Should we buy this holiday let business?

Rockporkchop

After reading the wonderful advice given recently, especially on the hotel thread etc, I am posting my situation and would be extremely grateful for any advice and comments. It is house related but will give some background information first.

DH has just been made redundant after many years at the same company. Unfortunately there are very few jobs in his field at the moment and the salaries for those jobs are not great. I am currently on maternity leave but was going to be a SAHM after it ended, now I will be forced to return to work full time while DH stays at home with the (nine month old) triplets - not what either of us want to do. I always hated my job and desperately do not want to return full time - I did look into part time but the nursery costs would be £150 a day so not worth it.

We currently live just outside London and commute to the City to work but have been thinking about changing our lives for a while now. We have seen a lovely property in Norfolk and it has four holiday cottages in the grounds which are currently used as a holiday letting business - there is also swimming pool, games room, sauna etc. The cost of the property inc all furniture etc is £850,000 and the gross annual turnover for the last 6 years has been around the £100,000 mark, with no change since the recession. They said that their running costs etc amounted to approx £25,000 but I don't know if this included their mortgage, if they have one. We would need a mortgage of £380,000 which we have been offered at a rate of 5%. We would be looking to run the place together and share the childcare.

Does that sound feasible at all? I know it sounds stupid but what sort of turnover should I be looking at for that sort of purchase price? Is it ridiculous to be thinking of buying a property like that at all? We were not looking to buy a holiday let business but have really fallen in love with the property and the area and it would be so great to not have to be out of the house for 12 hours a day and never see the babies we waited so long for.

Many thanks in advance for any comments or suggestions.

PasturesNew

Rockporkchop wrote: »

... nursery costs would be £150 a day so not worth it.

If you paid for just working days, and didn't pay for 25 days' annual leave and 8 days' bank holidays, that would be £34k/year. Alternatives would be to hire nannies that come to your house daily.

You could get a mature, experienced, fully-qualified Norland Nanny cheaper.

Rockporkchop wrote: »

Rockporkchop wrote: »

... £850,000 ... gross annual turnover for the last 6 years has been around the £100,000 mark, with no change since the recession ...running costs etc amounted to approx £25,000

If you think of that in terms of a mortgage, if the £100k were your income and £850k was the mortgage, that'd be over 8x salary.... and the properties themselves will have running costs, which would bring the income down to £75k/year.

Doesn't look to me like the figures stack up at all.

As for "no change since" ... we're early days yet.

Rockporkchop wrote: »

Rockporkchop wrote: »

... mortgage of £380,000 ...

Rounding the figures up, if you borrowed £400k and put down £450k, the income to pay for the £400k mortgage (£75k) is still almost 6x the income.


Running that place and childcare would be 1 person's time full-time and 2 people one day per week (booking in/out, maintenance). I think one of you would still need to work, so you'd still have that problem.

And, if you bought it now, the season's just about over, you'd have to survive/pay the bills for months until the season started again.

I just don't think the figures stack up. And you've not mentioned having any skills re: property maintenance, running a business, marketing, running a people-based/experience/tourism business. You don't simply put an advert in the paper and they come. I know many people who spent fortunes on advertising holiday accommodation , holiday flats, etc and nobody ever came (and now they can't even sell them either).

GDB2222

You are purchasing two things here, a house and the holiday cottages, and you need to place a value on each of them. If the house is worth say £500k, well then you have the benefit of living in a £500k house.

On the figures you gave, net income of the business is £75k, less mortgage say £25k (rounded up a bit), less £10k for contingencies. So, £40k, less tax, to live on, which means a completely different lifestyle to what you are used to probably.

Is there space for more cottages?

Rockporkchop

Sorry, yes between us we have skills in marketing and property management. The property is an unusual one, well established and is consistent most of the year round. They have two staff on booking in days (Friday) which comes out of the £25k running costs. They would be happy to stay on.

GDB2222

Do you have a link to the property, as otherwise it's difficult to say.

silvercar

Watch last weeks property snakes and ladders. That had a couple with a dream of holiday lets and a business plan with figures that didn't match to reality. There is a thread on the economy board about it.

Trollfever

silvercar wrote: »

Watch last weeks property snakes and ladders. That had a couple with a dream of holiday lets and a business plan with figures that didn't match to reality. There is a thread on the economy board about it.

They didn't live in the real world!

Rockporkchop

silvercar wrote: »

Watch last weeks property snakes and ladders. That had a couple with a dream of holiday lets and a business plan with figures that didn't match to reality. There is a thread on the economy board about it.

Oh I loved that episode but they virtually built the building and were setting up from scratch whereas this is a furnished and established holiday let business. Also they wanted to charge stupid rates and ignored most of Sarah's advice, and I would do neither of those things!

Madmel

I'm only running one holiday cottage, but it's FAR from a full-time job. Our changeover day is Saturday but it only takes around 2 hours to strip the beds, put the washing on, clean the place and make it up for the next guests. It obviously takes more time to dry the bedding, but I have plenty of sets so am not left waiting for the sun to come out

In the winter we offer short breaks but as I work away from here on 3 days per week, it can sometimes be a bit tricky coordinating it all. We do tend to be quieter in the winter, but it suits us and we have some years offered the cottage on a 13 week let to people who live on holiday parks which have to close for 3 months. They do their own laundry and cleaning so it's hardly any work at all.

Speaking personally, I would do whatever I could to spend more time with my children when they are young. They seem to grow up so fast so in my view, anything I could do to work near to them would be a bonus. And when they get a bit older, they can help you... It's amazing what a 6 year old can manage when you are cleaning a cottage and preparing it for guests!

Rockporkchop

Thanks GDB222 - there is no link at the moment as the particulars are still being prepared. The house is easily worth £500k and the 4 cottages definitely make up the balance of the money. There is no room for any more cottages but if we do get sick of running it as a let then we could convert it back to one massive house with two self contained cottages.

I would be over the moon with £40k less tax after the mortgage and bills are paid! I earn a decent salary but after my current mortgage and outgoings are deducted I will have about £800 a month left for being out of the house for 60 hours a week. If neither of us had to go out to work then I would be very happy to make enough money just to get by until they all go to school.

I don't actually have a "lifestyle" anymore as I am ready for bed by 11pm and it's not worth the military organisation to go out!

Rockporkchop

Madmel - thanks very much. Do you think the 4 cottages would be manageable then if DH was doing it all full time? And is the marketing and accounts etc a real headache? I can't work out whether I am just talking myself into the idea and pretending that the figures stack up because I desperately want to stay at home with the babies. Also we currently live in a house with a garden like a shoebox so it would be great to have some grass for the babies to play on. I didn't even consider the extra help three little extra pairs of hands will bring!