It’s a question I’m frequently asked at social occasions when I explain my business – ‘You manage all those multi million pound homes, surely the owners don’t need the money so why would they bother having guests in?’
I spent more than a decade building up a holiday home agency in Cornwall before I sold it to buy Rumsey of Sandbanks. I’d assumed it was the same sort of business and it does follow exactly the same structure and revenue model yet it has taken a few years for me to really understand my clients’ motivation.
In Cornwall with hindsight it seemed very straightforward – people had stretched themselves to buy the second home they had always dreamed of, or sometimes inherited it and the property had to pay its own way and often pay a mortgage too. Here in Sandbanks things are a bit more nuanced so here are my thoughts
They still know the value of money
You might think that we are dealing with young footballers or trust fund kids but that’s not the case at all. Almost without exception the owners of our premium properties are self made entrepreneurs, executives or professionals who remember just how hard they had to work for every £100 in their early life. It just doesn’t sit well with them to have an asset that runs up costs rather than deliver a return, particularly when they inevitably are too busy to use the place as much as they would like.
There’s a long string of people queuing up to charge you for something to do with your second home and running it as a business provides income to cover expenses, makes them tax deductible and crucially produce a change in the mindset of suppliers who will understand they need to be competitive.
The incalculable value of taking the hassle away
Picture the scene – you’re getting ready for a black tie dinner, it’s the end of a gruelling few weeks of work, perhaps you’ve flown between continents, put in 100 hours before closing a big deal or won a case you’ve been working on for months. It’s a big night out and you deserve it. Perhaps you might be up for an award, maybe you’re sharing a table with a really big fish from your industry that you’ve been wanting to meet for years. Your spouse’s phone rings and it’s their sister who is at your second home celebrating a big birthday. Yes the place is fabulous but there’s a bit of an issue, the oven doesn’t seem to be working and they have 12 people coming for dinner in 3 hours, also whilst they are on the kids can’t get the sound on in the cinema room. Frantic phone calls ensue – you have a cleaner but she’s never used the oven, your maintenance man can go round and have a look but not sure if he can do anything. You can get an emergency electrician out but he doesn’t really do appliances or know his way around the complex house control system.
It’s impossible to put a price on avoiding this sort of situation and you can’t fix it in the moment by throwing money at it. Whatever the outcome the result is stress and maybe a ruined evening – you only have to look at the premium paid for first class air travel to see how much value a cash rich time poor person puts on a smooth experience.
Free concierge services
Of course they are not really free but renting means you have a service in place to ensure the property is ready for guests, linen and cleaning is sorted and there’s a 24 hour callout service. This means that the owner is also treated like a premium guest and can enjoy their stay without worrying about meeting tradesmen or anything else – you arrive late (inevitably) and everything is perfect, enjoy the property and stay as late as you can leaving us to clear up behind you. As the costs come out of rent received it feels like it’s not coming out of your pocket.
Extensive tax benefits
Finally it may be a secondary benefit but just for good measure there are very significant tax benefits to take advantage of:
- No council tax to pay as the property will be business rated and if it’s your only one you’ll get small business rate relief at 100% and pay nothing.
- Tax relief on pretty much everything. Capital allowance rules let you claim full tax relief on purchases up to £200,000 a year and if you don’t have the income to claim against it’s carried forward indefinitely until you do so that fantastic kitchen or designer sofa just got much cheaper.
- Capital gains tax reduction. This can be worth many times more than the rent, when you sell that second home you’ll pay just 10% tax on the gain instead of the usual 28%
- Retrospective Benefit – Are You Sitting On A Gain? This is a really big one, in certain circumstances operating as a holiday let for at least a full tax year the entire gain may qualify for entrepreneurs relief even if the place has been a second home for a long period.
Many of our owners have joined us when they were on the point of selling their place because in their mind it had turned into something like a boat that costs a lot to keep and you hardly use it. Helping to turn it into an asset that you can also enjoy has become the core of our business and takes us away from competing with the Airbnb type DIY platforms.
Simon Tolson owns Rumsey of Sandbanks. Contact Simon on 01202 707357.