Buying a chalet holiday let

Bertha123

Hello all. So there are a few holiday chalets to buy in Isle of Wight. Could probably get one for £30,000. There is an 85 year old lease on it. At the moment the site is awaiting to be bought so the clubhouse is shut. Site fees are £1500 per year, I have been told the fees have been set by the Leasehold regulation (or something like that) so unlikely to rise that much when the site is bought (I don't know if this true?!). Outgoings might be £2500 per year. NB. I live in South west England so would for a company to do the cleaning after every changeover and I would be unlikely to visit THAT often. I do love the IOW though so I would use it and visit to check it etc!


Now rental potential; they are only tiny chalets but I have had a look at the prices the others charge. Based on occupancy for 2 weeks in both May and June, 3 weeks in July and August, and 2 weeks in September, plus another two short stays outside of this time, would mean overall I would get a couple thousand profit per year after my outgoings. Not a huge amount I know. However this still would be better interest than if that £30,000 was in a savings account. Also perhaps I might even get more guests than that (or less!).


However my only concern is selling the chalet. If I can get m y £30k back then great as the money I made would be better than a bank so great. However people on Lay my Hat forum are concerned that chalets do not increase in value much, the lease is already very short and the profit margins are small. Also it is a worry that site is waiting to be bought as it is unknown and something to be wary of perhaps?!


However I also thought perhaps once site is bought and clubhouse is up and running again, maybe chalets are more desirable for the people considering buying them. (I am aware clubhouses aren't attractive to everyone but since there is one that is empty, surely that is a bit of an eye sore and if it was open again, would be better). I thought would the fact the clubhouse is open cancel out the shorter lease. Please note the chalets have risen in price but obviously not much because of their low value so it is not silly to think it will increase again, but at what point is the lease an issue.


I wanted to get other views from you guys on here. I know I wouldn't make loads, all I am concerned with is getting better interest than in an account and getting back what I paid for the chalet in so many years time.


Thank you for reading

dogshome

Hmmm - Buying a chalet on a holiday site that is up for sale, and meanwhile the Clubhouse is closed ?

Such businesses are usually bought as a 'Going Concern' and the price will take in the past years trading figures
The Clubhouse Bar and other earners within the building are a major profit centre, so why in the peak of this years holiday season is this one closed ?

This type of business has many income streams apart from the annual fee.
which often include:
1) A monopoly on bottled gas supplies, at a high mark-up
2) Metered Electricity, also at a high mark-up
3) A rule that holiday lets to third parties can only be arranged through the sites
own sales office, with a good chunk of the rent going to the site's owners.

But the real killer is the new, and as yet unknown, owners who will be looking for extra profit streams over and above those now in existance

My advice is not to walk, but RUN away

AnotherJoe

And what happens if its sold for some other totally different use? Maybe houses?

Bertha123

I think the site has been without an owner for a while...


-There is no gas.
-You are correct electric is on a meter - most chalet owners top it up with a few pounds for their guests then guests do the rest.
-Currently chalets sort their own guests.


Can whoever buys the site do what they like though? How can I check this out?

AnotherJoe

Bertha123 wrote: »

I think the site has been without an owner for a while...


-There is no gas.
-You are correct electric is on a meter - most chalet owners top it up with a few pounds for their guests then guests do the rest.
-Currently chalets sort their own guests.


Can whoever buys the site do what they like though? How can I check this out?

Subject to planning permission, yes. You can only check out, whats been applied for at this moment. YOu cant check out that a week after you buy it, someone applies for and then is granted, plans to change it into, well almost anything that doesn't involve there being chalets there. Maybe a new housing estate, maybe a retirement home / village, maybe an adventure theme park, whatever. Or the price of facilities being hiked.

If it hasnt been sold now, its very unlikely to be sold for another 6 months almost anything can happen.

If you only plan to use it a few times a year, then when you factor in the costs and hassle seems to me you'd be better off just renting. It seems to be a very poor investment deal, its a depreciating asset with an uncertain future.

eddddy

Bertha123 wrote: »

Can whoever buys the site do what they like though?

Not really - the new buyers will have to honour leases and contractual obligations.

Presumably you will be buying a lease. Your rights under the lease will continue.

e.g.
if the lease says you can use the chalet for the next 10 years, that right continues.

if the lease says the owners must provide water connections, electrical connections etc, those obligations continue.


But there are horror stories about people buying holiday sites, then making life hell for holiday home owners, and scaring off potential buyers - until chalet owners agree to sell their leases back to the new site owners for a pittance.

Or they may look for every way possible to 'scalp' chalet owners (without breaching the terms of the lease) for as much money as possible.

Or they might be honest straightforward people.

dogshome

This site cannot be without an owner

One possibility could be that the site was owned ' A Sole Trader' who has died and it is now under the juristiction of his/her Executor who has no experience of running a Chalet park - Hence the closure of the Clubhouse which involves Licence legislation, experienced staff who need paying and hands on management.

Whatever the reason is for absentee management, this site is a rapidly depreciating asset with a totally unknown future, and as owner provided services, ( Road maintenance/Gardening/Sewage disposal etc ), are left undone, the value of the chalets declines with it.
RUN, don't walk