What level of return can you expect to earn from your property investment?
As a rule of thumb the gross rental yield will average 8% of the purchase price and furnishings costs. The net yield after marketing fees, cleaning costs and utility bills will average 4%. The figures will vary with location, size and USP's of the property.
Do you think that buying a holiday property represents a good investment?
Yes it can be as long as the decision is viewed with the following factors in mind:
- Your cash will earn a better return than leaving it on deposit in your bank
- You will earn sufficient income to cover the fixed costs of second home ownership
- You will, hopefully receive steady capital appreciation on your asset
- You can enjoy your investment first hand, something you cannot do with stocks and shares
- You will be able to earn a higher net return from a residential buy to let investment as the tenants will pay the majority of the running costs. The downside will be potential voids in lets and the loss of control over your property.
- There are generous tax allowances from holiday lets albeit that these have reduced by HMRC over the past 3 years.