address small repairs or damages until the tenants leave the property.

It can sometimes pile up and lead to significant issues, increasing the overall cost and effort.

If we boil it down, holiday-lets require regular maintenance, but BTL properties can fall into disrepair and result in larger complications in your property.

These important factors can help you draw a line between holiday-let vs buy-to-let properties. 

If you want professional assistance with finalising a property and making an investment decision, you can trust Pluxa Property.

Pluxa Property Helps You Between Holiday-Let vs. Buy-to-Let Properties 

We, at Pluxa Property, are a professional property investment consultancy specialising in various areas across the UK.

Our team provides personalised advice which can assist you in understanding the market trends, potential returns, and the unique aspects of each property type.

That’s not it.

With our insights and data-driven approach, you can make informed decisions that align with your financial objectives. We offer ongoing support to help you manage and maximise the returns from your investment.

So, what’s making you wait?

Go through our range of properties available in the city of your preference to finalise one for your holiday-let or BTL property investment strategy.

FAQs

1. Is buying a holiday home a good investment in the UK?

Buying a holiday home in the UK can be a good investment due to high demand and potential property value increases. You can enjoy cultural attractions and potential tax benefits. However, it can be costly as you have to handle responsibilities like maintenance, and there are challenges in obtaining mortgages and dealing with resale taxes.

2. How much ROI can we get in a holiday-let?

Landlords earn up to 30% more yield than buy-to-let landlords, with an approximate 8% annual return. You can earn up to £13,000 per year, depending on location, property size, and management efficiency.