Close Icon
Are holiday homes a good investment-South Devon holiday home

If you’re thinking of buying a holiday property, now could be a fantastic time to generate a sound financial return on your investment. Here’s everything you need to consider when asking are holiday lets a good investment?

The past few years have seen an enormous growth in self-catering holidays within the UK. Consumer research suggests it will continue beyond that as we settle into new holiday habits post-pandemic.

This flourishing market is a result of the rising popularity of staycations, which has impacted the attractiveness of holiday letting as an investment opportunity.

It, together with other contributing factors, has created an ideal environment for positive potential letting income and revenue. For those thinking of buying a holiday let, you could experience a lucrative return on investment.


Use the quick links below for specific details or continue reading for a detailed look at whether or not holiday lets are a good investment.


Are holiday lets a good investment?

Yes! Owning a holiday let can be financially rewarding and an overall fantastic endeavour. Whether it’s to generate income, supplement savings in retirement or simply cover the costs of owning a second property.

But it will only be profitable if you treat it like you would any other successful business. Making the decision on whether to invest in a holiday cottage to let requires careful consideration, understanding of the market, interest rates and all the other influencing factors.

Here are a few of the reasons why holiday lets are a good investment.

Rise in UK staycation trend increases demand for self-catering holiday homes

Rise in staycations - 4 Bolt Head Holiday Cottage

The rise of taking holidays in the UK – also known as ‘the staycation’ – is undeniably increasing in popularity. With the fall out of the pandemic and complexities of Brexit being key contributors.

Demand for self-catering staycations has positively boomed at an unprecedented rate, as Brits have shifted from travelling abroad to getaways closer to home that feel safer and are less costly.

According to our survey, the three main motivators for holidaying in the UK:

  • Ongoing uncertainty of travel abroad
  • Ease of holidaying in the UK
  • More affordable to holiday locally

In 2021, we saw demand like never before at Coast & Country Cottages, with peak summer occupancy in excess of 95%. Unsurprisingly, last year we saw coastal towns and walking destinations dominate the list of UK holiday hotspots.

Google trends showed a 50% year on year increase in searches for keyword such as Devon holidays, self-catering Devon and best places to stay in Devon.

With research showing that the Great British staycation is fast becoming the holiday of choice, this could be the ideal time to invest in a holiday let.

Short-term holiday lets earn more money

Short-term holiday lets tend to be more lucrative compared to long-term rentals. The weekly rate charged for holiday lets are significantly higher, which increases your income potential.

According to Sykes the average holiday let owner earning is approximately £21,000 per year*. Holiday let owners can maximise their rental income by including money earning property features. With the addition of a hot tub (54%), pet friendly (11%) and Wi-Fi (16%) earning more income.

While it’s worth being aware that owning a furnished holiday let will incur more expenses on taxes, utility costs, property management fees or general maintenance, the gross revenue per annum is a lot higher.

Tax advantages of holiday lets

children running on beach in summer

Letting your property as a furnished holiday let permits numerous advantages, as it is considered a trade rather than an investment.

Benefit from offsetting mortgage interest costs against your revenue, as well as reconciling council tax and other bills against your income.

For a comprehensive look into what costs you can offset against your holiday let, visit the HMRC HS253 help guide for more information.

Use your holiday let investment for yourself

With spectacular landscape and award-winning beaches on our doorstep, it’s hardly surprising that the biggest motivator for investing in a holiday let is that you can combine owning your dream holiday home with running a successful business and offsetting the cost of your own holidays.

We recommend that if you are thinking of buying a property, you choose somewhere you would like to holiday yourself.

With our beautiful countryside, breathtaking coast and lively towns, there are plenty of fantastic locations to choose from in Devon.


Disadvantages of owning a holiday let

Ongoing costs of a holiday let business

It’s important to remember that you will have ongoing costs on a permanent basis, and you should be sure to budget accordingly. Read through our blog on the cost of running a holiday let for everything you need to consider.

Holiday let mortgages have specific conditions

A holiday let mortgage is specifically designed for an owner to borrow money in order to purchase a property that will be for personal use, as well as let out on a short-term basis for holiday guests.

Understanding the difference between the types of mortgages available to you as a holiday home owner is imperative.

Seasonal income

An important drawback to consider is that many holiday lets can attract fewer bookings during the winter. So, if you have a mortgage, it pays to put aside funds to cover your repayments at times when the property is not being let.

That being said, those holiday lets offering short breaks are seeing more bookings in the quieter seasons.

As a holiday home owner you can choose when you wish to offer short breaks, but we highly recommend doing so in the winter as owners can earn 30% more.

We’ve seen a 111% increase of three-day bookings for this winter in comparison to 2019.

Holiday lets require ongoing work and management

Creating a perfect experience for every guest can be demanding, with frequent changeovers, maintenance requirement and guest communication.

If you are not using a letting agency, this can be quite a big commitment. Read our blog on choosing the right holiday home management service for an in depth look at the holiday let management service solutions available to you with Coast & Country Cottages.


How to succeed with your holiday let investment

Gitcombe estate - how to succeed with your holiday let investment

Location of your holiday let investment is key

First and foremost, your holiday home should be somewhere you love to spend time and not just a source of potential letting income.

Location and type of property will be a key factor in your success and will dictate the amount you can charge and the ultimate return on your investment.

The most popular locations reported for 2021 are by the seaside, while the other half are popular walking destinations. So, choosing a prime tourist location will ensure a high volume of bookings and a great return on investment.

Here in the South West there are a huge variety of beautiful properties in spectacular locations to choose from. Read our blog on where to buy a second home in South Devon for an insight into what to consider when looking to buy a holiday home.

Choose the right property

Whether your holiday home is likely to be a profitable venture in the long term depends on a variety of elements. The type of property, its location, number of rooms and property features will determine the pricing strategy and overall revenue.

Additional considerations like permitting short breaks, allowing pets and off-season discounts contribute to additional bookings. It’s also important to consider which guests you want to attract to generate a lucrative flow of bookings.

Furnish your holiday let to a high standard

Selecting the right furnishings and equipping a property to the highest standard determines the look and feel of a property. A key factor that will influence guests when booking their holiday.

Creating a space that make guests feel at home and show you’re going the extra mile to make their stay enjoyable is key to your letting success. Read our blog on how to furnish a holiday let for key tips and expert advice.

Use a trusted holiday let management company

Choosing a trusted and reliable management agency is key to the success of a holiday let investment.

Finding the right holiday letting agency, for expert advice and support can make all the difference to achieve the best out of our letting journey.

Partnering with industry experts like Coast & Country Cottages, who specialise in the self-catering holiday market it key to your property’s earning potential and overall positive outcome.

For a more in-depth look at what to expect, read our blog on how to start a holiday let business.


What are the costs involved in buying a holiday home?

If you are considering buying a holiday home as an investment, there are a number of ‘hidden costs’ which should be factored in before you make your purchase.

Stamp Duty

Stamp duty can be an unforeseen charge which can add thousands to the cost of a buying a property.

It is a tax levied on the sale price of a residential property that cost more than £125,000. The charge is only applicable after the minimum threshold price is reached and rises in conjunction with the value of the property thereafter.

If you already own a property or are purchasing a property as a holiday let, you’ll usually have to pay an additional 3% stamp duty on the total property purchase price. In addition to the normal rates.

Are holiday lets a good investment

*Stamp duty guide information from HMRC website

The rules and regulations are updated periodically, so it is advisable to make sure you are aware of the impact it will have on your buying price. Find out further information from HMRC on stamp duty.

Click below to work out a rough estimate of what your stamp duty will be.

Stamp Duty Calculator

When the time comes to sell your property, providing you sell at a profit, you may have Capital Gains tax to pay. Fortunately, if you meet the conditions to be a Furnished Holiday Let, there are a few different Capital Gains tax relief options available.

You may qualify for Entrepreneurs’ Relief which means that when you sell your property, the tax rate will only be 10%. Business Asset Rollover and Gift Holdover Relief are other possible avenues to receive respite from taxation.

Read our comprehensive guide to Furnished Holiday Let tax for everything you need to know about this aspect of letting your holiday home.


What return on investment could you expect from a holiday let?

When buying a home to let you’ll be doing so with the aim of profiting either from capital appreciation or rental income.

If you would like a good idea of your property’s earning potential, our New Property Consultants can offer expert advice.

Our team can talk you through the process of buying a property and give an idea of the income you can expect, based on our expert knowledge of our area, pricing, and demand.

Enquire with our team of holiday letting experts today. Call us on 01548 843773 or visit our let your cottage page to request your FREE Owners Guide.

Request your FREE Owners Guide


When is the best time to buy a holiday home?

Are holiday lets a good investment?

So, you may ask, when is the best time to buy? With the current low interest rates on lending and the increase in demand for self-catering property in the UK, it’s an ideal time to look at investing in a fixed asset like property.

Trends indicate that the busiest day for property enquiries on Rightmove is the day after Boxing Day.

According to estate agents, Luscombe Maye, the highest level of enquiries for holiday homes is during the month of January. We had a chat with Luscombe Maye where they shared tips on holiday home investments in Salcombe.

If you need assistance in buying a holiday home, we would be happy to put you in touch with some of our fantastic South Devon estate agents.

If you are thinking of investing in a holiday let, call our New Property Consultants today. With our wealth of knowledge and years of experience in the holiday letting market, we can support you in making the perfect investment.

Contact our New Property Team on 01548 843773 for help and advice, whatever stage you are at. Alternatively, order a copy of our FREE Owners Guide.

Request your FREE Owners Guide


If you’re looking to start a holiday letting business, the following owner guides may be useful to you:

All property owner blogs


At the time of publishing, Coast & Country Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies.

Generic information is contained within this article and each individual’s mortgage and saving affairs are different, further advice should be sought from a qualified supplier.

*Statistics published in Sykes 2021 Staycation Report.