Cost of starting?

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
Formatted
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Cost of starting?

Post by Formatted »

I'm a farmer and looking at purchasing a larger farm. It has 3 holiday lets on the property. We've previously run a campsite and B&B so roughly know whats involved in dealing with consumers.

I've gotten in touch with a local agent and another online agent who advertised the property for the current owner. The general consensus was they were good rental properties but needed a bit of a touch up and modernizing.

They are a:

4 Bedroom Bunaglow
4 Bedroom Cottage
2 Bedroom Cottage

What should I be budgeting to fill them full of white goods/sofas/kitchen stuff? Are there any good places to buy in bulk?
zebedee
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Post by zebedee »

Hello Formatted and welcome to the forum.
With regard to buying in bulk, probably most of us do not come into that category as we tend to purchase properties one at a time - I may be wrong.
Usual high street companies are often used for white goods. What is more important is what you actually buy e.g. A frost free freezer will be less work to manage when you are busy than one that needs defrosting. There can be advantages to you purchasing from a smaller local supplier as then you can call them out if you have any problems. They may also be prepared to offer a discount if you are supplying all your properties (don't forget to include a very good quality vaccum cleaner, kettles and toaster to encourage a deal in prices.)

You need to consider what sort of market you are aiming for. Will you want to appeal to the higher quality end? This may bring you more money per rental, but also means that what you provide needs to meet expectations in terms of quality and space. Will you accept pets? children? Do you want to be Visit Britain/England graded? You might want to look at the self catering criteria on the Visit England website before you start as it will give you the heads up on what to provide and what to avoid. Also, look at your local competitors - you may want to provide something different to them to fill a gap in the market.

For beds, or mattresses go to Mattisons.

Provide at least double the amount of cutlery and dishes than the number of guests, a dishwasher is essential for many people and you need to ensure plenty of everything so that the dishwasher can be full and they can still have a cup of tea.
People on this forum often use Ikea for cutlery and dishes. This means you can have supplies of spares readily available.
You will get a lot more replies with thoughts from other.
kg1
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Post by kg1 »

As one is a bungalow think about making it 'disability friendly'. There is a growing market for this & not many properties with the right facilities. Definitely a niche market for which you can ask a premium.
Formatted
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Post by Formatted »

zebedee wrote:
A dishwasher is essential for many people and you need to ensure plenty of everything so that the dishwasher can be full and they can still have a cup of tea.
Loads of food for thought there, I hadn't even thought about the dishwasher! I've budgeted about £2,500 a piece to get them up to scratch but now feel like I am woefully under.
e-richard
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Post by e-richard »

Please also don't forget (free, high speed, unlimited) WiFi.

That is probably even more important than a dishwasher
** Richard
PIMS: Holiday Rental Management system
They say we learn from our mistakes. That makes me a genius !
kg1
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Post by kg1 »

e-richard wrote:Please also don't forget (free, high speed, unlimited) WiFi.

That is probably even more important than a dishwasher
Equal I would say!

We sleep 5 and have 10 of everything re plates, cutlery, glasses. Then the dishwasher will probably only be run once a day.
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greenbarn
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Post by greenbarn »

What is the target market? Depending on where you’re aiming there’s a lot of people who’ll pass if a decent sized place doesn’t have a dishwasher, as they’d expect one - along with washing m/c, tumble dryer, separate fridge and freezer, double oven, ceramic hob (unless you’ve got gas) and so it goes on. If you see your target market as towards the budget end, then expectations shouldn’t be so high, but don’t underestimate the speed at which guests’ expectations are growing. e-Richard mentions wifi; a few years ago it was a bonus, now guests will assume you have it.

Related to the previous point - how many bathrooms in each property? A four bed with one bathroom won’t really cut it assuming it sleeps 8. Off the original topic I realise, but it’s worth looking at sacrificing a bedroom to create an extra bathroom - particularly if it can be an ensuite. Less people, higher comfort levels, higher degree of satisfaction, happier guests!

Back on topic: we bought a batch of white goods for kitting out 3 properties (this was 9 years ago) and a local supplier was near as dammit the same price as the online boys, but delivered and carried everything where we wanted it and were nearby if things went wrong. Naturally, they went bust...
If you have a local branch of the Euronics franchise they’ll be worth talking to about quantities.

For kitchen stuff - cutlery, crockery etc, take a very hard look at the catering suppliers and their ranges of plain white hotel crockery such as Porcelite that is robust and not expensive. People like Nisbets, GlobalFSE, and the smaller and more specialised Mr Whiteware (who I think have no minimum order). The quantity you’ll be buying, it will be simpler to deal with trade suppliers and stuff doesn’t tend to get discontinued just before you need a few more replacements for stock.

Sofas - decent leather is hard wearing and looks good for a long time, and a really good idea if you’re going to allow dogs. Cheap “bonded leather” lasts about as long as you’d expect and doesn’t look good when it starts to age (ask me how I know!) If you take the time you can find top quality leather sofas that are ex-display or secondhand, still look like new (or maybe a few weeks old) and sell for a few hundred rather a couple of thousand just because they’re difficult to sell.

With everything, the Holy Grail is “guest proof”. Very few things are in fact guest proof, but a great number are definitely not. Oh, and as simple to operate as possible. It’s getting difficult to find a microwave oven with two knobs - time, temperature - rather than the full Star Trek Bridge, but they are still available and nobody has ever asked us to explain how one works at some stupid time in the morning.

There’s quite a lot to think about when you start.... !
zebedee
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Post by zebedee »

Loads of food for thought there, I hadn't even thought about the dishwasher! I've budgeted about £2,500 a piece to get them up to scratch but now feel like I am woefully under.
If necessary, I would suggest you do one property at a time but do it really well. You would be able to charge more for that one and show guests what you will be offering in the future. You could eve write a blog about the changes.
You are more likely to get retuning guests that way who will look forward to trying the properties which are renovated and get recommendations from guests to others.
Don't be tempted to do it on the cheap unless you are catering specifically for that market.
Formatted
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Post by Formatted »

greenbarn wrote:What is the target market?
zebedee wrote: Don't be tempted to do it on the cheap unless you are catering specifically for that market.
I suppose that isn't actually a question I've tackled yet. I know what my market is but I'm not sure where it fits into the price structure.

The holiday lets are aimed at families who are looking for a week away in Cornwall. We have good access to Truro, Newquay and there are a load of beaches. I also run 'Farm Experience' days as well as lambing courses; having residential accommodation will be something new for this. I do a bit of 'leadership training' as well but I don't think they'll want to stay overnight.

I'm definitely in the middle of the market, lots of young families but then how does that effect what you charge?
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Cymraes
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Post by Cymraes »

Have a look on some listing sites to see what your local competition is charging and the quality of their offerings compared with what you have in mind. That gives you a starting point with pricing.
zebedee
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Post by zebedee »

With families, think about safety and toddlers with sticky hands, so safety gates, fire guards etc and wipe clean furniture and walls. Possibly shorter curtains, rather than longer Ines if the windows allow.

We use a very good quality paint on our walls which will wipe clean without showing any lasting marks.

Definately a dishwasher, microwave, access to a washing machine and tumble dryer but get a coin operated meter for the dryer or else you will be broke.

Will you take dogs and or other pets??? So much to think about...

Get the agents back in and ask them more about the local prices. Ask them what you need to do to charge a higher rate. Use their advice like you would use an estate agent if you were selling as they should know the market well, but don't just get one agent in, ask at least three for their opinions.
newtimber
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Post by newtimber »

As you are a farmer, you presumably are VAT registered. If you have to charge VAT on your rentals and only have 3 cottages, you don't have the advantage of scale and won't be competitive. By the time you've paid 20% VAT, 20% odd to the agent and then the cleaning, business rates, repairs and renewals it may not be worth the effort. Are they suitable for permanent lets instead?
Formatted
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Post by Formatted »

newtimber wrote:As you are a farmer, you presumably are VAT registered. ?
I had not thought of that, surely there must be other people in a similar position?

EDIT Having done a quick bit of research, the income from the farm can come in outside of our LTD company and so doesn't have to be VATed. I will check this with an accountant though.
newtimber wrote:Are they suitable for permanent lets instead?
All have planning permission for Holiday Lets only.
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Post by newtimber »

Formatted wrote:
newtimber wrote:As you are a farmer, you presumably are VAT registered. ?
I had not thought of that, surely there must be other people in a similar position?

EDIT Having done a quick bit of research, the income from the farm can come in outside of our LTD company and so doesn't have to be VATed. I will check this with an accountant though.
You also have to ensure that your turnover from the cottages isn't going to exceed the VAT threshold in any financial year. I don't know where the cottages are located so I don't know whether this is likely.
Formatted
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Post by Formatted »

newtimber wrote:
Formatted wrote:
newtimber wrote:As you are a farmer, you presumably are VAT registered. ?
I had not thought of that, surely there must be other people in a similar position?

EDIT Having done a quick bit of research, the income from the farm can come in outside of our LTD company and so doesn't have to be VATed. I will check this with an accountant though.
You also have to ensure that your turnover from the cottages isn't going to exceed the VAT threshold in any financial year. I don't know where the cottages are located so I don't know whether this is likely.
Cornwall? Not sure totally what the rate is yet.
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