Furnished Holiday Lets – Why Use A Management Company?

Michael Johns, Senior Investment Consultant, has addressed many of the questions he hears daily when talking to clients about Property Management. Michael has been with Residential Estates for over 7 years and has approximately 20 years in the property industry. Working daily with investors globally Michael, along with the rest of our team of experienced consultants, are available to help investors create and expand a bespoke portfolio to help them financially, be it for pension plan or as residual income.

Most investors, particularly the successful ones, are happy to pay the “experts” to carry out a service such as property management, as opposed to eating into their own precious time. There are some tasks that can be carried out by the landlord in order to save money, but identifying which can be, and can’t be is very easy and it really depends on four elements:

  1. How complex /specialised the task is
  2. How much of your time it is likely to take up
  3. The cost of the service
  4. How important that task is to the successful running of the property / the cost of failure

In addition to this, the maverick operator is faced with the fact that the government are clamping down heavily on anyone looking to take advantage of any loopholes or grey areas in the property industry.

The popularity of HMO’s (Houses in Multiple Occupation), which enabled landlords of large houses to redesign interiors to offer smaller spaces to more tenants, therefore increasing their ability to make high returns, was quickly met with licensing in many cities.

Every day I hear of cases where freeholders have instructed landlords to remove their advertising for short term lets on Air BnB and Booking.com because their lease forbids it. The same with buy to let mortgage providers who are trawling the internet to find landlords who are illegally renting out on short term lets where their mortgage terms prohibit it.

This part of the industry is fuelled by greed. When using the right management company, in the right property, and done legally, there is plenty of “meat-on-the-bone” to bank large profits every month without cutting corners.

The tax benefits of Furnished Holiday Lets are one of the main attractions to property investors, along with the high returns and the opportunities for self-use.

The latest move by the government to address non-compliance is to identify those landlords of second homes who are registering their properties as Furnished Holiday Lets, to take advantage of the tax benefits. However, many of these owners have no intention of actually renting the property out and in most cases, don’t even advertise their properties as available.

In England, second home owners can claim business rates as opposed to paying council tax if they make their property available for 140 days or more in the year. They can then claim business rate relief and pay nothing in tax for that property. And HMRC have claimed that they have no mechanism for screening these properties and their availability. They will continue to offer tax incentives on professionally managed furnished holiday lets but intend to close the loophole on those who are doing nothing to promote UK tourism.

The new legislation will only give incentives to those properties which meet the 140 days in actual days / night rented. Maverick property managers will be faced with this onerous paperwork challenge, a report that can be generated in just a few minutes through a professional property management company.

The Furnished Holiday Let business is on the verge of a boom, and investors are well advised to take advantage of this market now, but to have a long term focus as opposed to seeing it as a way of making a quick-return. Those who use a professional service will see the benefits and future-proof their investment.

Even in the short-term there are huge benefits of using a professional service and looking at the complete picture as opposed to singling out individual management costs is advised. Professionally managed agents such as Residential Estates have the tools in place to maximise nightly rates and long term agreements in place to maximise occupancy rates.

The current demand for holiday lets and second homes had boomed recently due to the surge in bookings for UK “Staycations”. Air DNA have recently reported that bookings in Cornwall and UK National Parks have doubled since 2019.

The views, thoughts and opinions expressed in this article belong solely to the author, Michael Johns, and are not necessarily those of Residential Estates, or other groups/companies to which Michael Johns is affiliated.

If you'd like to speak to one of our expert investment advisors about how adding FHL to your portfolio could help you achieve your financial goals, please fill out the form below or call 01244 343355

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