The Dream of Owning a Holiday Let in the UK: Your Guide to Success

Have you ever stayed in a charming cottage on holiday and thought, “I could do this”? The dream of owning a holiday let in the UK is powerful, blending an idyllic location with the promise of a high income. For many, turning that thought into a profitable reality is more achievable than you might think.

Beyond the picturesque fantasy, however, lies a practical question: is a holiday let a good investment? According to industry data, success hinges on understanding the true ongoing costs, the hands-on workload, and the seasonal risks that aren't always obvious.

This guide provides a clear, step-by-step plan for your holiday let investment journey, from assessing a property’s real potential to welcoming your first paying guests.

Buy-to-Let vs. Holiday Let: What’s the Real Difference for Your Bank Account?

On the surface, renting out a second home seems straightforward. However, the path you choose, a traditional long-term rental or a short-term holiday let, leads to vastly different outcomes for your bank account and schedule. A standard “buy-to-let” property provides a predictable, fixed income each month from a single tenant. In contrast, a furnished holiday let can generate that same monthly income in a single peak-season week, but it might sit empty during a quiet patch in winter.

The difference in workload is just as significant. With a long-term let, you are a landlord; once you have a good tenant, your main job is maintenance. Owning a holiday let, however, makes you a hospitality business owner. You're responsible for marketing, managing a booking calendar, handling guest queries, and arranging cleaning between every single stay. It’s a hands-on role that requires constant attention to detail to secure those 5-star reviews.

Because these two investments operate so differently, they are also treated differently by banks and the tax office. You can’t use a standard buy-to-let mortgage for a property you plan to rent out on Airbnb, and the tax rules have their own specific criteria. Recognising these differences from the start is crucial for securing the right funding for your dream holiday home.

How to Finance Your Holiday Home: Cracking the Holiday Let Mortgage

Because a holiday let is treated like a business, you can’t use a standard mortgage to buy one. Instead, you’ll need a specialist product called a Holiday Let Mortgage. These are designed for the unique, seasonal income patterns of a short-term rental property.

The most important difference you’ll encounter is that lenders are often more interested in the property’s earning power than your personal salary. For your application, they will rely heavily on a Rental Income Projection. This is a formal estimate, usually from a local holiday let agent, that shows how much the property could realistically earn from bookings over a year.

This different approach also changes what you’ll need for a deposit. As the income can fluctuate between a busy summer and a quiet winter, lenders see these mortgages as slightly higher risk. To offset this, you should be prepared for a larger down payment. Most lenders will expect a deposit of at least 25% of the property’s value, with 30% being common.

This income projection is also your most powerful tool for determining if a property is a worthwhile investment. The next step is calculating your potential profit.

Is It a Good Deal? How to Calculate Your Potential Profit

Once you have that rental income projection from an agent, you can perform a quick test to see if a property is worth a closer look by calculating the Gross Yield. Simply take the estimated annual income and divide it by the property's purchase price, then multiply by 100 to get a percentage.

For example, a £300,000 cottage projected to earn £30,000 a year has a Gross Yield of 10%.

This single number is your fastest way of comparing different properties. While there’s no magic figure, many investors aim for a Gross Yield of 8% to 12% as a starting point. Anything in that range signals a potentially strong investment that deserves more research.

Of course, that income isn’t pure profit. A smart investment strategy moves beyond "Gross" to calculate "Net" yield. To do this, you must subtract the running costs, which are the unavoidable expenses you must budget for:

• Changeover cleaning and laundry

• Utility bills (gas, electricity, water, Wi-Fi)

• Specialist holiday let insurance

• Booking platform fees (e.g., Airbnb’s 3-5% cut)

• A maintenance fund for repairs

  
  

The figure you’re left with after deducting these costs from your income gives you a much more realistic picture of your Net Yield. This is the number that truly shows how hard your money is working. But a great yield depends entirely on one thing: picking a location with year-round demand.

Beyond Cornwall: A Smarter Way to Find the Best Place to Buy

It’s easy to picture a Cornish village for a holiday let investment, but a truly profitable property must earn money in November, not just August. This is the challenge of seasonality. A city apartment drawing visitors for year-round events can often financially outperform a beach house that sits empty off-season. Your goal is consistent income, not a short summer gold rush.

Before falling in love with a property, become a digital detective. On sites like Airbnb, look at your potential competition. Are their calendars booked solid or wide open? Note how their prices change between peak and off-peak dates. This simple research gives you a real-world snapshot of demand that’s far more valuable than any sales brochure.

A popular hotspot with hundreds of existing listings can also mean fierce market saturation. When you're one of 20 similar cottages in the same area, you’re constantly fighting on price just to stand out. A smarter Airbnb investment strategy is often to find a place with strong demand but less direct competition, letting you fill your calendar without a stressful price war.

Finding a location with a unique, year-round identity is half the battle. Once you’ve pinpointed that perfect spot, the next question is a personal one: who is going to do the actual work?

The Workload Reality: Are You a Hands-On Host or a Hands-Off Investor?

Running a successful holiday let yourself is like having a demanding part-time job. Beyond just cleaning, you’re the marketer, the booking manager, the 24/7 customer service agent, and the emergency plumber. This hands-on approach maximises your profit, but it requires significant time and energy. One of the biggest risks of short-term rental property is underestimating this daily effort, which can lead to burnout and poor guest reviews.

For many investors, the solution is to hire a professional management company. These holiday let agents handle everything from advertising to organising changeovers and dealing with guest issues. In return for this peace of mind, they take a significant slice of your booking income, typically between 15% and 25% plus VAT. This fee can feel steep, but it transforms a hands-on business into a much more passive investment, especially if you don't live near your property.

Ultimately, this choice shapes your entire investment. If you live locally and have the time, self-managing can dramatically increase your net income. If you value your time more or live hours away, an agent is practically essential. This decision doesn't just affect your workload; it fundamentally changes your cost structure and your ability to leverage the unique tax rules for holiday lets.

Unlocking Tax Perks: Why You Need to Know About "Furnished Holiday Let" Status

This is where a holiday let’s financial advantage can truly shine. The government has special furnished holiday letting tax rules for properties that qualify as a "Furnished Holiday Let," or FHL. This means your property is treated like a business by the taxman, allowing you to deduct a much wider range of running costs like furniture, utility bills, and even mortgage interest expenses from your rental income before calculating your tax bill. This significantly boosts your real-world profit compared to a standard buy-to-let.

To unlock these benefits, your property must pass a few simple tests each year. These legal requirements prove it’s a genuine holiday business. Essentially, your property must be available for letting to the public for a substantial part of the year, actually be rented out for a minimum period, and not be occupied by the same guests for long continuous stays. These rules ensure your property operates as a commercial venture, not just a lightly-used private getaway.

While the concept is straightforward, getting the details right is crucial, and a mistake can be costly. For this reason, speaking with an accountant who specialises in holiday lets is one of the most important steps you can take. They can confirm your eligibility and ensure you’re set up correctly from day one—a small investment that will save you significant stress and money down the line.

Your 5-Step Action Plan to Becoming a Holiday Let Investor

That charming holiday cottage can now be seen through an investor’s eyes. With a grasp of the core finances, the importance of location, and the real work involved, you can confidently evaluate the difference between a nice property and a profitable one. To turn this knowledge into action, here is a five-step plan to begin your journey:

1. Review your finances to determine your deposit.

2. Begin initial online research into 2-3 potential locations.

3. Find and speak to a specialist holiday let mortgage broker.

4. Draft a one-page business plan with estimated costs and income.

5. Schedule a brief chat with an accountant about FHL tax rules.

   
   

A Conversation, Not a Commitment: Exploring Strategic Partnerships

Holiday Let Investment - Curzon Villa by DBR Investment Group

At this stage, many investors realise that while the opportunity is compelling, scaling efficiently often benefits from the right partners. This is where experience, structure, and alignment matter just as much as capital.

I’ve always believed the best partnerships start with a conversation, not a commitment. - Piotr Szydlik

This year, DBR Investment Group is initiating discussions with a select group of private partners who share our long-term outlook on UK property and holiday let investments. We’re not seeking quick decisions or transactional funding. Instead, we’re looking for alignment in vision, values, and a measured approach to growth.

Private funding enables us to scale strategically and unlock opportunities that may not be accessible to individual investors alone. However, these conversations are not about asking for immediate investment. They are about understanding each other’s objectives, exploring possibilities, and determining whether there is a strong foundation for working together.

If you are considering holiday let investments but value structure, transparency, and proven execution, an initial conversation can often be the most valuable first step.