Helping your clients to buy their first holiday let

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    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 a 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 between a yield of just under 5%, compared with a yield of just under 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.

    Mortgages
    This website is for authorised intermediaries only. This information has not been approved for use with customers and is not intended for public or customer use. Your clients’ property may be repossessed if they do not keep up repayments on a mortgage or any other debt secured on it. Loans are subject to status, terms and conditions.

    Castle Trust Bank means Castle Trust Capital plc, a company incorporated in England and Wales with company number 07454474 and registered office at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

    © 2024 Castle Trust Bank. All rights reserved.

    This website is for authorised intermediaries only. This information has not been approved for use with customers and is not intended for public or customer use. Please confirm that you are an intermediary before accessing information on this website.

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