What's the best way to fund a holiday home purchase?

AnotherJoe

You say you've done the numbers but I'm very sceptical of them because if the holiday park could get £25k a year income on an house selling for only 5x that, and if most of that £25k was profit, they wouldn't sell them, they would keep them and let them out and take all that substantial profit for themselves. They after all woudl have things you cannot provide, eg on the ground management, economies of scale, abilty to maximise occupancy which you can't*, and so on.

Or, even if they had absolutely no interest in running a highly profitable business, the houses themselves would sell for much more than around 5x income.

You say their prices have tracked yours, so maybe they are a decent proposition asa second holiday home, for people who will visit frequently and perhaps let out to friends and family to cover some of the costs but asa business I'm very sceptical and I think you've been carried away by your own marketing hype about how good you are, if people don't visit in say November and January because the weather is generally poor and travelling not great and no school holidays , that's a tough call to overcome that. A holiday park could put events on to fill in during low periods, you can't.

* a holiday park owing multiple properties can have multiple people in the same week, you can't, so they can get a higher occupancy rate.

Ozzuk

AnotherJoe wrote: »

You say you've done the numbers but I'm very sceptical of them because if the holiday park could get £25k a year income on an house selling for only 5x that, and if most of that £25k was profit, they wouldn't sell them, they would keep them and let them out and take all that substantial profit for themselves. They after all woudl have things you cannot provide, eg on the ground management, economies of scale, abilty to maximise occupancy which you can't*, and so on.

Or, even if they had absolutely no interest in running a highly profitable business, the houses themselves would sell for much more than around 5x income.

You say their prices have tracked yours, so maybe they are a decent proposition asa second holiday home, for people who will visit frequently and perhaps let out to friends and family to cover some of the costs but asa business I'm very sceptical and I think you've been carried away by your own marketing hype about how good you are, if people don't visit in say November and January because the weather is generally poor and travelling not great and no school holidays , that's a tough call to overcome that. A holiday park could put events on to fill in during low periods, you can't.

* a holiday park owing multiple properties can have multiple people in the same week, you can't, so they can get a higher occupancy rate.

I've seen those figures quoted on lets costing less than 50-60k - nice lodges in parks, have been tempted myself. BUT...it has always come with a very short lease so the vendor is getting a nice capital injection every couple of years (the reason why they don't let fully themselves).

madmax76

Thank you again for the comments I have received regarding my original post, there are some really good points being bought to my attention. A bit more info:

*The lease is 125yrs.
* They are detached lodges on a holiday park, across the road from a fantastic lifeguarded beach that is miles long. Frequented by surfers, also right on the coastal footpath and great infrastructure locally.
* Some lodges are owned by the park and some privately, looking online at the 4 advertised and owned privately all are booked out already for at least 50% of the year. The lodge that has a hot tub commands £200 per day during peak season and is getting it. The lodge we're considering buying also has a hot tub.

Thank you again for all your input, it really is opening my eyes.

babyblade41

madmax76 wrote: »

Thank you again for the comments I have received regarding my original post, there are some really good points being bought to my attention. A bit more info:

*The lease is 125yrs.
* They are detached lodges on a holiday park, across the road from a fantastic lifeguarded beach that is miles long. Frequented by surfers, also right on the coastal footpath and great infrastructure locally.
* Some lodges are owned by the park and some privately, looking online at the 4 advertised and owned privately all are booked out already for at least 50% of the year. The lodge that has a hot tub commands £200 per day during peak season and is getting it. The lodge we're considering buying also has a hot tub.

Thank you again for all your input, it really is opening my eyes.

My underlined in bold, Is that a lease or licence agreement, check this first as this will be important

martindow

You will need someone extremely reliable to check everything, to clean and to change bed linen between visitors. If it's you it is a tie and a chore especially if you don't live locally. If it is someone else and they let you down for whatever reason it would be disastrous for your business reputation.

madmax76

The estate agents have told us it is 125yrs leasehold, we would of course thouroughly check out all paperwork etc. I work part time and wil bel available to manage and clean the property myself on changeover days. On the odd occasion I'm not then I would have pay a private company to do so. We live 10 miles away.

There certainly has been a lot to consider especially with regards to the amount of wear and tear that happens as well as having to deal with rowdy and disrespectful guests. Also the mention of obtaining a security deposit seems a great idea.

Referring back to my original post: what would be the best way to fund the holiday home purchase? Does anyone have experience of having a holiday let mortgage?

TIA

Ozzuk

When I bought mine it was classed as a commercial property, I had to have a business case, high arrangement fees, poor interest rates (compared to residential) but I think things have moved on now and there are a number of specialist providers. LTVs tend to be more brutal than residential, ours had a 50%ltv limit, but again I think that is more relaxed now. You're probably still looking at 75% max.