Should we buy this holiday let business?

chickmug

Madmel

Tell me what bits of my postings are you surprised about and I will answer you?

lincroft1710

Madmel - a lot of holiday parks now have a 48 week season, so all the "permanent residents" have to winter in Spain or similar for 4 weeks.

Madmel

chickmug wrote: »

Madmel

Tell me what bits of my postings are you surprised about and I will answer you?

- Your post about 6 month lets - in this area that is something completely different as I have already said.

- Your post about accounts. A business run from home IS allowed to claim a portion of things like broadband and mobile phone IF they are legitimately used for business. For example, I claim 25% of my broadband costs against business use. The IR are happy with that. As long as you are consistent and don't claim 75% one year and 10% the next and it is reasonable (i.e. I administer bookings using my broadband connection but also use it for main work and leisure), there isn't a problem.

- Your post about the valuation. Is it valued as an going concern (land, bricks and mortar, fixtures & fittings plus goodwill) or are they looking to sell the buildings alone as in a residential house sale?

Do they pay booking fees to any intermediately?

Do they have any annual contacts with any intermediately?

Have you asked for the accounts?

Do you have accountant that understands business accounts and who will look through for you?

Booking fees are a relatively small percentage of the booking price - typically 10-12% in my experience. Annual contracts are just that - you don't have to renew them; they are in the region of £150+ depending on the size of advert - and the term is INTERMEDIARY. We ask all our guests how they heard about us and have ditched some advertising that was not yielding results with no detriment to our occupancy levels.

I feel it is rather patronising to the OP to suggest that they need an accountant to look at business accounts. Hardly money saving! It's not rocket science and if someone is considering running a business, they should have the common sense to be able to understand a profit & loss account.

If as is the case at my place, the buildings cannot be sold separately, there may well be some bargaining scope as they are best suited to very limited purposes. As far as I can see, the possibilities are short-term holiday lets, lets for 6 months or more, or for a large extended family to live close together permanently.

lincroft, I can only speak from personal experience in my local area where holiday parks shut off the water during the winter months to ensure residents move out.

chickmug

Madmel wrote: »

- Your post about 6 month lets - in this area that is something completely different as I have already said.

For your (very limited) information) in the area I have worked six month lets is common!

- Your post about accounts. A business run from home IS allowed to claim a portion of things like broadband and mobile phone IF they are legitimately used for business. For example, I claim 25% of my broadband costs against business use. The IR are happy with that. As long as you are consistent and don't claim 75% one year and 10% the next and it is reasonable (i.e. I administer bookings using my broadband connection but also use it for main work and leisure), there isn't a problem.

Thought that is what I said??????????????????????? Quote:-
"Legitimate running cost will include many items that could be seen as a perk of running the business, mobile phones, broadband, car running costs and the like".


- Your post about the valuation. Is it valued as an going concern (land, bricks and mortar, fixtures & fittings plus goodwill) or are they looking to sell the buildings alone as in a residential house sale?

Due to the explanation given by rockporkchop I assumed it was being sold as a going concern.


Do they pay booking fees to any intermediately?

Do they have any annual contacts with any intermediately?

Have you asked for the accounts?

Do you have accountant that understands business accounts and who will look through for you?

Booking fees are a relatively small percentage of the booking price - typically 10-12% in my experience.

Still an amount to take into account as 10/12% is hardly chicken feed?

Annual contracts are just that - you don't have to renew them; they are in the region of £150+ depending on the size of advert - and the term is INTERMEDIARY.

So my mistake with the word INTERMEDIARY. In your eyes you need to pull me up on this - pathetic. Anyway this is NOTHING to do with advertising but to do with annual contracts with booking agents. Some are overseas and charge a significant % of all bookings they provide.

We ask all our guests how they heard about us and have ditched some advertising that was not yielding results with no detriment to our occupancy levels.

I feel it is rather patronising to the OP to suggest that they need an accountant to look at business accounts. Hardly money saving! It's not rocket science and if someone is considering running a business, they should have the common sense to be able to understand a profit & loss account.

Anyone who considers buying something at this price would need their head examining if they did not consult an accountant with relevant experience. To call me patronising is beyond belief.

If as is the case at my place, the buildings cannot be sold separately, there may well be some bargaining scope as they are best suited to very limited purposes. As far as I can see, the possibilities are short-term holiday lets, lets for 6 months or more, or for a large extended family to live close together permanently.

lincroft, I can only speak from personal experience in my local area where holiday parks shut off the water during the winter months to ensure residents move out.

For goodness sake just what is your problem and if rockporkchop doesn't want the help I offer that is for them to tell not for you to pick silly holes in my posts. Grrrrrrrr:mad:

franklee

I understand a profit & loss account but if I was spending 800K I'd want an accountant to go over the books, like wise if something new to me crops up. Not that I have 800K

GDB2222

It absolutely has to be an accountant with much experience of this type of business. The point is not to look at the accounts (which any accountant and many non-accountants can do), but to find out what is missing, what holes there are, and indeed whether the accounts are actually believable at all. So, what you are getting is someone's experience of looking at the figures for this type of business.

chickmug

Hi franklee & GDB2222

Not very often but I have been given totally ficticious accounts, & even Vat returns, by a 'going concern' seller. Did they think we were stupid (no comments) but we always made sure we had them direct from the accountant.

It amazes me to see those wanting to sell on their business after only a year or so and who had borrowed £100's of thousand based on a few scraps paper (accounts!!!!) with a coffee 'mug stain' in the corner. And even more surprising the fact that some bank was willing to lend on this tatty bit of paper. Perhaps only one of the reasons the banks got into such a mess?

GDB2222

The bank employees got bonuses for lending, so lend they did!

On the accounts, there are a few things you can do to make the figures look better. For example, in the first year or two, you can depreciate everything down 100% and take the hit in that year. It's hardly fraudulent to have that as an accounting policy, but it has the result that later years' figures have no depreciation in them, and it shows a rising trend in profits. Likewise, you might purchase 10 years worth of toilet paper or bed linen in year 1, so that you take the cost in year 1 and later years' profits are increased. You then sell the business just before the toilet paper mountain runs out. (Of course, I don't know what expenses a business like this has, so I've probably chosen really silly examples, but hopefully I've conveyed my meaning.)

That sort of thing might be hard to spot unless you know what sort of figures to expect each year in the first place. I'm not clear on the accounting rules for small private limited companies. Do they have to have an audit that shows a true and fair view? I think that might only apply when the turnover is >£1m or thereabouts?

chickmug

GDB2222 wrote: »

Do they have to have an audit that shows a true and fair view? I think that might only apply when the turnover is >£1m or thereabouts?

No audit required/expected but 'signed off' accounts, from Chartered Accountant (hopefully the sellers use one) important.

They could do their own accounts, or use an inexperienced book keeper, which does happen and in which case UGH.

GDB2222

No audit required/expected but 'signed off' accounts, from Chartered Accountant (hopefully the sellers use one) important.

The trouble with that is that there are no established accountancy principles for these cases, particularly not for sole traders or partnerships. As I hope I showed above, you can quite legally apply very conservative accounting principles in a business which understate the early years' profits and overstate later years. That then gives an impression of growth in the business which is really not there.