Should we buy this holiday let business?

Rockporkchop

Thanks PasturesNew, when you put it like that I guess it doesn't sound like a great idea!

I don't really want a nice efficient nanny coming round and making me look bad! We definitely want either one of us (preferably me) staying at home with them until they start school.

zzzLazyDaisy

From what you say running this place will take quite a lot less hours than going out to work, especially when you add in travelling time, and the fact that even when you are at home you are tired.

If the sums add up, even if you'll be living on a reduced income, you also won't have the costs associated with work - petrol, smart clothes, lunches, convenience food because you are too tired to cook etc.

If your OH is handy at maintenance/gardening, once you are settled there may be local work from time to time.

Most importantly, you will have time with your precious babies.

You need to be certain the figures add up, check the books etc. Is there room for some haggling on the price?

But all things being on your side, what a wonderful start to give your children!

Madmel

If you could stagger the arrival days then it would definitely be possible. But turning 4 cottages round on your own on one day would be more of a challenge, not impossible but not easy.

The previous owners here did 2 cottages (but one is now my father's place) AND B&B in the house (now our home!) She did have some help on a Saturday but mostly managed with just the two of them.

It depends on how many beds need to be changed, what time the guests leave, so you can get in there, and what time the next ones arrive. As an example, ours leave by 10 am and the next ones arrive after 3.30 pm. I can do the whole lot in 2 hours confortably for a place with 4 beds that sleeps 5. If DH is around, it is much quicker, and if one of the kids pitches in, faster again (they are quite good at folding towels and vacuuming - for a small fee!) However, if there are babies or wheelchairs, which means getting out extra kit like door ramps, travel cots etc, it can take longer. If the place is a complete tip, it can take longer, although that doesn't often happen.

I agree with LazyDaisy's comments about what you'll save. Not only will you not have childcare costs, but your own expenses will go down significantly. You can't put a value on the precious first years of your children and if that means cutting back on luxuries so you get a better quality of life in the country, so be it.

If you want any more help or advice on the nitty gritty of cottage ownership, PM me. All the best whatever you decide to do.

chickmug

I have dealt with many of these types of businesses and on the gross turnover you state the typical Profit & Loss Accounts will give a Net Profit in the region of £35,000 lowest to a maximum of £50,000.

So with mortgage repayments of around £24,000 per year and that will rise once rates start moving up. Leaving a Net Income of £11,000 to a very risky £36,000.

The usual 'rules of thumb' applied in business generally never come into it with this 'Lifestyle' 'Way of Life' business. I have sold similer for more money and where the taking are under the Vat thresh hold.

When I was working enquiries for this type of business were very high but most fell by the wayside once they had dug into the reality of the money side. It was often said in the business that any form of Self Catering business would not really support very big loans. So suiting cash buyers and they used to be many of these with a million or two.

If you still wish to pursue it you need lots of detailed information and happy to look through accounts if you PM me. The agent should have them on PDF as well as up to date Vat returns. However I don't feel convinced it would work?

GDB2222

chickmug wrote: »

I have dealt with many of these types of businesses and on the gross turnover you state the typical Profit & Loss Accounts will give a Net Profit in the region of £35,000 lowest to a maximum of £50,000.

So with mortgage repayments of around £24,000 per year and that will rise once rates start moving up. Leaving a Net Income of £11,000 to a very risky £36,000.

They need somewhere to live, anyway, and more than half of the purchase price relates to the owner's living space. To include that half in as expense of the holiday lettings business seems to me to be misleading. They are paying about £300k for a holiday letting business with a t/o of £100k. Is that so terrible? I thought the plan was that either husband or wife would continue working, and that income could pay for the house - as indeed it would if they stay where they are.

chickmug

GDB2222

I thought in OP they were saying about one working if they stayed where they were?

It is typical with this type of business that people chased the attractions of the lifestyle and many we sold were to those who had full cash to buy. It is up to their accountant to advise them as how best to do the accounting to maximise their return. Same as to the notional split home/business it is up them to agree with IR what is and is not tax allowable.

BUT in addition it was common for one, or the other, to have other income from employment, self employment, investment income, property portfolios, or pensions that had kicked in. Those who expected to buy at this price level, with the expected income, did often fall by the wayside.

There other ways, with the money they have, of generating much higher Net Profits from a business, in a nice area, but none with such an idylic lifestyle.

GDB2222

Oh, I see where you are coming from. I agree that they may well be disappointed if they hope that this will be sufficient on its own to support them. Also, if they are looking for one of them to work, average pay in Norfolk is pretty low compared to what they are used to in the City.

I'm intrigued, by the way, what type of business at the £500k mark can generate much higher net profits?

DD2_2

It seems a bit of an 'all or nothing' gamble. If it doesn't work out, you'll lose everything. Could you not look at using some of the redundancy money to retrain your OH ?

chickmug

GDB2222 wrote: »

Oh, I see where you are coming from. I agree that they may well be disappointed if they hope that this will be sufficient on its own to support them. Also, if they are looking for one of them to work, average pay in Norfolk is pretty low compared to what they are used to in the City.

I'm intrigued, by the way, what type of business at the £500k mark can generate much higher net profits?

Due to location I worked in and not saying that all, or any, are that desirable to work in day to day! But I have known ex Company Directors run many of these types of businessesd as the snobby side diminishes in holiday areas.

Sometimes it better to spend on a leashold business, with (live in or rent it out) or without living accomodtion and the rest of the money on a separate home.

Providing it is in the right spot I would say the most profitable is Fish & Chip Shops - usually competition proof as well. I have dealt with those with £100,000 NP.

Newsagents & Convenience Stores can be surprisngly high profits - but very exposed to one of the big boys muscling in and very long hours and physical work. Again I have dealt with those with £100,000 NP

Some Pubs but where there is letting rooms and restaurant sides but the have become expensive due to the freehold part increasing in value but the profits have not.

Pee

With commercial premises there is a rule of thumb for valuation which was 10% - so if you bought for £875,000 you should expect an annual income of £87,500. I don't know if that has changed with interest rates. It may also make a difference in that you would also be having a home rent free, which might be worth a certain amount.

I think you want to make this work to have chance to spend time with your children, which is obviously important and something you can't later "get back". However this would be a complete change for you and your OH, and changes can create problems.