Proven Ways To Cut Your Holiday Let Bills
It isn’t cheap running a holiday let due to the ongoing costs such as cleaning, utilities and maintenance to name a few. Altogether these can result in you making a loss, just about breaking even or making only a nominal profit.
Increasing your occupancy or rental rates isn’t the only way to boost profits. By simply cutting your expenses you can knock hundreds of pounds off your bills.
We’ve put together a list of tips to help cut your costs. Most of which are free, relatively cheap and easy to implement.
Take advantage of tax breaks
Nobody likes paying taxes, but as a holiday home landlord, you can take comfort in the fact that you reduce your tax bill by off-setting certain business expenses.
- Property essentials (cleaning products, toilet rolls, welcome packs etc.)
- Repairs & renewals (decorating, plumbing, replacing items)
- Business-related travel expenses
- Office expenses (software, printers, stationary etc.)
- Advertising, both in print & online
- Mortgage interest
- Council tax
- Utility bills
- Agency fees
To qualify under the furnished holiday letting (FHL) tax rules the property must:
- Be available as a holiday let for at least 210 days of the year
- Be let out for 105 days of the year
- Any long lets (over 31 days) can’t be included in the 105 days
There’s also the opportunity to roll over capital gains. This means if you buy another holiday let, any profit made from the first home can be deferred until you sell the second one.
Off-setting as much of your allowable expenses against your rental income is a way to cut your tax bill. Get advice from an accountant. A good accountant will know all the tax breaks that holiday lets can qualify for and they typically save you more money than their fee.
By shopping around and switching utilities, you could save hundreds of pounds each year.
According to the Government, over 13 million UK households are estimated to be losing out on £2.7 million per year by staying with the same energy provider. By shopping around and comparing, homeowners can save on average £200 per year.
However, there are other ways of cutting costs, simply revising your tariff could save you money. Most people are on a ‘standard tariff’, however, this isn’t always the cheapest tariff. It’s possible to save by changing to a ‘fixed tariff’ to protect you against price rises for the duration of your contract.
Don’t just opt for dual fuel deals because these aren’t always cheaper. Compare suppliers providing individual gas and electricity, to see which is the best deal. Also, look at your billing method as paying by direct debit and switching to online billing can save you up to 10%.
And don’t fret about informing your current supplier because if you switch, your new one will take care of all that. Just make sure to check whether there are any cancellation fees before you go ahead.
Reduce changeover costs
Cleaning a property after a guest has checked out is essential, but it’s likely to be one of your biggest overheads. Typically, most holiday home owners have a reliable cleaner or clean themselves.
A good cleaner is worth their weight in gold and will charge around £200 per changeover for a 3-4 bed rental. Some will only charge £100 but you shouldn’t compromise on cleaning as this will lead to bad reviews and complaints! With the rise of Airbnb there are lots of companies coming to the market offering cleaning services, so you may want to shop around and compare if you need to cut your changeover costs.
Alongside this, you should provide cleaning products (such as a hoover, mop and brush) to encourage guests to clean up after themselves. By having guests leave your property in a tidy state, your cleaner won’t be tasked with too much work. Ultimately, reducing their time spent cleaning your holiday home and therefore the cost of the changeover.
But do refrain from asking guests to do a spring clean, they are on holiday after all.
You can further cut costs by removing unnecessary and unused items from the welcome basket in favour of providing the essentials, such as:
- A pint of milk, tea, coffee & sugar
- A loaf of bread & butter
- A bunch of fresh flowers
- A packet of biscuits
- Doggy treats
They’re small tokens that don’t cost a lot of money but do make a wonderful impression.
Holiday lets take a beating, it comes with the territory, so it’s crucial to buy products that can withstand heavy use. Cheap furniture and appliances might be appealing especially considering they are for guests’ pleasure. However, it’s a false economy because you’ll be forever replacing items and you will end up spending more in the long run than you would have done if you’d bought high-quality products in the first place. Buy cheap, buy twice!
Consider purchasing an extended warranty for appliances. It’s usually easier and more cost-effective to replace rather than repair appliances. Plus, you’ll save on hanging around for call-outs, repair costs and it minimises disruption to your guests and bookings.
It’s worth keeping an eye out for seasonal sales, which offer a great opportunity to save when refurbishing your property and take advantage of interest-free offers. Also, don’t forget to use cashback websites like TopCashback which give a percentage back on what you spend if you shop via their tracked links.
It’s also worth signing up for the Moneysaving expert weekly newsletter which includes deals from retailers. Another tip is to abandon your shopping basket when shopping online as some retailers will send you a discount code to entice you back to the purchase.
Convert to energy saving devices
During the winter months, energy usage and costs are at their highest for properties in the UK when rental rates and profits are typically at their lowest.
Energy saving devices can cut costs dramatically and reduce heat, water and electrical wastage.
- Changing bulbs to energy efficient bulbs or switch to LED lighting. According to the Energy Saving Trust, replacing one traditional bulb with an LED alternative can save up to £6 per year. If you replaced each bulb in your holiday let you could save a considerable amount.
- Invest in smart devices to manage energy use by turning devices on and off remotely. Simply turning devices off instead of leaving them on standby can save you around £30 per year. Plus, you can set devices, lights and the heating on a timer. This means guests don’t have to arrive at a cold dark property and you don’t waste money by leaving unused devices on or heat an empty property.
- Buy energy efficient appliances such as a washer/dryer which is a sought-after feature in a holiday home. People pack lightly so the chances are they’ll want to clean their clothes at some point during their stay. According to Uswitch, washers can account for roughly 7% of your energy bill. While energy-efficient washers cost more, they use less than half the water and energy than typical washers. Meaning the initial upfront cost quickly balances out.
- Water saving showerheads can save a four-person household as much as £75 a year on water heating. Combine this with a water meter and you’re looking at saving a further £120 per year on water bills.
- Installing a water meter can save on water bills. With a meter, you only pay exactly what you use, and it can save you up to a £100+ per year according to Moneysaving expert. Plus, the installation of a water meter in the UK and Wales are free.
By introducing these devices, you can prevent soaring energy bills whilst still providing guests with the facilities they require.
You can reduce your energy bills by making a few simple changes which don’t have to cost a fortune or impact on your lifestyle too much.
- The investment that will reap the most reward is to improve the roof and wall insulation at your property. The Energy Saving Trust found that an uninsulated house could lose 25% of its heat through the roof, a whopping 66% through the walls and a further 10% through windows. Although the cost of insulating your roof/loft typically costs around £395, it could save you around £225 a year. Cavity wall insulation costs around £720 but can save on average £225 per year.
Although these measures aren’t cheap, they will eventually pay for themselves in a couple of years. Plus, a warm and cosy property is essential for holidaymakers, especially during the winter months.
- Keeping the heating on constantly at a low temperature could save you money compared to switching it on for boosts of heat. It also prevents guests complaining because they have to wait for the house to heat up which might take a while depending on the size of the property. You can also save money by choosing gas appliances over electric as gas is cheaper and simply turning your thermostat down by just one degree can save around £80 per year.
- Almost 90% of a washing machines energy costs come from heating the water. Washing laundry at 30˚C instead of 40˚C can cut cost of the cycle by a third. Also, wash your holiday home laundry at the property during turnovers as your electricity is a tax-deductible expense.
- Bleed your radiators to release trapped air which causes cold spots that affect efficiency.
- Use a water butt to collect rainwater for watering your garden.
Collectively, the savings from these tips mount up over time and justify the investment and time incurred.
Keep on top of maintenance
Holiday home maintenance can be time-consuming. However, neglecting or delaying maintenance means issues can quickly escalate into more serious and costly problems. For example, a missing roof slate could lead to rot and damp issues. So instead of simply getting it replaced in the first place, you could end up spending hundreds of pounds to repair water damage to ceilings and damp related issues.
Here is a maintenance checklist that you can use to check your property for common problems year-round.
Although you’ll want to keep on top of maintenance, don’t go rushing into getting professionals in to fix every issue. You might be able to fix the damage yourself and save on the added expense. However, if it is out of your skill-set then leave it alone. Getting someone to fix your bodge-job could work out far more expensive.
Save on insurance
Taking out insurance is one of the most important money-saving measure holiday let landlord can take. It’s a false economy to have inadequate, or worse – no insurance. Without insurance you stand to lose what is likely to be one of your largest financial investments, should it be destroyed by a fire for example.
The last thing you want is financial ruin for not paying on average £150 per year for building insurance.
Instead of taking out the cheapest policy you come across, try these tips to reduce the cost of a comprehensive policy:
- Properties with security systems and smart devices might be entitled to a discount as these reduce risks and potential claims.
- Opt for a higher excess if you can, as this will lower the premium.
- Paying all the premium in one go will normally end up being cheaper than paying your premium monthly.
- Regularly look for better deals before renewing your existing policy but remember the cheapest policy doesn’t necessarily guarantee you the best cover.
Talk to us. At Schofields we provide specialist insurance for holiday homes and 80% of those who switch to us save.
Compare mortgage offers
Another large expense for holiday home owners will be mortgage payments. Regularly review your mortgage arrangements to ensure you’re getting the best deal. Even if you’ve got a decent deal right now, it’s worth shopping around as a lower interest rate could lead to huge savings.
Re-mortgaging your property isn’t as daunting as it sounds. You can talk to your bank, mortgage brokers and use comparison sites to see if your current mortgage payments can be reduced.
Use a letting agency
Owning a holiday let is time-consuming and hard work. You have to effectively manage, maintain and market your property. But does it make financial sense for you to do all of this?
A good exercise is to work out how much you earn per hour managing your holiday rental vs your day job. This way you can see whether it would be a better financial and lifestyle choice to call in the professionals and let an agency manage the property and bookings.
If you do go with a letting agency you will have more free time and bookings/income could potentially increase due to their high level of expertise. Plus, some property management fees can be written off as operating expenses when you do your holiday let tax return.
Your time isn’t free!
Don’t just go for the first property manager you see. Here are some tips on choosing a letting agent.
A profitable holiday let isn’t just about getting more bookings to increase profits. With just a few simple changes to how you run your rental, you could be saving hundreds of pounds.