House Hunter: East Anglia
'I want to sell up and buy a holiday cottage' The problem
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Your support makes all the difference.MARIA ROBINSON OF BALHAM, SOUTH LONDON, WRITES:
Six years ago, I bought a small buy-to-let property in Streatham as an investment, and it has since risen from £140,000 to £235,000.
My estate agent advises me that the market is likely to be flat for the foreseeable future. She says that if I want to sell my buy-to-let in the next year or two, I should do so before its value goes over £250,000, at which time any buyer would have to pay stamp duty. The sale would take longer and buyers would be more likely to want to bargain down the price below the threshold, she says.
Therefore, I want to sell now and, instead, buy a holiday cottage which I can rent out. I am told that some coastal areas are still appreciating rapidly, so the potential benefit to me will be higher than keeping my buy-to-let. I am also told that the tax advantages for a holiday home are now much better than those for a buy-to-let, and that the market is less saturated. Is this so?
Assuming I could afford to buy a holiday cottage for £200,000 to £275,000 in East Anglia - an area I know well - what might be available to me? What do you consider the pros and cons of holiday letting?
The advice
GRAHAM NORWOOD REPLIES:
There are seven golden ru-les for holiday home letting:
* Choose a good location - East Anglia is ideal: close enough to London for those wanting long holidays or weekend breaks. Remember that the summer season is only 20 weeks long, with some weekend breaks in winter. Many letting agents recommend emphasising weekend breaks, as many Britons prefer to take summer holidays overseas.
* Buy a two- or three-bedroom property, as most holiday lets are booked by small groups of young friends who share a property, or young families with children. Also avoid big properties - only 15 per cent of holiday lets require more than three bedrooms.
* Fund your purchase through an interest-only mortgage because the interest payments can be 100 per cent offset against tax. If you have a lump sum following the sale of your buy-to-let, pay off a chunk of your main home loan and rely on the largest possible interest-only mortgage for the holiday property.
* Hire a letting agent to advertise your property, find tenants, manage turnovers and arrange maintenance. There are national and local agents (check on the internet). Management fees can be high - 15 to 30 per cent of the rental income - but do you want the alternative?
* Keep the property up to date. The installation of dishwashers, DVDs and CD players are no longer luxuries. Fire regulations mean that extinguishers and flame-resistant furniture are musts too. Expect to refurbish the interior of your property every three years.
* Get the right insurance cover. Letting agents often insist on public liability insurance of £1m or more, costing between £200 and £500 per year depending on the size and location of your property.
* Keep your finances in order. Much of your costs on management fees, insurance, repairs, decoration and travel to and from the house may be set against tax on your rental income, and subsequently even offset against your own income tax, too.
Therefore, I recommend buying a two- or three-bedroom property in any of the areas of East Anglia most popular with its natural catchment area, London. This includes Suffolk, parts of Cambridgeshire, or places like north Norfolk.
The solution
Property one: Four-bedroom house
Price: £250,000
Agent's details: If this school house at Trimingham is too large to rent, then you could convert one of the bedrooms into a study. It's in the heart of popular north Norfolk, and has two bathrooms and a 24-foot reception room.
Agent: Savills, 01603 229229
Property two: Three-bedroom house
Price: £279,500
Agent's details: A handsome late Georgian house occupying a picturesque village-setting in Cavendish, Suffolk, with views of the local church. This house has a pretty, walled garden and separate brick outbuildings.
Agent: Carter Jonas on 01787 882881
Property three: Three-bedroom cottage
Price: £285,000
Agent's details: A semi-detached cottage with front and rear gardens as well as off-road parking, in Long Melford, Suffolk, a popular summer holiday and weekend retreat renting area.
Agent: Carter Jonas on 01787 882881
Fact file
There are well over 500,000 holiday homes in Britain, the majority of them let out for at least part of the time.
Savills, the estate agent, says 1.2 per cent of the homes in East Anglia are second homes, the fourth highest region in the UK.
East Anglia fulfils the two main reasons for holiday home purchase, says Yolande Barnes, head of research at Savills. "It's good for the personal weekend retreat and for holiday homes that can be rented out to net a handy second income," she says.
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