How to get a return on your property

Tim Sutcliffe of Shrewsbury-based Pi financial looks at how to earn money from your property:

If you have a barn that is ripe for conversion, an annexe or a flat above the garage it may be possible to rent it out to raise additional income.

In fact, some homeowners even move out of their own home in the summer in order to let their own property out and maximise the holiday rental income.

An increase in the number of Brits taking their main holiday in their own country is boosting returns for owners of holiday homes. Returns can be high but letting is hard work.

Being accessible to large cities helps. The further away you are from centres of population, the shorter your season will be.

Parts of the country do well all year - others close down for winter.

Marketing your cottage or annexe to specific groups such as painters, ramblers or dog-owners, can extend its appeal.

Or you could undertake more substantial modifications, making the property environmentally friendly, or accessible to wheelchair users, for example.

Returns are proportionately higher with more luxurious properties, though the costs and efforts required of the owners in terms of looking after tenants and sorting out problems are greater.

The economic climate is such that people are worried about taking any holidays at all. They are booking cottages at the last minute and paying reduced rates.

Even so, apart from mortgage costs, the average return on an upmarket furnished holiday let - that is the rent after the costs of maintenance, cleaning, council tax and so on - is in the order of 10 per cent.

That is an attractive income, irrespective of what happens to the property's value.

But according to recent research holiday properties tend to outperform average properties in terms of price due to their usually attractive locations, period appeal or other positive characteristics.

Mortgaging a holiday home is also difficult as lenders dislike the irregular income they generate. Most owners, if they need to raise cash to buy a holiday let, increase the mortgage on their main home.

The recent obsession with buy-to-let ended in tears for many investors, and for many banks.

But experienced landlords say there are some great opportunities and that quality properties that would quickly find tenants are being marketed at knock-down prices.

Rents, meanwhile, are stable or rising, with increasing numbers of tenants either unable to buy their own properties or being housed by their local authority.

It adds up to a market where landlords say they can achieve rental yields of eight per cent or more.

The only problem is that the mortgage market continues to freeze out many landlords so it is important to explore all your options to find an affordable scenario.