Buying a holiday rental can be one of the smartest property investments you’ll make. Generate income for most of the year, use it yourself for vacations whenever you want, and benefit from property appreciation while you’re at it. In the right location with the right approach, holiday rentals regularly outperform traditional buy-to-let properties by 20-40%.
But here’s what most first-time buyers don’t realize until they’re six months in: this isn’t passive income. It’s a hospitality business that happens to involve real estate. You’re competing with hotels, professional property managers running dozens of listings, and every other owner in your area.
The difference between owners who thrive and those who struggle usually comes down to expectations. If you go in thinking your property will “basically run itself,” you’ll be disappointed and probably lose money. If you treat it like the business it is, put in the work (or pay someone to do it), and focus on the four areas below, holiday rentals can deliver returns that make the effort worthwhile.
Here’s what actually matters when you’re buying one.
What is a Holiday Let?
A holiday let (vacation rental in North America) is a furnished property you rent to guests for short stays, typically a few days to a few weeks. If you’ve used Airbnb or VRBO, you already know what these are.
The term “holiday let” is British. Americans and Canadians call them vacation rentals or short-term rentals. The concept’s the same: you’re competing with hotels for tourist dollars.
Why Holiday Let Financing is Different
This is where most buyers get surprised. You can’t just get a regular mortgage and start listing your property online.
Unless you’re paying cash, you need specialized financing. A holiday let mortgage works differently than standard home loans, and most first-time buyers don’t realize this until they’re already looking at properties.
UK financing: Expect to put down 25-40% (not the 15-20% you’d need for a regular buy-to-let). Interest rates run 0.5-1.5% higher than standard mortgages. Lenders want proof that projected rental income will cover 125-145% of your mortgage payment because they know your income will be seasonal and unpredictable.
US/Canadian financing: You’ll pursue either an investment property mortgage (15-25% down, higher rates) or potentially qualify for second home financing if you’ll genuinely use it personally 14+ days per year. But here’s the catch: many US lenders won’t count projected vacation rental income at all for qualification. You need to qualify on your regular salary alone.
Work with brokers who specialize in vacation rental financing. Your regular mortgage person probably hasn’t done enough of these to know which lenders are actually willing to work with short-term rental projections.
The Real Differences from Regular Rentals
Holiday lets generate higher income per night, but you’re constantly hustling for bookings. Long-t 

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