Advice please - Business Mortgages?

[Janemorley74]

Good morning.

I am looking at starting up a holiday home business and wanted to know if it is possible to get a business mortgage.

The idea is to pay off a mortgage by using holiday home rental income as well as income from managing other people's properties.

The property I'm looking at is roughly 600k.

I'm thinking eventually I can then live in the property when I'm older snd it's all paid off.

Thanks
Jane

 

[Frank the Insurance guy]

Hi @Janemorley74 ,

Yes you can get a mortgage for holiday home business. I have clients that have done exactly that to rent out on AirBnB!

However, like any mortgage you will need a substantial deposit - you may be able to use equity from your main home.

You need to talk to a mortgage advisor who will be able to advise on what sort of deposit is required and they can provide guidance on the current interest rates.

 

[Mark T Jones]

I'm not up to speed on commercial mortgages, but from memory core criteria were 30% deposit, 20 years plus a compelling, properly costed business case.

That said, there may be products specific to this sector.

Look for a broker who specialises in holiday lets.

 

[fisicx]

Isn’t there legislation about holiday lets and limiting the numbers in tourist areas?

It might be the mortgage is refused because you wouldn’t be able to let.

 

[AetasPartners]

Hi Jane,

I have a mortgage adviser who can help you with this if. No cost for an initial conversation.

 

[tony84]

Its a holiday let mortgage you will need.
They are not really mainstream, but there are a good few lenders out there who can do them but I think most of them are through building societies.

If you speak to a broker they should be able to help.

We started getting into this with some clients due to where we are based (not far from wales), but due to changes by councils and governments its been a little while since we have done them.

 

[ethical PR]

Hi @Janemorley74 ,

Yes you can get a mortgage for holiday home business. I have clients that have done exactly that to rent out on AirBnB!

However, like any mortgage you will need a substantial deposit - you may be able to use equity from your main home.

You need to talk to a mortgage advisor who will be able to advise on what sort of deposit is required and they can provide guidance on the current interest rates.

Have you done your market research around supply and demand - many holiday let markets are oversaturated. What does your profit and loss budget say will be your monthly operating costs and what is your estimated income ?

 

[Jprandss]

I looked into this recently for a property on the scilly isles, through a broker (cant remember who).

25 to 30% deposit, they didn't seem to need a lot of business case details apart from projected turnover and profit.
Bear in mind its commercial interest terms, ie likely between 8 and 9% currently.

For my case the numbers came nowhere near stacking up, and that was for a property that would have 90% occupancy through the 8 month season. Obviously everywhere will be different.

You will know likely occupancy and night prices if you are in the property management business already.

 

[conferenceca]

Yes, it is possible to get a business mortgage for a holiday home. You will likely need a substantial deposit, often around 25-30%, and a solid business plan showing projected rental income and expenses. A mortgage advisor can help you navigate the options and current interest rates.

Make sure to research local regulations and market demand, as these can affect your ability to rent out the property. Some areas have restrictions on holiday lets, so it's crucial to be aware of any local legislation.

Good luck with your holiday home business!

 

[Maksimax]

Yes, you can get a business mortgage for a holiday home. Lenders will assess rental income potential and property value.

 

[Socio South West]

If you are planning to manage holiday homes for absentee owners, my advice would be to forget about buying your own property unless you have at least a subtantial percentage of the purchase price available.

What the vast majority of holiday home owners fail to appreciate - especially those who are sold the 'house with a gite' dream in France - is that beside the running cost of the letting there is a hardcore maintenance cost that creeps up over a number of years until major refurbishment is required and this usually wipes out the profit of several (or even many) years.

There is a very fluid market for good holiday property management and provided you are in the right area you won't be short of quite profitable work if you don't mind getting your hands dirty - and sometimes very dirty...... . The move to AirBnB type business has eased the reliance of set changeover days, and for many makes quite a nice steady earner now.

I also won't go into the potential tax situations that can arise from holiday home ownership - discuss this with an accountant if you proceed.

 

[businesscon]

If you are planning to manage holiday homes for absentee owners, my advice would be to forget about buying your own property unless you have at least a subtantial percentage of the purchase price available.

What the vast majority of holiday home owners fail to appreciate - especially those who are sold the 'house with a gite' dream in France - is that beside the running cost of the letting there is a hardcore maintenance cost that creeps up over a number of years until major refurbishment is required and this usually wipes out the profit of several (or even many) years.

There is a very fluid market for good holiday property management and provided you are in the right area you won't be short of quite profitable work if you don't mind getting your hands dirty - and sometimes very dirty...... . The move to AirBnB type business has eased the reliance of set changeover days, and for many makes quite a nice steady earner now.

I also won't go into the potential tax situations that can arise from holiday home ownership - discuss this with an accountant if you proceed.

Given the long-term maintenance costs and potential need for major refurbishments, do you still think purchasing your own holiday home is a viable option, or would it be more beneficial to focus on managing properties for absentee owners?

 

[Socio South West]

Given the long-term maintenance costs and potential need for major refurbishments, do you still think purchasing your own holiday home is a viable option, or would it be more beneficial to focus on managing properties for absentee owners?

Hoilday homes are a good way to hold money and keep it in the property market as an investment which has certainly served me extremely well. Managing it 'in house' makes it fairly easy to have sufficient for longer term maintenance and improvement projects.

If you are seeking to buy with a substantial percentage borrowed setting aside sufficient for long term maintenance from rental earnings will not be easy: I would thus favour the management business only.

 

[Fagin2021]

You would be wise to ‘wait and see’ before purchasing a property as a holiday home – with or without a mortgage.

In the 2024 March budget the then Chancellor abolished many of the tax advantages enjoyed by FHL (furnished holiday let) owners to bring them in line with Buy-to-Let landlords. It’s unlikely the Labour Government’s October budget will overturn these changes.

The Welsh Labour Government has made the requirements to classify a property as a FHL far more stringent, (and unachievable by many properties). If an FHL cannot meet the new requirements it will instead be deemed a ‘second home’. This means it will no longer pay business rates or qualify for business rates relief. Instead it will be charged council tax, and councils (some have already done so) can charge a premium of up to 300% on second homes.

Who’s to say the Labour Government won’t give cash-strapped English councils the same freedom ?

To add to the mix, costs (energy, maintenance and especially insurance) have all shot up and in some areas, oversupply of Airbnb properties has led to a fall in rental prices and occupancy rates.

In summary, many FHL owners are facing a perfect storm of rising costs and falling income. Personally, I’d wait until well into 2025 to see if the FHL market stabilises. Meanwhile, construct an Excel spreadsheet and run ‘What If’ analysis on the different possibilities.