Static caravan advice

gramezza

Hi all. After some advice please on a static caravan purchase. I've done some research around here on other forums but none seem to really be in the situation I'm in. Also, I know a caravan isn't an investment per se, but I couldn't think where else to post this.

We are looking into the figures of buying a static caravan with the intention of making some profit off it, however small. Long story short we are interested in a brand new one in Brean which is going for £40k.

My wife's mom is putting £20k of her own money into it as a joint thing, meaning we have to put the other £20k. In order to do this we would need a loan. The caravan will be in our name only, this is because the wife's mom doesn't work so she can't be putting her name on things like this (she was left the £20k as inheritance...but that's another story).

As you may know Brean is a popular destination for fans of caravan holidays which is what spikes our interest. The site is open 42 weeks of the year, and we would be looking at reserving 10 weeks of that for family use, meaning we would rent it out for 32 weeks of the year (or aim to, at least).

Site fees are £5,000 per year, which includes utilities. The site has good reviews so I'm not hugely concerned about lack of interest.

Now despite the £20k put in by the mother in law, we still have to put in £20k of our own. Although we both have good jobs, £20k is still a lot of money. I've looked at a First Direct loan - I bank with them and have had a loan with them before. The rate is 3.3% (if approved) and would end up paying £22,388 back over 7 years. This equates to just under £3,200 per year in loan payments to buy the caravan.

Of course any profit we make will have to be split 50/50 with the mother in law as it is half owned by her. I also need to factor in tax at 20% which I assume I need to pay on the profit. (It's also just occurred to me that I may need to pay 40% tax on it maybe? I'm not sure how the tax works fully in this regard as the profit will most likely take me into the higher tax bracket. But happy to accept advice on this too).

As an example I've gone on worst case scenario. An average of £400 p/w rent over 30 weeks (rather than the 32 weeks). It's a deluxe caravan so would command a higher payment for the week but I have to accept there may be some weeks where its unoccupied so I've gone worst case at £400 per week. This equates to £9,600 after tax has been deducted at 20%. Minus ground rent and the loan repayments leaves a profit of £1,400 per year roughly. This of course would need to be halved with the mother in law.

We would most certainly use it as a family during the year so we would also have use of it. They stipulate that the caravan has to be replaced or moved after 15 years. At this point we could reevaluate whether to buy another or sell it.

Doing this will significantly bump our outgoings up each month however we are hopeful of covering these outgoings as above.

Any advice, thoughts or recommendations welcome.

Alistair31

One thing is for sure, this is in the wrong section - a static caravan in not a wise use of anyone’s £40k.

Don’t do it.

Alexland

94% occupancy rate (30 weeks of 32) seems very optimistic and it's not clear where the costs are for taking the bookings (agent, advertising, payment processing, etc), cleaning in-between bookings and maintenance? Once you consider everything then I doubt this will make profit overall.

Browntoa

£5000 a year rent now , if the agreement allows , for example, 10% a year increase then that's rapidly eating into profitability.

Specialist market for resale , possibly only via the site owners at high fees .

It's a bad idea

mumf

I used to own a static van. Year on year ,costs increase and the value of your van decreases.You will NOT make profit.

Dime_Bar

What ever the merits of this, I think your maths are wrong.

1) Your profit is not after you have made the loan agreement, it is the amount you rent out for minus the charges for those rentals (cleaning etc) minus utilities, minus the site fee, minus any maintenance. Then half it then you should cover your loan with your half.

2) Where do you get 30 weeks from, presumably the 10 weeks you will be booking will all be outside of school holidays and other peak times, of that is the case then I could see you getting a reasonable occupancy rate, not as hight as you think though, but you would have to work hard to do it.

On a plus point I know someone who did this, they bought two caravans on a site which didn't have strict age rules on the vans, just tiles on good maintenance. They bought them second hand and turned a profit on the two over multiple years, but they didn't have to service a loan as well as the site fees etc.

Cash-Cows

It would seem to make more financial sense to rent someone else's caravan.

colsten

gramezza wrote: »

I have to accept there may be some weeks where its unoccupied so I've gone worst case at £400 per week.

Your worst case scenario is actually £0 per week, for all sorts of reasons, incl natural disasters.

13Kent

It's unlikely that you will make much of a profit as it's hard to fill weeks that are not holiday weeks, and once you have added the cost of cleaning, the cost of any repairs/replacements for things damaged or taken from the van, advertising costs,PAT testing, electrical safety check, gas check, insurance, utilities on to the cost site fees annual running costs will be quite high. Often sites offer to rent the van out for you for a guaranteed sum, but what often happens is that they let your van to guests who may have booked bargain breaks such as Sun holiday breaks, and you only end up with minimum rent once they have taken out their advertising and cleaning costs from the income.

You will need to pay tax on any income earned also, declaring it on a self assessment form. You can put against it deductions such as insurance, site fees and cleaning costs, but the amount of weeks you use the van yourself is factored into this also, so you can only claim for the number of weeks it is available for rent.

Also remember that a caravan depreciates in value quickly as a car does, especially a brand new one at the end of 15 years it won't be worth anything and you may have to pay to have it removed from the site. Sites don't make it easy for you to re-sell if you change your mind - often people buy and for the first year most of the bills are included, but come the second year when they realise the running costs plus the loan for buying the van work out to more than the cost of their mortgage each month they often sell up at a huge loss as they can't afford the monthly costs.

Having said that if you intend to use the van yourself a lot and you enjoy the lifestyle then it is lovely to have a bolt hole and a little holiday home, but it is not a money making enterprise.

If you want a holiday home in Brean this may be a better option as it will retain it's value. https://www.rightmove.co.uk/property-for-sale/property-69998665.html

There is a lot of good advice here, do your research before you buy. http://www.gostatic.co.uk/

Reaper

If you were to go ahead I don't see why you would buy new. The sites usually charge over the odds for buying new. I'd suggest looking for a second hand one and not via the site.

Better still look for a better investment and rent when you want to go as above (also not renting via the site).

Aretnap

Alexland wrote: »

94% occupancy rate (30 weeks of 32) seems very optimistic...

Depending on precisely which 32 weeks you mean it would mean being occupied for 3 out of 4 weeks in March and October, and every week of every month in between. While I'm not familiar with the economics of holiday lets this sounds wildly optimistic, and not even close to the worst case scenario. Probably optimistic even for a best case scenario, unless you're going to price it significantly more cheaply than other comparable caravans... but have you factored pricing to sell into your average rate?