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Second home to Holiday let!


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Any advice appreciated! 

 

I have a second home up North which was used whilst working away from home which now sits empty since I’ve relocated back South with work. 

 

I am am looking at ideas on how to make the property work as a Holiday Let but not sure how best to fund the project- it’s currently on a resi repayment mortgage with Halifax and tied in for another year on fixed rate. The property sits at 60% LTV and has massive potential as a holiday let due to its location in a national park. 

 

The property is a 3 bed country house with an acre land and has a seperare building attached which I intend to convert ( planning agreed) to an additional 3 bed holiday let property - so that the estate renovated to a 6 bedroom property estate. 

 

I am am stuck on the next step- due to lack of instant funds.

 

Everything with regards to builders/ architect is in place, minus funding and also type of holiday let mortgage lenders to source? And would a lender loan additional borrowing to assist in completing the work or do they only lend on properties ready to go? Any input on holiday let business or advice is appreciated all. 

 

Ady

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Hi Ady.  The holiday let mortgage providers I've spoken to (which is only the ones who'll lend in Scotland, so there are lots more) won't lend on anything that requires much more than a bit of decorating.  How fast can the conversion be done?  What do the figures look like if you use bridging finance to get it completed and then exit the bridge onto a holiday let mortgage?

 

As far as lenders go, I've found the Cumberland Building Society and Leeds Building Society both very helpful regarding their holiday let products.  Cumberland bases maximum borrowing on a written estimate from a specialist holiday letting agency of what they would expect your property to let for per year, Leeds bases it on what it would achieve as a normal BTL.  I would recommend getting both Cottages.com and Sykes out to give you lettings estimates, even though you might not necessarily go  with either, they both have their pros and cons.  Agency commission is a lot higher than with BTLs, expect to be paying around 20%+VAT (you might get an agency to go under that if your property is exceptional or they're short of properties in your area and have high demand - I'm paying 18%+VAT on that basis versus my agency's usual charge of 24%+VAT). 

 

Have you got someone lined up to do the changeovers for you and handle any guest emergencies?  I find about one in three guests contacts me about something and it's not always something that can be sorted out over phone or email.

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Caroline,

 

Many thanks for the useful reply. 

 

The main house is in a very good rentable state ( though not to high standard I want it to be but hopefully good enough for lender), I am now thinking to rent this as a HL, if I can source lender, as it only requires a make over, with an aim to eventually convert the outbuilding to rentable 3 bed HL over the off seasons. I have spoken with a broker today to source a lender, possibly Leeds, fingers crossed. 

 

I have a ve a lovely lady that lives down the road that manages holiday let’s in the area, hoping that she can manage the upkeep, cleaning etc. 

 

Have looked at quality cottages but like you say they charge 25%, ouch....but could use them to start with when running to build a customer base and feedback - I hope to get the property to a high quality standard. 

 

Thanks again for for your input it’s really appreciated. 

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You're welcome :)  One other thing that sprang to mind - does your planning for the conversion allow for year-round occupation or is it limited to a certain number of weeks, i.e. holiday use only?  I know planners can sometimes put that restriction on in national parks and it will affect lending.

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Yes they have stated the outbuilding is not to be used as a second home, nor as residential. It is solely to be used as a short term self-catering holiday let only, no person is to occupy the property for longer than 28 days in any calendar year.

 

....the separate main house will be used by us when we need it as a second home, but with the intention to convert to holiday let so that we can rent the whole estate. 

 

I am considering speeding things up with a bridging loan, but will need to look into this e.g. interest rates and criteria. The other option is to try source a HL mortgage lender or take things slowly and fund it myself over the next few years. 

 

Its going to to take some effort but I am determined to make it work. 

 

 

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Hm, try talking to this chap:  https://www.holidayletmortgages.co.uk/

 

He does development finance as well.  He was very helpful when I was looking for my first HL mortgage, to the point of saying that he wasn't going to act for me officially, because on the size of loan I needed, his fee would be uneconomic and there were only two lenders who'd lend in my remote part of Scotland anyway - he told me who they were and wished me luck.  I thought that was exceptionally fair of him and will be going back to him when I have a bigger project. 

 

There's a barn conversion in a national park in the case studies on that site, which sounds a little bit like what you're planning.

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