Covering the Expenses of your Holiday Home

For many owners, the dream lifestyle of having a primary home as their necessary base and a second home in the sun wouldn’t be possible without the income they earn by renting to holiday makers. Some offset a significant portion of their expenses, making a holiday home an affordable luxury, maybe only a third break even on their properties, still an enviable position to be in. For a minority the profits cover other important living expenses such as their children’s education, or fund a pot for a rainy day.

If you wish to pay all or just some of your expenses, it is important to work out what you’ll need to cover.

The typical costs of running a holiday rental business include:

• Initial investment of renovations and/or refurbishment
• Monthly mortgage payments (including interest, taxes & insurance)
• Insurance (building, contents and liability)
• Complex, or grounds fees (if you own an apartment or complex)
• Utility bills (monthly, quarterly or annually)
• Maintenance, repairs and redecorating
• Housekeeping, or housekeeper’s fees
• Advertising and marketing costs

The cost of your mortgage rate should be fixed, so it’s easy to determine what your annual expenses should be (x12 monthly payments). Only the final three costs are expenses generated by turning your second home into a holiday rental. Maintenance and repairs would still need to be paid whether you rent to travellers or not, but it’s likely you will need to spend more if you have paying guests in mind. The cost of marketing is relatively low, so the main extra expense is housekeeping.

If you use a property manager you will also have to pay:

• Management charges (usually in the form of % commission)
• Agency fees
• Some property management companies might charge other fees

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