Some special buy to let cases

Buying off-plan

Buying a property before it has been built is known as buying off-plan, and it's often marketed as being an easy route into the buy to let market. But there are potential costs:

• Properties built at the same time reach completion simultaneously – in the case of a large estate or apartment block, this can mean a previously high-demand area is flooded with available accommodation. Rental prices drop as a result and yields are driven down.
• Initial prices may be inflated by property developers. Before opting for off-plan, you must ask yourself how much capital you are willing to have tied up in property which has been valued only on paper.

Holiday Lets

Acquiring property in order to let it on a short-term basis is becoming increasingly popular with UK buyers. Whether it's a seaside cottage in Pembrokeshire or a ski chalet in Bulgaria, holiday lets can definitely be a good investment. In fact, in 2005 figures indicated that self-catering was the fastest-growing sector of the UK holiday market. Annually, there are over 4 million short-term rentals of cottages and holiday apartments in the UK.

So what are the benefits of short-term rental?

• the opportunity to maximise revenue from seasonal attractions or local events. A typical two-bedroom house in the welsh village of Hay-on-Wye, for example, might cost £500 per month as a standard residential rental. Yet the same property could command a rent of £1000 per week during late May - simply because the town hosts the annual Hay Festival of Literature. Demand for holiday lets at this time is consequently very high.
• tax advantages which apply only to rental income from furnished holiday accommodation - see www.directgov.uk for more details.
• greater flexibility - using the property as a base for your own holidays, for example, is easier if your tenants aren't permanently resident.

So what's the downside? Short-term rentals require a major commitment in terms of marketing and property maintenance. To ensure a good return, you'll want to have tenants in week after week and that means continuous involvement. Don't underestimate the cost and time involved in cleaning the property and washing bed linen, towels etc. You'll need to prepare a letting "pack" to give holidaymakers information about the property and its facilities, as well as local attractions, and keep on top of invoicing and client correspondence. Holidaymakers can be much more demanding than "ordinary" tenants, so it helps to have good social and problem solving skills. If the idea of being an absentee landlord appeals or you simply don't have much free time, holiday letting may not be for you!

An excellent factsheet is available from www.scavenger.net, which examines in more detail the financial potential of holiday lets, and the current market opportunities.

Buying abroad

Owning a property abroad is becoming increasingly popular – by 2004 a staggering 1.38 million Britons had bought a home overseas. The high cost of UK houses, lower international travel costs and affordable borrowing options are major reasons for this trend. Think carefully before buying, however, and consider:

• The complexities of negotiating and buying a house in a foreign country and/or language.
• The legal framework – do you fully understand how estate agents, contracts etc. work in the country of your choice?
• The fees and costs involved – these can be far higher than in the UK.
• Factors outside your control such as political stability and environmental hazards.

If you intend to rent the property as a "holiday let" and enjoy the property yourself for at least part of the year, you should ask yourself some questions before going ahead:

• Are you buying the property because you like it rather than because it will appeal to others?
• Are you staying within your budget? A cheaper property might free up capital to spend on development and renovation.
• Will you really want to spend your "holiday" time repairing and maintaining the property?
• How will you ensure security and adequate maintenance of the building when you are absent – do you need to factor in the extra cost of employing a caretaker or property manager?
• Are local healthcare facilities adequate?

Further advice about letting abroad, with a French focus, can be found on the website of Rentals France.