This week we are looking at the benefits of short term lets to Newark landlords. With the current tax regime being very much anti landlord, particularly when the vast majority of landlords own less than five properties it is easy to see why many landlords are dipping their toe in the short term let sector. This is backed up by the Chief Executive of the NRLA who said recently:
“The growth in holiday lets is a direct consequence of the Government’s attack on long-term rented housing. “Tax policies actively discourage long-term investment in the private rented sector by landlords. With a Housing Secretary that wants to shrink the size of the sector, it is little wonder many landlords have jumped ship to the holiday lets market. “As a result, for many in holiday hot spots finding a long-term home to rent is all but impossible. With demand for such housing at a record high, all it is doing is increasing rents when tenants can least afford it. “The Government needs to end its anti-landlord attitude and develop pro-growth tax plans to help renters access the housing they need.”
The immediate financial benefits are as follows:
- You will be able to reclassify the property as a furnished holiday let which is commercial, and you will therefore be able to claim small business rate relief on it. This only applies to one property though.
- If you opt for a managed service your income will be regarded as trading income rather than rental income and you will be able to claim the full allowance on your mortgage interest. If, however, you just rent your property out to an operator you will not be eligible for this benefit.
- If you can imagine fixtures and fittings in a house; heating systems, boilers, wiring, kitchens then this has a value, and you can offset this value against your tax liability. These are called capital allowances. You can organise a capital allowance surveyor to do a valuation and they will typically charge a % of the saving they make for you.
Additional benefits are as follows:
- You will no longer have tenants (managed service) so there will be no arrears to chase and the income is paid after each guest leaves if you wish, or you can opt for a monthly payment if that suits you.
- You have guests and if a guest misbehaves, he leaves, and your management service will ensure he never visits again.
- The property is professionally cleaned after every guest ensuring it is kept in pristine condition. Anything less will not encourage repeat bookings which is crucial to the successful operation of short term lets.
Income is area dependent, and it very much depends on the draw of the area for tourism. For pure holiday lets the winters can be tough due to the seasonality whereas if you target the contractor market in areas where money is being spent on significant projects then this strategy makes great sense as there is a steady flow of guests while these projects develop.
If what I have said is of interest to you then contact us for more details about the services we offer.
