If you’re looking to work out how much income you could earn as a holiday let owner in the UK, use our holiday let profit calculator to discover how much profit you could make.
The tools and information in this guide are to be used for illustrative purposes only. For financial advice on the suitability of owning a holiday let, speak to a qualified specialist.
How much income could you earn?
Holiday let profit calculator tool
Tips on how to price your holiday let
Key operating costs to consider
How do I calculate a holiday let rental yield?
Can I make a living from holiday lets?
How much income could you earn?
Average revenues for holiday lets vary across the country. Whilst there are websites that can provide estimated incomes based on area averages, your actual revenue will depend on different factors such as:
- Location. Cities, holiday areas or locations close to popular amenities and attractions will naturally be more popular and realistically allow you to command more income.
- Occupancy. How often your listing gets booked over the course of a year is another vital factor determining how much you can earn. Think about how many bookings you’ll realistically anticipate to make but also consider other factors such as seasonal demand and whether there are holiday let restrictions in your area that prevent you from renting the property out all year round.
- Property type. Whole properties rented out will command a higher premium than single rooms. Larger houses or properties with unusual or attractive features may also command a higher rental price tag.
- Amenities. Special features of a house such as hot tub or a swimming pool may be popular and listings that have these may charge higher prices than ones that don’t.
- Status. Some booking platforms are more popular than others and may naturally make it easier to have a higher occupancy rate. Within the platforms themselves, holiday let owners with more guest reviews may attract more bookings and ultimately income than owners with less.
To get a realistic idea of how much you could earn then, take these factors into consideration and look for similar listings in your chosen area on popular bookings websites. How much actual profit you could make after potential revenue and costs are taken into account will depend on other factors, however. That’s where our calculator can help.
How to use the calculator
To get the best out of our tool, consider the following before using it.
- Revenue potential. Using our section on how much you could earn as a guide, do the research in your chosen area so that your expectations are realistic.
- Pricing. How you choose to price your listing won’t just depend on the average income for your area. Jump to our section on holiday let pricing if you need help in this regard.
- Costs. A basic profit calculation will require you to subtract your potential costs from your income. Our section on running costs covers some of the key areas.
Once you have worked out the above, you can get a basic idea of how much potential monthly profit you could make. Jump to our section on holiday let rental yields once you’ve used the tool to understand the potential long term profitability of your holiday let.
Holiday let profit calculator tool
Tips on how to price your holiday let
Once you’ve worked out your potential revenue, you can decide how much to price your property per night. You may want to price your listing differently to the average income in your area for several reasons. Here are the top issues to take into consideration.
- Your budget. When starting out and applying for finance, you may benefit from creating a plan. Once you’ve worked out all of your costs, this may dictate how much you charge. Our guide on how to start a holiday let business covers this topic and much more.
- Seasonality. You may decide to charge more for when your listing is in demand and offer cheaper rates when times are quiet.
- Competition. If there is lots of competition in your area, you may want to price your listing differently in order to stand out.
- Guests. Depending on who you’re trying to attract, you may choose to raise or lower your listing price.
- Listing features. Listings with unique and attractive features may prove to be popular with guests. If you have a standout feature of your property and you feature this prominently in the promotion of your listing, this may allow you to charge more.
Key operating costs to consider
To get an accurate gauge of potential profits gained from running a holiday let, you’ll need to account for costs. This may be difficult to get the full picture when starting out, so here’s an overview of running costs you may want to consider:
- Tax.
- Mortgage.
- Insurance.
- Property management fees.
- Cleaning costs.
- Platform service fees.
- Maintenance costs (e.g. boiler services etc)
Check out our holiday let running costs guide to explore this topic further.
How do I calculate a holiday let rental yield?
The purpose of our holiday let calculator is to work as an approximate guide regarding potential monthly income after deductions. A holiday let rental yield also factors in the cost of your property and can help you assess its long term profitability. This can be calculated using the following formula:
(Annual rental income / value of the house) x 100
Say the value of your house is £300,000 and your annual income is £20,000. Your rental yield can be calculated as follows:
(£20,000 / £300,000) x 100 = Rental yield of 6.66%.
Using this formula, you can understand your property’s gross rental yield. To work out a net rental yield, subtract your holiday let costs (tax, insurance, maintenance, etc) from your annual rent first.
Can I make a living from holiday lets?
It’s certainly possible to make a living from holiday lets. However, it’s also important to be realistic about how achievable this is. Even once you’ve set up your holiday let business, you may not make enough money to earn a living straight away. Factors that can affect this include:
- Your monthly household outgoings.
- Holiday let costs.
- Occupancy rate.
- Pricing.
- Legal restrictions.
- Existing savings.
Say for example you owned a holiday let in the London area. As all holiday lets in this area are not allowed to be rented out for more than 90 days per year without planning permission, you may need to own multiple holiday lets in order to earn a sustainable living if doing this in London. When working out whether you can make a living, you’ll need to consider factors such as this to work out how far away you are from achieving your goal. Depending on your objectives, you might need more than one property or higher savings in order for this to be feasible. For other people, making a living off holiday lets may be more achievable. Each person’s circumstances are different, so you’ll need to make a plan to work out if you can achieve yours.
Why insurance is important
Insurance is an essential although often overlooked component to owning a holiday let. Whilst it’s primarily used to protect your property if something goes wrong, insurance has an important role to play where it relates to income too. Not having the right cover could results in problems such as:
- Lost future income. Once you’ve made a claim for property damage, getting everything fixed can take time. If you have a stack of pre-existing bookings, you could also lose out on income unless you have insurance to cover this.
- Unforeseen costs. Underinsuring your property could result in you having to foot the bill for very high costs. Make sure that you get your property’s rebuild cost and the total sum of contents right. Getting it wrong could seriously derail your income plans. Insurance cover itself varies a lot from insurer to insurer too. Some insurers may cover issues such as theft or malicious damage by a guest, whereas others may not.
- Stress and hassle. Having to deal with an ongoing legal battle or liability claim can add significant stress on top of large bills. You may want to consider having comprehensive cover in this area to avoid this happening. Regions of the UK such as Scotland also require public liability cover in order to qualify for a short let licence.
If you need a quote for insurance, head over to our holiday let insurance page or click on the link below to get a quote today.
Get a quote
