Holiday Lodge Investment

silvercue

Hi,

I am looking at buying a holiday lodge in Cornwall/Devon for an investment.  Aim is to let it out for holidays using an agency (I may have no choice in the agency depending on where I buy).  I would like to hope I can get somewhere close to10% ROI after costs.  Of course I will then have to deal with any CGT or Income Tax implications too.  I am looking for somewhere that does not charge a fee to sell later down the line.    I am already at the stage of looking at some specific lodges.  Though other than just searching through websites one by one I am not sure where else to find good info from independent sources on where to buy/avoid etc

I have been given some projected revenues and am awaiting cost breakdowns, but it looks decent

I was wondering if anyone here has made a similar investment and whether they have any advice/tips, or things to watch out for.  

I have a feeling that there may be a host of unexpected costs/issues that could make this less attractive after a year or two.

I am looking at something like £200-250k spend.  Agency are looking at 26% + VAT cut of rental (which seems high).   Overall, I still think this could generate about 20k after costs and before tax, though still waiting on more detail.

user1977

Are you getting these projections from a source other than the people trying to sell you the lodge?

dimbo61

If you have £200/250,000 to invest why not pay more into your pension ? LISA, and Stocks and Shares ISA, Premium bonds.
Improving your own home ?
Fees, Void periods, Tax and letting agents fees could mean no profit or income at all. 

silvercue

dimbo61 said:

If you have £200/250,000 to invest why not pay more into your pension ? LISA, and Stocks and Shares ISA, Premium bonds.
Improving your own home ?
Fees, Void periods, Tax and letting agents fees could mean no profit or income at all. 

Thanks for the reply.
My Pension is looking OK, I know it is a tax efficient way to invest money, but I want to see benefits of investment much earlier than 67.  Also, after lump sum, the annuity needs me to live a long time to really see the value, so not sure pension is for me. 

CASH ISAs return is too low.  Shares ISAs are not for me - I already play the markets and Crypto and so far have a better return than any ISA (it is one of the reasons I have the money to spend).

I am spending a bit improving my home.  I live alone now though, so extensions etc are no use for me really.  

silvercue

user1977 said:

Are you getting these projections from a source other than the people trying to sell you the lodge?

At the moment only the source, so I am sceptical.   That is one reason I am asking on paces like here to get a view from someone who may have experience

grumiofoundation

silvercue said:

dimbo61 said:

If you have £200/250,000 to invest why not pay more into your pension ? LISA, and Stocks and Shares ISA, Premium bonds.
Improving your own home ?
Fees, Void periods, Tax and letting agents fees could mean no profit or income at all. 

Thanks for the reply.
My Pension is looking OK, I know it is a tax efficient way to invest money, but I want to see benefits of investment much earlier than 67.  Also, after lump sum, the annuity needs me to live a long time to really see the value, so not sure pension is for me. 

CASH ISAs return is too low.  Shares ISAs are not for me - I already play the markets and Crypto and so far have a better return than any ISA (it is one of the reasons I have the money to spend).

I am spending a bit improving my home.  I live alone now though, so extensions etc are no use for me really.  

I would suggest spending more time researching pensions and stocks and shares ISAs then at least you can make an informed decision.

Pensions are not limited to annuities. You can open a SIPP and are not required to take an annuity. You can also access before 67.  I suspect you are confusing your workplace pension (I suspect a defined benefit pension if you can't access before 67) with 'all pensions'.

A stocks and shares ISA does not give a 'return'. The return is governed by what you invest in (but all returns tax-free).

Unless you have been investing solely in very 'exotic' investments you could have made the same returns you have made playing the markets (but more tax efficiently) investing in the same shares/funds in both a SIPP or stocks and shares ISA. 


https://forums.moneysavingexpert.com/categories/savings-investments
https://forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

Edit: 
Who is offering this holiday lodge scheme offering >12.5% return ?
is it similar to that offered in link below, see comments. I am sure you could easily find many more examples of too good to be true offerings if you looked hard enough.
https://forums.moneysavingexpert.com/discussion/6275401/landal-greenparks-lodge-investment/p1

YellowCarBlueCar

I don't have any experience specific to lodges, but do own a holiday let.

Firstly don't underestimate the amount of work involved in keeping everything up the the standards that guests (rightly) expect.  Think of the upkeep that your own home needs in a year, then add some more to that, as not all guests are as careful of your property as you would be.

Don't forget to budget for wear & tear & breakages, advertising, insurance, rubbish collection, travel, utilities etc.

Are you prepared to 'muck in' at short notice on any changeover, or have someone local who will?  The first you will know that you have a wet mattress to deal with, or someone who's kids have been 'colouring in' your sifa may be when your cleaner arrives, and you need to have a solution that day.  Another thread here https://forums.moneysavingexpert.com/discussion/6278414/damage-to-tv-screen-on-holiday is another example of a changeover 'curve ball' (as well as an eye opener to some guests attitudes!).

With a lodge will you get any capital appreciation of the property (genuine question - I don't know)?  With our cottage, the ROI of the rental income vs property value is pitiful, the only way we'll do well out of the business is through property value rise.  The good news here is that FHLs benefit from entrepreneurs' relief from CGT.

Mizydoscape

Hi OP. I used to work in this area at a park that had lots of holiday lodges all privately owned and either sublet through the company who owned the park or privately sublet. The company also owned several parks across the South of England and Wales.

Personally I would never ever buy a lodge on a holiday park as an investment. They are generally a depreciating asset and you will only have a licence to keep the lodge on the pitch for a certain number of years. You will be subject to increasing pitch fees. There are all sorts of fees and charges and rules over how the lodge must be kept, how often the exterior is painted, what your inventory must contain. The best performing lodges were always 3 bed with hot tub but hot tubs cost a lot to run (gas - They fill them with hot water to ensure they were up to temp on a quick turnaround, electric, water - fresh water for each set of guests) plus the massive use of hot water always wore the boilers out quicker than you would like. Everything the guests broke was charged back to the owner and the owner had little to no say about it.

They are great if you want to offset your running costs by letting it out and getting "free" holidays (ignoring your sunk cost into the lodge itself) but as an investment rarely pay off in the long run.

When you come to sell the lodge the park may have a clause that says you have to give them a % of the sale cost. If you want to part ex the lodge you'll only get book value for it. The market for 2nd hand lodges is awful unless you take a massive hit on the price.

Feel free to PM me if you have any specific questions!

silvercue

Thanks @Mizydoscape

The main one I am looing at has zero charges for selling the lodge at a later date.  I have checked this and it is important if I was to buy.  I also asked about their ability to increase the charges and the contract terms and conditions state they are only allowed to increase in line with inflations.

Understand there will be a lot of fees, I am waiting on a breakdown of those.

The depreciation of the lodge is probably my main red flag at the moment.

Just for the record - I would love to be able to buy a house instead, but the prices are so high!

MysteryMe

Holiday lodges are not an investment. Whoever told you that is a trying to con you.

Please speak to an independent financial advisor. 

Mizydoscape

silvercue said:

Thanks @Mizydoscape

The main one I am looing at has zero charges for selling the lodge at a later date.  I have checked this and it is important if I was to buy.  I also asked about their ability to increase the charges and the contract terms and conditions state they are only allowed to increase in line with inflations.

Understand there will be a lot of fees, I am waiting on a breakdown of those.

The depreciation of the lodge is probably my main red flag at the moment.

Just for the record - I would love to be able to buy a house instead, but the prices are so high!

If your budget is 200/250k cash then that is plenty to buy bricks and mortar in lots of areas of Devon and Cornwall. But then renting a holiday home made of bricks and mortar is very different to renting a lodge out.

If you're still interested I'd tread very very carefully. The park I worked for always produced great figures for prospective owners. The reality is that only a very small amount of owners on the park saw those returns and then only for the 1st year or 2 until the lodge has had wear and tear through it and is trumped in popularity by the new development they'll get permission for. I wouldn't be surprised if after 5 years your 'asset' was worth 50% of what you paid for it when you come to sell.