How Much Does It Cost to Run a Holiday Let Cottage?
Running a holiday rental can be an enjoyable and very satisfying business, but there are a number of regular running costs to consider before you kick off your new venture.
There’s certainly money to be made as a holiday let landlord. Britain’s holiday rental market has experienced “significant” growth, in light of the pound weakening and millions opting to choose ‘staycations’ instead of a trip abroad for their annual break. Sykes cottages bookings rocketed by 36% in 2018, compared to 2017.
To ensure you build your new holiday rental business up into a success, you’ll need to be savvy with the cash and know-how to spend your capital wisely. In this blog, we’ll take you through some figures to give you a clear idea of potential expenses, so you feel more prepared for the challenge ahead and there are no surprises further down the line. And, to keep things tidy, we’ve split your potential outgoings into ‘weekly/monthly costs’ and ‘annual costs.’
These expenses will of course vary depending on the size of your property. We’ve based them on 2-bed holiday cottage. You may or may not need to include mortgage repayments.
How much do holiday let agents charge?
Even if you’ve got the most attractive holiday let in the UK, if it doesn’t get exposure, it’s not going to get booked up! Visibility is key – and unless you are managing everything yourself, you will need to use a holiday cottage letting agent(s) to help you get bookings.
Letting agents will typically charge on a commission basis, the fees you can expect to pay are roughly 20% (plus VAT) of the booking amount (other factors can affect the percentage of commission charged, depending on the package you choose).
In return for that commission fee, they’ll spend time (time you might not have) marketing your rental to the right audience/s and handling all the associated administration that comes with each booking.
Some agents will manage even more for you than that if you require more support with labour-intensive tasks such as cleaning, laundry, general maintenance, key holding service and emergency call out. But whilst this will save you a great deal of time, you will be spending a lot more each month for that privilege!
If you’ve got time to handle everything yourself however, you’ll be able to benefit from keeping more of what you earn from each booking.
Holiday let changeover costs: cleaning & laundry
If there’s one thing you should never skimp on, it’s cleaning and laundry. The cleanliness of your holiday let is paramount and can mean the difference between a brilliant review and a great stay, and a negative review and an unpleasant stay – if guests think that your place falls well below cleanliness standards. It’s obvious really, you need to invest time and money in keeping your property clean. It’s damaging for your business’s reputation otherwise – ‘mud sticks’!
A thorough clean and tidy between each booking is therefore essential, and to facilitate this you’ll need to allow yourself or your housekeeping team 3-4 hours to get things spick and span during the ‘change-over’ period.
But it’s not only the surfaces, floors and furniture that will need sprucing up; you’ll need to make sure any laundry is clean and fresh too. Although many cleaning companies will offer a laundry service too, you might well find that it’s far more cost-effective to handle the laundry portion yourself – otherwise the fees can soon mount up. To give you an idea of costs:
For a two-bed holiday cottage, property management companies typically charge about £50 to clean the cottage.
Many companies also offer a ‘check and refresh’ service to ensure everything’s in order pre-guest arrival if there have been a fair few days between bookings. For a one-bedroom cottage, you can expect to pay £15 on top of the changeover fee.
The average cost of laundry can come in at around £35 per booking – but it’s dependant on the number of items that need washing/drying/ironing. For this reason, many holiday home business owners try to handle this aspect themselves to save on costs.
The small touches make a big impact – and these days, holiday cottage hosts will be pulling out all the stops to keep their guests happy. A ‘welcome pack’ or ‘welcome hamper’ is one way to make a great first impression.
Items may include freshly baked goods, local produce, a small selection of locally produced ales/beer/cider or posh toiletries to make the stay an even more enjoyable one.
The average cost of a welcome pack/basket/hamper will be roughly £15-£20 per booking.
So, expect to pay £100 to £120 for a changeover, including a welcome pack.
Some of the world’s leading holiday home portals where owners and managers can list their accommodation – such as Airbnb, booking.com and HomeAway operate on a commission-based, ‘pay-per-booking’ model. You will need to include these fees your projected earnings.
What the main sites charge:
- Free listings
- Pay 3% commission per booking
- Professional property managers (6+ listings): Up to 14% commission
- Free to list your property
- Pay 12-15% commission per booking
- Free Listings
- Pay 5% commission and 3% payment processing per booking
As you’d expect, your holiday cottage will need to be a fully-functional retreat for your incoming guests – and that means running water, electricity and/or gas and reliable access to broadband.
In this digital age, having high-speed broadband available for guests can really be a deal-breaker, even for those who are otherwise looking for a quiet and relaxing countryside break.
You should also consider a variety of TV options to offer guests – things such as Sky TV, Netflix or Amazon Prime’s streaming service can be nice little extras for someone’s stay. After all, after a long hike or trek around the hills/forest/woodland, a quiet night in relaxing in front of the TV with a nice glass of wine will likely be your guests’ idea of heaven!
- Sky TV (basic, HD, without Sky Sports) – £27
- Now TV (Entertainment and Sky Movies Passes) – £23.97
- Netflix HD – £8.99
- Amazon Prime – £7.99
- TV Licence – £12.87 (£154.50 per year)
- Utilities (Gas/Electricity/Water rates) £100
- Broadband £20
Regular maintenance and gardening
Paying guests will be hoping to find that the holiday cottage they’ve booked is an altogether idyllic place for them to nest and relax in. So, it’s vital that your holiday let is in tip-top condition both inside and out.
For that reason, it’ll be invaluable to build great relationships with nearby handymen, electricians, plumbers and gardeners. As well as the odd emergency when a boiler may break or a pipe might leak, the upkeep of your property’s garden/s is also important to meet (and exceed) your incoming guests’ expectations.
The typical monthly cost for a regular gardening service ranges between £40 to £60 (depending on garden/s size and complexity of layout) and for window cleaning, expect to pay around £15 per month.
You should also budget £75 per month for essential maintenance and unexpected costs (boiler breakdown, damage, urgent appliance repairs, ad hoc breakages).
Holiday cottage insurance
After all of that investment and hard work, you need to ensure you’re protecting your holiday home and guests should anything bad happen. Taking out the right insurance for your holiday home will help you enjoy your asset and give you peace of mind.
As an example, the average annual cost to insure a detached cottage in Cornwall: buildings sum insured £200,000 and £30,000 contents, would be £240.
It’s crucial that you keep an eye on finances month-to-month and keep accurate records of your outgoings and income – not least because you’ll need to complete a tax return each year which includes your furnished holiday let. For extra support, you might like to opt to employ an accountant to help you navigate through any red tape. They know how to ensure you are making the most of your investment and your income.
The accountancy costs can vary, but you can expect to pay roughly £250 as a fee for their help, advice and to submit your tax return. So do make sure you include this in your budget spreadsheet each year!
The great thing is that for holiday lets (compared to buy to lets), is that there are advantageous tax breaks available which can reduce your costs.
Take a look at the Government’s pages on Furnished Holiday Lettings for more information.
What about council tax?
If your holiday let is in England (there are different rules for Wales and Scotland) and available to let for short periods that total 140 days or more per year, you’ll pay business rates, rather than council tax.
The Valuations Office sets the rateable value and business rates are charged accordingly.
However, if you only let one property and its rateable value is less than £15,000 you may be eligible for small business rate relief.
Keeping your guests and your cottage safe
Gas safety check
By law, these must be conducted once a year in all rentable properties, and you can expect to pay £75 for a qualified engineer to visit, test and issue your Gas Safety Certificate.
Portable appliance testing (PAT)
Many companies will charge between £1 and £2 for each appliance that is PAT tested for you, and bear in mind that if you only have say, 10 small appliances that need to be tested, you can expect to pay a standard PAT testing callout cost on top.
There are several companies however that will charge a fixed testing fee for any number of appliances – typically up to a limit of 100.
Health and safety risk assessment (unless you self-assess)
There is nothing more important than the safety of the guests at your holiday rental. There’s already a great deal of information and ‘checklists’ available online about how to self-assess your holiday home when it comes to conducting a Health and Safety Risk Assessment. But, if you are looking to outsource this task, you’ll need to employ a specialist to carry out the assessment. Cost £100-£200.
Regular cleaning of your chimney or flue can reduce the build-up of soot, clear obstructions such as bird and insect nests, help prevent fires, and prevent carbon monoxide poisoning.
A typical price for a professional chimney/flue sweeping service will start at around £50 (for a single chimney).
‘Touch-ups’ to your property
At least once a year you should step back and assess whether your holiday cottage needs a general touch up here and there… perhaps a new lick of paint on the walls, a new sofa, mattress, sheets, carpets cleaned or a new gadget to enhance your future guests’ stay. Expect to budget £1000.
Running your website
Having a website to promote your holiday cottage is essential when it comes to gaining visibility and trust on the internet. As well as any listings or ads you’ve placed elsewhere, a website allows people to instantly check availability and book directly with you and acts as a great platform to show off your cottage’s best photos and reviews.
Typical annual costs for your own website
- Hire a developer (one-off cost): £500 to £1,000
- Domain: from £2.99 per year
- Hosting: £6 per month
- Or you can use one of the many platforms to create a website for around £200 per year
How much could you earn from letting your holiday cottage?
Depending on the type of property, the location and its features, you could stand to make a tidy little sum each year from renting out your holiday cottage to paying guests. A 2-bedroom holiday cottage can rent for more than £700 per week during peak season.
You should remember though that it’s unlikely that your holiday cottage will be occupied 100% of the time. You should aim to attract bookings so that your property is rented out for 70% of the year. However, 50% occupancy is more realistic in areas with seasonal tourism.
Yields are dependent on several factors, including property value, the going rental rates and the number of bookings or demand in the area.
Potential holiday let yield for a 2-bed cottage in Cumbria:
For accurate figures, speak to holiday cottage letting agencies who have experience selling cottage holidays in your area.
There’s certainly a lot to think about before you take the plunge and start letting your holiday cottage, so make sure you do your research and accurately plan your finances. There will also be ‘setting up costs’ (kitting out, furnishings and interior decorating), so budget £15,000 for these.
We hope you’ve found the above information useful. Yields on holiday lets can outperform more traditional forms of buy to let, but involve a lot of work!