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Holiday lets vs Buy to Let - which is better for retirement income?

ended 08. March 2024

A journalist writing for the Daily Mail has made the following request:

Following the Spring Budget tax changes to holiday lets I'm writing an article on the pros and cons of both when investing for future retirement income - and the financial outcomes.

I'd welcome all leads on stats / commentary - plus I'd love to feature a few landlords who are pro BTL, and others who say holiday lets are a better strategy. If you are an expert who can help provide a case study, you get extra credit!

This is for a spread that needs to be filed monday morning, so time is tight

5 responses from the Newspage community

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Ken JamesVerified
Director at Contractor Mortgage Services
Its all about Location Location Location, in the right Location a Holiday let should in my opinion Trump a standard Buy to let. There has to be a demand that allows you to secure bookings in both High, medium and low seasons. There is no value in a property sitting empty and therefore having that demand met is key to a succesful Holiday Let. A buy to let will have lower rents but give a more steady and consistent income, this will lend itself more to a pension strategy but the value of the Holiday lets potential income does give it an edge, also the owner of the porperty also has the ability to use the property from time to time subject to gaps in bookings which may also enhance their retirement.
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Kundan BhaduriVerified
Property Developer and Portfolio Landlord at The Kushman Group
We are portfolio landlords with both, holiday rentals and BTL properties across the South East of England.

Traditional buy to lets have given stability and relative certainty of cash flow over the years. Holiday rentals while being exciting in their approach, are a lot more operations intensive and offer little to no assurance of stable cash flow. Those doing 'Rent to Rent' arrangements on holiday lets will soon see their income diminish significantly as the holiday rental market so far had the solace of being section 24 tax exempt. However with the changes in the budget, it will prove to be the death knell for this segment. The big attraction to this segment of the market now being taken away, it remains too be seen how many actual landlords remain in the market. I would strongly favour compliant BTL investments at this point over holiday rentals.
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Akhil Mair0
Director at Our Mortgage Broker
The Spring Budget's tax changes are reshaping holiday let investments, urging investors to assess future retirement income.

Pros:

1. Lucrative Yields: Holiday lets yield high returns, especially in tourist destinations.
2. Flexible Usage: Owners can use and rent out the property as needed.
3. Portfolio Diversification: Holiday lets diversify investment portfolios, lowering risk.

Cons:

1. Seasonal Variations: Fluctuating demand affects income.
2. Management Costs: Maintenance and guest interactions incur expenses.
3. Regulatory Challenges: Tax changes and regulations may impact profitability.

Financial Strategy:

Investors enhance returns through:

- Tax Planning: Leveraging tax-efficient structures and deductions.
- Market Analysis: Identifying profitable opportunities.
- Diversification: Spreading investments across assets and locations.

Despite tax shifts, strategic planning ensures stable retirement income.

I can be contacted directly to discuss my personal case studies
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Tom McNulty0
Director at Gloucester Mortgage Centre
Holiday Let investment when selecting the right property will generate higher returns than a traditional single BTL, but with those higher returns on offer comes higher risks. It will require more effort or costs to market the property, turn around in between stays etc.
Selecting the wrong property could easily turn out to be a nightmare. Research thoroughly as you should do with any investment and you will reap the rewards.
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Mark Robinson0
Managing Director at Albion Forest Mortgages
Holiday lets tend to offer a higher return but with a higher risk of vacant periods. The stability of a buy to let is often preferred by landlords. There is also a higher level of work involved with a holiday let as it is constantly turning over occupants and needing cleaning/refreshing.

However, with upcoming changes to the laws this may make holiday lets even less favourable among landlords, thanks to the recent budget that targets them.