Short-Term Vacation Rentals Explode As More Lenders Offer Stay Mortgages
Stays are increasing and mortgage lenders are expanding their offerings to meet demand. Should real estate investors and homeowners consider getting into short term vacation rentals now?
Even before the coronavirus outbreak, which put an end to overseas travel plans, the UK holiday market was booming. As more Britons booked stays as well as holidays abroad, overseas travelers took advantage of the falling book and book more UK stays.
At the consumer level, environmental issues have become more important in recent years. A survey last year by Skye Holiday Cottages found that 33% of people want to be greener. 20% of those surveyed said they intended to book “more sustainable” vacations in the future.
From a real estate investing perspective, there are many factors that are increasingly attracting homeowners looking to diversify. While long-term rental remains a strong market, short-term rental involves certain financial aspects and fiscal advantages. Along with the growing demand for short term rentals and vacations, it is becoming a more attractive business model.
The current situation – more mortgages, more options
Although travel abroad is again an option following the COVID-19[female[feminine epidemic, the demand for stays is still likely to increase. Many people remain reluctant to go on vacation abroad and seek a closer and cheaper alternative. This should remain the case for a while.
As such, mortgage lenders are filling what was once a gap in the market for borrowers. The number of options available to those who wish to offer short term vacation rentals on a mortgaged property is increasing.
YBS Commercial Mortgages now offers a anonimous society rental product. It is primarily aimed at vacation rentals in major UK tourist locations. With a maximum loan amount of £ 1million, the product offers a five-year fixed rate of 3.85% with a maximum LTV of 75%.
Allan Griffiths, Regional Director of YBS Commercial Mortgages, said: “We know the UK tourism industry has been hit hard by the coronavirus pandemic and the lockdown that followed, but as restrictions ease, the stays are gaining popularity. “
Teachers Building Society also launched new products for the market. The lender offers a fixed rate of 3.49% over three years and a fixed rate of 3.74% over five years. Both are intended for borrowers with an LTV of 75%. The products will support demand from new and existing real estate investors in light of recent market growth.
Ralph Punter, Business Development Manager at Teachers for Intermediaries, said: “As our own research has shown, consumer demand for UK vacations has increased as a direct result of the pandemic, a trend we anticipate to continue next year as well.
“Combined with the recent announcement stamp duty vacation rentals, we expect to see increased interest in the vacation rental market from investors.
The best short-term rental location might surprise you
Real estate investors and homeowners looking to diversify into vacation rentals will need to think about location. In addition to the property itself, a ideal location will make the best returns.
While many may assume that resorts are the best place to look, avoiding seasonal areas can also be a good option. Although the summer months will see extremely high demand and high prices in traditional “tourist areas”, winter could be a different story.
Perhaps surprisingly, the UK location with the highest short-term rental yields is actually Liverpool. According to research by Portico Host, Liverpool landlords earn an average of 27.2% in rental returns. The data also revealed that Manchester was a hot spot for high yields for vacation rentals.
These cities are likely to be busy all year round, as they attract business travelers as well as tourists. Rachel Dickman, Regional Director of Portico Host, said: “These places generally have excellent transport links, proximity to popular tourist attractions, employment hubs and good restaurants and cafes. ”
She added that Liverpool in particular receives an increasing number of tourists every year. About 1.34 million people visited the city in 2018, including business travelers, students and young professionals. It also hosts and attracts major sporting and leisure events, which attract thousands of additional people.
“The increased demand for this type of housing underlies the rents that can be achieved,” Rachel added.