Holiday Home Property Investment: What You Need to Know

Everyone loves a getaway, so it’s no surprise that the holiday home investment market — also known as the holiday‑let investment market — is still going strong. According to a 2024 Sykes report, the average UK holiday‑let owner generated about £24,700 in gross income in 2024 — a modest rise on 2023’s £24,500 despite a tougher economic climate.

In certain hotspots, returns are significantly higher: the UK’s top‑earning region now is The Cotswolds, where owners reported an average gross income of £29,000 in 2024.

But are holiday homes outstanding investments? While any serious real estate investor should at least consider holiday lets, like any property purchase, it’s essential to weigh the benefits and drawbacks before committing. That’s why we’ve created a comprehensive guide to holiday‑let investment, designed to help investors make an informed decision.

As a property investment company with over 20 years’ experience helping investors of all types build and grow their portfolios, we’re well placed to offer guidance on this topic.

But first: what exactly are holiday homes, and what does investing in a holiday home actually involve?

What are holiday homes?

Holiday homes — which are also known as vacation homes, second homes or short-lets — are properties that are primarily used as temporary residences for individuals or families during holidays. They also tend to be good candidates for Airbnb short-term holiday lets. These properties are typically located in desirable vacation destinations, such as beach towns, mountain resorts, or rural areas with natural attractions. Holiday homes vary greatly in size, amenities, and price, and can take various forms, including:

• Cottages: Small, cosy houses often located in rural or scenic areas.
• Cabins: Rustic, log-built homes typically found in wooded or mountainous regions.
• Beach houses: Houses located near or on the beach, offering easy access to the shore and ocean views.
• Condos or apartments: Apartments or condominium units in resort areas or urban destinations that are owned for vacation purposes.
• Villas: Larger, often luxurious homes that are especially popular in tropical destinations.
• Ski chalets: Alpine-style properties located in ski resort areas, designed for winter holidays.

Many holiday homes feature amenities like hot tubs, private gardens, or direct trail and beach access, making them attractive for personal enjoyment and rental income. Their appealing mix of location, features, and rental prospects often makes holiday homes a valuable addition to an investment portfolio.

What we like about holiday let investment

Here are some of the key advantages that make holiday home investment so appealing:

• High rental income: Holiday homes in popular destinations can command premium rates, especially during peak seasons or school holidays. On average, holiday lets tend to deliver slightly higher yields than traditional rentals, reflecting their seasonal appeal and flexibility. Location, property type, and the quality of amenities can make a noticeable difference in what you can earn.

• Potential for appreciation: Over time, your holiday home could grow in value, offering the possibility of a profitable sale down the line. Many investors find that properties in sought-after destinations tend to appreciate steadily, particularly if the area remains popular with tourists.

• Personal use: You can enjoy the property yourself whenever you like — whether for holidays, weekend breaks, or a relaxing second-home escape. This dual use makes holiday homes unique, blending investment potential with lifestyle benefits.

• Savings on holidays: Owning your own holiday home can significantly reduce accommodation costs, especially if you visit the area frequently. Over a few years, these savings can add up, making vacations more affordable and stress-free.

• Long-term retirement plan: Some people buy holiday homes to eventually retire there. This approach combines financial planning with lifestyle planning, giving you a place to enjoy in retirement while potentially benefiting from property appreciation and rental income in the meantime.

• Full control over the property: As the owner, you have the freedom to make improvements, upgrades, or renovations, enhancing both rental appeal and your own enjoyment. From interior design choices to outdoor landscaping, your decisions can directly impact income and long-term value.

• Legacy and inheritance: A holiday home can become a family asset, providing a cherished retreat for future generations. Beyond the financial value, it can create lasting memories and a sense of connection across the family.

Tax advantages: Holiday homes that qualify as furnished holiday lettings (FHLs) can offer tax perks, including Capital Gains Tax reliefs, allowances on furniture and fixtures, and profits that count towards pension contributions. HMRC requires the property to be furnished, commercially let, and meet minimum occupancy thresholds to benefit from these rules.

Profit potential of holiday home property investment

Investing in a holiday home can be a smart way to earn rental income while building long-term property value. Popular UK destinations like Cornwall, the Lake District, and Britain’s beautiful coastal towns continue to see strong demand from domestic tourists, boosted by flexible work-from-home arrangements and the growing appeal of short breaks. Rental income can help cover mortgage payments, maintenance, and management costs, delivering profitable yields in top locations.

Holiday home ownership also gives you control. You can increase value through renovations, add amenities to attract renters, and manage bookings yourself or through a letting agent. This flexibility lets you decide how hands-on you want to be while still generating income.

While earnings can vary seasonally, choosing the right location, pricing strategically, and marketing effectively can create a steady revenue stream. Combined with potential long-term appreciation, holiday homes offer a mix of lifestyle enjoyment and wealth-building potential.

Holiday let investment: areas of consideration

Investing in a holiday home can be highly rewarding, but there are a few areas to think about before getting started:

• Ongoing expenses: Like any property, holiday homes come with costs such as property taxes, insurance, maintenance, and utilities. Planning for these expenses ensures you can maximise your returns and keep your investment running smoothly.

• Seasonal income: Rental demand often peaks during holidays, school breaks, and summer months. Many owners offset quieter periods by offering mid-week stays, weekend getaways, or discounts, creating a steady income stream year-round.

• Occupancy rules: To qualify as a furnished holiday letting (FHL), properties must be available for letting for at least 210 days a year and let commercially for at least 105 days. Keeping accurate records and planning for peak and off-peak periods helps ensure smooth management and maximises rental potential.

• Property management: Managing bookings, cleaning and maintenance, and guest communications can be time-consuming, but professional property management services make it easy to enjoy the benefits without being hands-on, while still generating income.

• Location matters: Success depends on location, but by choosing well-connected, popular, or niche destinations, you can attract steady bookings and long-term capital growth.

• Regulations: Short-term rental rules can vary, but staying informed and working with local authorities or letting specialists helps ensure compliance and smooth operation.

• Currency considerations: For international properties, exchange rate fluctuations may affect expenses or income. Planning and using financial tools can help manage risk effectively.

When approached strategically and with professional guidance, these considerations can be managed effectively, enhancing both your comfort and long-term gains.

How can I invest in holiday homes?

Holiday home investment involves steps like unearthing the ideal location, finding suitable properties, and actually buying a holiday home. Even seasoned investors can find this process challenging, which is why Alesco has been a trusted source of holiday investment advice for over two decades. Our expertise, comprehensive market insights, and in-depth knowledge of property investment enable us to assist both novice and experienced property owners in making sound decisions.

Drawing upon our extensive experience, a wealth of market information, and expert insights, Alesco can guide you in swiftly establishing a profitable holiday home portfolio. Whether your objectives involve securing consistently high rental yields or achieving robust capital growth, we can help you pinpoint exceptional property investment opportunities from our exclusive portfolio. Furthermore, we can help you with aspects like performing due diligence and actually buying a property.

Contact us to learn more or to make an enquiry.

Property Investment Types