Helping your clients to buy their first holiday let
For property investors on the hunt for better yields, there is little denying the appeal of a holiday let. Analysis of properties on Rightmove and using data from Airbnb shows that, in the East Sussex seaside town of Hastings, a typical one-bedroom flat close to the sea front would cost around £177,000.
If let out on an standard buy-to-let basis through an assured shorthold tenancy (AST), that property might earn £725 per calendar month, or £8,700 over the course of a year. However, if it was let on a short-term basis, and even accounting for just a 54% occupancy rate, it could earn more than £17,000. That’s the difference of a yield just under 5% or a yield just below 10%. There are obviously other costs and considerations in operating a holiday let, but it’s easy to see why so many investors are looking to move into the holiday let business.
The trouble is, buying a first holiday let is not always that easy as many lenders will want a track record of previous holiday lets, or a track record that the property has been used for holiday lets. So, what’s the answer?
One way to help your clients invest in their first holiday let is to use bridging to buy the property and then refinance onto a term mortgage once there is some track record in place. The downside of this is that it can prove expensive if your client is unable to secure a suitable exit route in good time. But what if you could secure the exit route at the outset?
At Castle Trust Bank, we’ve seen a lot of demand for our bridge-to-let product from property investors who want to get up and running with their first holiday let. The benefit of this approach is that bridge-to-let offers a guaranteed exit onto a term loan at the outset, so the clients know they won’t be stuck on bridging finance indefinitely. In fact, if it’s possible to demonstrate the track record of the holiday let before the end of the bridging term, borrowers can switch over to the term finance sooner.
With bridge-to-let, first-time holiday let investors benefit from the ability to access a new investment area with the confidence of a guaranteed exit and the added benefit of achieving that exit sooner if they are able to get up and running quickly.
So, if you are thinking about helping your clients to buy their first holiday let, think about bridge-to-let.
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