Making your holiday cottage pay

The dream of finding a cosy cottage away from the bustle of city streets, a corner of the country where you can chill out and de-stress, is one shared by many people. But can the fantasy become reality, or can the price be too high?

"We bought the place in Kerry on a whim, and we've been doing it up for ages. We had to dry-line the walls, put in a new kitchen - and we don't have the time to go there much anymore. Now we're wondering whether we should sell it, or maybe rent it out," says one cottage owner.

Says another: "We thought we were doing really well: the agent we signed up with had it rented out all summer, and we expected to earn at least £3,000. Then the septic tank erupted - and it cost over £1,000 to fix."

Economic prosperity is giving an increasing number the opportunity to turn the cottage dream into reality.

But owning a second home involves work, time and continued expense. Even more so if you're thinking of renting it out to help cover the costs involved.

So is buying a cottage a good investment? And is it realistic to expect your holiday home to pay its own way? The first thing that must be said is that the only good reason to buy a holiday home is because you love the house, or more likely, its location, and want it first and foremost for yourself and your family.

Generally speaking, cottages are likely to be a good investment long-term, on the basis that the property will increase in value over 10 to 20 years - but they are decidedly not a way to make quick or easy money.

The days when you could pick up a traditional cottage for a few thousand pounds are long gone: nowadays you will find little for under £20,000 to £30,000, and at that price, it's likely to be pretty tumbledown; average prices for country homes range from £50,000 to £100,000 - and you can pay well over that in places such as west Cork and Connemara.

Unless you find a property that has already been renovated to your taste, you will have to fix up your second home: many people, of course, like to do this themselves over a number of years. But if you do hire someone to do the work for you, "you'd see little change out of £30,000", reckons Marie O'Halloran, tourism officer with responsibility for the self-catering sector of the South-East Tourism Organisation.

This would cover basics such as dry-lining, damp-proofing the floors, rewiring, sorting out the plumbing, installing heating, a new kitchen and bathroom. Major work, such as a new roof, or adding an extension, would cost more. And it is vital to check that your property has an adequate water supply, and a proper sewerage system.

If you think that you might want to rent out the cottage soon, or even some years down the road, you should bear this in mind while renovating, so that you don't spend money on something that may make it less rentable.

One English cottage letting agency, Emerald Cottage Holidays, advises owners to "avoid at all costs installing a solid-fuel central heating system" but says to make sure that open fires are part of your renovation plans as they are at the top of every holidaymaker's list. (It adds that background heating, either central heating or storage heating, is, however, essential.)

It would be a good idea to talk to the self-catering supervisor in the relevant tourism region, even if you're only looking at cottages to buy at this stage. The regional tourism bodies are in charge of the self-catering classification "star-rating" system, and people such as Marie O'Halloran - who inspects 500 to 600 cottages a year - are experts on everything from local building costs to the cost of fitting out and marketing your cottage for rent.

Most city people who buy a cottage to get away from it all drift towards the idea of renting it out when they realise the high costs involved in renovating and running their second home. "All we want is enough to cover the mortgage," many say. But you have to balance the time, trouble and expense that renting it out involves against the likely income.

AGENTS such as James Flynn, of Discovery Holidays, Ian Hold ship, of Irish Country Holidays, and tourism people such as Marie O'Halloran and Con O'Conaill, of Cork Kerry Tourism, all point out that the basic season is very short: there are just eight weeks in the high season, July and August, when you can charge top rents (up to £400 to £500 a week in prime locations).

Most cottage owners would hope to get rental for 12 to 20 weeks, with the most successful doing business for up to 30 weeks of the year, including Christmas, Easter and other holiday periods. But the average, warns Ms O'Halloran, is more like 10 to 12 weeks.

You will be doing well to generate an annual income of between £3,500 and £5,000 on a country cottage - and that's before paying tax, insurance, management/cleaning fees, maintenance fees, and of course, the initial fit-out. (Remember that you can write off the expenses against tax on rental income.)

All the agencies emphasise that you have to be serious if you're getting into the business of renting your property: holidaymakers, both Irish and foreign, are demanding - you will not, says Con O'Conaill, get away with fitting out your property with old furniture you no longer need.

Ms O'Halloran reckons that it could cost between £4,000 and £9,000 to fit out a three-bedroom cottage properly with everything from corkscrews to carpets and everything in between. If you don't live near the cottage, you will have to find someone reliable locally to manage it for you - to "meet and greet" new guests, comprehensively clean the house between lets and handle any queries/problems for you. Typically, the price for this will be £30 per changeover.

James Flynn of Discovery Holidays says you should expect to pay 10 per cent of your rental income on marketing, and after the first few years, another 10 per cent on maintenance - painting, repairs, replacing pots and pans. After seven years, says Ms O'Halloran, you should gear up for a major redecoration - getting new curtains, carpets and the like.

And after all that, you must market your lovely refurbished property one way or another - never as simple a task as you might think. Bear in mind that you'll have strong competition, as the number of self-catering units has pretty well doubled in the past few years to around 20,000 Bord Failte registered properties - and no one knows how many unregistered.

The good news is that the UK market is growing rapidly, partly because of the rate of exchange. As far as Jon Cockeril, Emerald Cottage Holidays marketing director, is concerned, the time has never been better to rent out Irish cottages. He has three words for home owners - "Ride the boom!"