Investing in holiday rental properties – how to manage them and maximise returns

Owning a property in your favourite holiday destination means that you are always able to take a break at your convenience and that there will be no nasty surprises when your booked accommodation turns out to be nothing like the photos online.

However, a holiday home can offer much more than a relaxed lifestyle for you and your family - it can also be an excellent investment opportunity, both in the short and the long-term if you do your homework and invest wisely.

Making the decision to invest in a holiday home to let requires careful consideration, an understanding of the market and all the other influencing factors so, whilst owning a holiday let can be personally rewarding, it will only be profitable if you approach it like you would any other successful business.

The first step is to do plenty of research, looking at the markets and available properties in more than one area that appeals to you, taking the following factors into account, before you enlist the help of an established and reputable agency:

Potential volatility in property values

Right now, many coastal regions are thriving due to semigration and the growth in the permanent resident population is buffering the markets in these areas to a degree.

But the fact remains that the values of properties in holiday locations are traditionally more volatile, booming in the good times and dropping more dramatically when the markets are down.

This is largely because, during economic downturns, holiday homes are high on the list of expendable assets so it’s important to buy in areas that don’t rely solely on tourism, but also have other industries and already have a solid contingency of permanent residents to support them.

Location, location, location

It’s essential that you buy the best property you can afford in the best location.

During peak season in the most popular towns, you’re very likely to be able to let your property for at least some of the time regardless of its location, but out of season and during tougher economic times, units in secondary locations are almost certain to suffer from low occupancy rates.

When selecting holiday investment properties, consider factors like beach views and proximity to shops and restaurants and other tourism hot spots.

Self-contained home or hotel-style units?

Purpose-built holiday apartments with small hotel-style rooms might yield a higher rental return on purchase price in the short term, but generally, self-contained units (or houses) with larger rooms plus a separate kitchen, bathroom and bedrooms will generally give you better capital growth and will also be easier to sell down the line.

Do your sums: and then double check them

Holiday rental prices, especially in peak season, are usually much higher than long-term rentals so your initial calculations are likely to look very good.

However, you also need to factor in long vacancy periods as well as fluctuating occupancy levels from season to season. And don’t forget to include maintenance costs which can be higher than normal with so many different people using the property.

And don’t forget that every week you and your family stay in your holiday property is a week’s less rental income that you will receive.

DIY or professional management?

If you live in the area and have time on your hands, then managing your own property could work for you, but if you don’t then a property manager is strongly recommended because guests do need attention and things can and do go wrong.

An experienced professional manager will know how to handle guest issues and they will also have a list of reliable professionals on hand to sort out any maintenance issues and, at the end of the day, it could make the difference between an empty and an occupied property.

Don’t skimp on cover

Short-term rental properties have far more people coming and going than in a one family home and accidents and incidents are far more likely so it’s essential that you are adequately insured.

And, as some policies include a limitation clause about vacancy, particularly properties that are vacant in excess of 60 days, it’s important that you read policy terms and conditions carefully when shopping around.

However, whilst insurance will give one peace of mind, it can’t alleviate the inconvenience and stress of problems arising so there are a number of precautions you can take when the property is vacant:

1. Switch geysers off at the mainboard: this will electricity consumption and also potentially prevent and alleviate any extensive damage to property should any problems arise; Stoves and ovens should be switched off at the wall;

2. Make sure all taps are properly closed;

3. Major appliances: remove the plugs from wall plug points to prevent power surge damage should the main electricity supply be interrupted;

4. Make sure all windows are closed and the property is properly locked and secured;

5. Roofs require regular attendance: ensure gutters are debris-free and that all roof tiles are in place and not loose.

Buying a holiday home can be a solid investment that not only offers good returns but which also affords you and your family many happy holidays in your favourite location, but it can also be a financial burden and source of stress.

So take the time to do your homework, consult with experienced professionals be prepared for every eventuality, that way, you’ll have no regrets.