Large holiday lets (7+ bedrooms)

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.
Rosieblue
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Joined: Sun Jul 28, 2019 9:52 pm

Large holiday lets (7+ bedrooms)

Post by Rosieblue »

Hi all

We’re thinking of a move to the Peak District from London to be nearer family and for a safer environment for our 2 year old.

We’re going to look at a couple of large holiday let business for sale. I wondered if anyone has any thoughts on the viability of a large property like this versus a set of smaller properties? Which will be easier/make more money!? (We’re drawn to a bigger business as that’s what we’ve stayed in a lot over the years with friends and they seem hard to come by; plus possibility of diversifying as a wedding venue/yoga etc. Although set of smaller properties may be easier for us to live onsite which brings me to my next question...)

We’ll thinking ideally we’ll live onsite if possible; does this put guests off?

As a couple can you make a decent enough living off this - we may be able to be mortgage free on a few smaller places but will need a business loan for anything really big?

Are we better to buy an existing business or to develop one ourselves; it looks potentially to be quite a premium to purchase an up and running establishment but of course it’s tried/tested and making money from the word go?

All quite subjective questions but would love to get some ipit from people in the business!
Sunbeam
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Location: Spain

Post by Sunbeam »

I would suggest that a larger property gives you more of a niche market - fewer 7 bed properties to compete with compared to properties with fewer bedrooms

I would say that it’s easier to maintain one large property than two smaller ones - one large kitchen rather than multiple smaller kitchens for example

Alternatively a smaller property that is very luxurious may command a higher rental rate than a large property that is more basic, and smaller is easier to maintain.

Perhaps with a large property, if all or most of the bedrooms are ensuite, you would have the flexibility of renting the whole house out or doing bed and breakfast in low season - and may be more appealing to rent out for retreats.

I am in Spain so have no idea about the market in the Peak District - but guessing walkers could fill low season and big family get-togethers at Christmas, school holidays or adult get togethers mid season.

If you are confident about setting up a rental business from scratch, buying a property that needs renovation means you can make it pretty much as you want - with your own living space appropriatey private from the rental house. Cost of renovations may bring the cost up to the cost of buying a ready-to-go property but you have it as you want.

If you are moving lock stock and barrel - being onsite is a bit more stressful but much easier to manage your business - and if this is your only source of income would suggest that the stress is par for the course of running any business - despite your friends and family thinking that all you do is a bit of cleaning before guests arrive!

Just random thoughts and not addressing all your points but hopefully some food for thought.
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GRL
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Post by GRL »

I'd look at similar large properties in the area close to where you want to move to. If they are fully booked then there's more chance you will also get bookings - if they are full of lots of empty weeks then either the market for that size of property is saturated or the area is not popular with large groups.
Rosieblue
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Post by Rosieblue »

Thanks both for your input; there isn’t much of that size near. Which makes me wonder if it’s needed there but the places we’ve looked at are generally full for the next 6 months save for an odd weekend here and there?

Think we’d love to do our own place but there’s not much that fits our needs available so might be led by that. Maybe we do a ready made model first to learn the ropes and then longer term swap to something we develop...

Many thanks
SPJ
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Post by SPJ »

I think if you are on site far from putting people off it gives you the opportunity to give excellent service. You can deal with any problems as soon as they occur and also you can give help/suggestions if people want to know what to do / where to go.

I wonder if several small places rather than one big gives you more flexibility? If you have four cottages say, each with about 4 person occupancy then if things are slow is it not better to have at least one or two of the cottages occupied rather than an entire large house empty?

Also, I may be wrong, but it seems to me that the large groups are where more problems occur because there can be a sense of "entitlement" - ie "I've spent all this money and I can do what I like" or more irresponsibility - large groups can get very silly! I'm not suggesting that's how you and your friends behaved :D but it has been known!
Drax
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Location: Yorkshire Dales

Post by Drax »

Re. living on site.
We live approximately 300 yards from our FHL so though we technically 'live on site' we are far enough away not to be intrusive to our guests.
One of our neighbours lives next door to her FHL and she admits she is always checking on her guests. In fact I have been 'horrified' at the lengths she goes to to rectify her guests 'perceived misdemeanours' whilst they are in residence.
I suppose If I lived immediately next door to our FHL I may be tempted to continually check on our guests (natural human nosiness perhaps).
Thus, there is a happy medium between living on site and off site.
Keep your powder dry.
SPJ
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Post by SPJ »

Heavens Drax! We're about 100 yards from our guests. Far enough to give them (and us) privacy in their own garden and terrace, but near enough to be on hand if they need us. I must say I'd hate to have our guests cheek by jowl.
LotBoy47
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Location: SW France

Post by LotBoy47 »

We’re about 25 metres from our gites and I go out of my way not to disturb or intrude on our guests privacy. I even try to be invisible when carrying out pool checks during the day.
SPJ
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Post by SPJ »

LotBoy47 wrote: I even try to be invisible when carrying out pool checks during the day.
Love it!
Mind you there are times when being close is so useful and whilst "reprimanding" our guests is something I hope I never do, a quiet word was essential last summer when I heard the chink of a glass beer bottle at the pool edge!!!!
Rosieblue
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Post by Rosieblue »

There’s a lot to think about! We’re probably going to be led somewhat by what there is available in terms of being on site or not I think...

If you’re buying an existing business is there a “standard” way of valuing it- something like the property value itself plus an amount to reflect current bookings and future potential? If we need financing the bank will want to be sure it’s viable of course but otherwise how is such a business valued?

Thanks so much to all for your help!
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greenbarn
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Post by greenbarn »

There doesn’t seem to be an overall “standard” way of valuing, as it’s often a mix of property value and revenue - both proven and potential.
Revenue can be very dependent on lifestyle choice; an outgoing owner may have run it as a full on business - more likely with some sort of on site presence and a few properties - or as a “bit of a hobby”, or somewhere in between. A purchaser might have a completely different lifestyle wish, and maybe a different target market.
Current bookings aren’t necessarily a guide; if an owner has their rental business up for sale they are very likely to restrict how far ahead they take bookings, maybe only 3 or 4 months, to avoid having to cancel bookings if any new owner has different criteria (simple example, new owner doesn’t want to accept pets, outgoing owner has an order book full for months of guests with 3 dogs - you get the idea!)
It’s a situation we’re in right now; we have our house, and barn conversion into three high quality lets in our grounds and have recently put it up for sale; it’s a relatively small market so it’s completely unpredictable as to how long it might take to sell, so I’m only opening bookings a few months ahead until my crystal ball comes back from repair.
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greenbarn
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Post by greenbarn »

PS - another thought about being on site. It can mean you can live in a fabulous location in a lovely house that you couldn’t justify buying without the business aspect. That really is buying into a lifestyle - that’s what we did around 15 years ago (no regrets!)
Rosieblue
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Post by Rosieblue »

That’s super helpful re valuation, we’ve got a couple of places to see at the end of the month so hopefully we’ll get a sense then of how they’ve been valued (a lot on the income we think...)

It’s all very exciting- if not a little daunting!
Rosieblue
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Post by Rosieblue »

We’re now scratching our heads about stamp duty costs - if it’s a business do we pay stamp duty; do we just pay stamp duty on the property value and not the additional value built in from the business? We’ve tried checking the UK Gov website but it’s very complicated...
Drax
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Joined: Thu Jul 21, 2016 4:36 pm
Location: Yorkshire Dales

Post by Drax »

Hi Rosie,
When we bought our 'second home' 8 years ago I had to pay Stamp Duty because it is not classified as your main home.
I think I paid 3% of the value. Also it was not a holiday let then, that came later.
It may be prudent to consult a solicitor to clarify the situation.
Keep your powder dry.
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