Buy and Hold Vacation Rentals

[Fraser Lawson]

Hello from Scotland!

I am just starting out in real estate, I have a slightly unusual market area and situation that I would like to get some other perspective on.

In 2015 I bought my first apartment thinking that I would live there myself. Since then my job has relocated me to a different city so I decided to start using Airbnb and other vacation rental sites for my property to earn a bit extra cashflow. I have now been doing this for almost one year and the ROI seems very good, I estimate ~30% based on my calculations before tax (including management fees.) The city is Edinburgh here in Scotland which has a huge tourist attraction in the summer months. I can see how hugely profitable this model is in my city and want to replicate this deal as much a possible, especially now when interest rates are at incredible lows here.

Unfortunately I spent all of my own capital I could possibly raise on this one apartment on a first residence mortgage. To replicate this deal I need 25% down payment for a conventional bank loan with 3-4% interest, and my city relatively expensive, we're talking £200000 - £250000 for one of these deals but they should profit around £10000 per year. My question is I suppose how to raise £50,000 for a down payment asap so I can start compounding the profits.

 Thankfully I have a relatively well paid Job so borrowing from the bank should be fairly straightforward as long as I have the deposit.

Any input would be greatly appreciated, I am happy to advise on UK city investing if anyone is interested in overseas.

Many Thanks

Fraser Lawson