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 Post subject: To buy or not to buy??
PostPosted: Tue Jul 14, 2009 6:53 pm 
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Joined: Fri Sep 05, 2008 7:10 pm
Posts: 78
Hi all

I've been reading the threads about people wanting to move to Lanza and set up home there and I'm getting the general feeling is "don't".

However, is that the same advice for somebody who is wanting to buy a property for holiday rental. I know that there are no bargains around at the moment due the exchange rate, but is this balanced out by the falling prices? When the exchange rate picks up will the house prices? (Anyone got a crystal ball).

If I was to buy, I'd be looking at something like a 3 bed villa with pool and hopefully a rental income of about 20k a year. Is this pie in the sky thinking?

At this stage I've not looked seriously into it so I'd welcome and respect any advice.

Thanks


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 Post subject: Re: To buy or not to buy??
PostPosted: Tue Jul 14, 2009 7:20 pm 
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Joined: Mon Mar 31, 2008 2:10 pm
Posts: 1024
Pie in the sky personally.

Look at what others are charging.

You would be lucky to get 20 weeks rented out.
Say a grand a week to achieve your £20k? Unlikely.

Less cleaning costs - proper commercial clean will cost you £70 -100 a week plus laundry plus repairs etc.
Agents costs? They will be looking for 10% min - or even having your ad on an owners website etc

And of course you will be declaring and paying tax on that £20k.....

BUT.....

if you can afford to buy outright - ie. you are not having to borrow or borrow too much then it can work especially if you are prepared to put a lot of the work in.

But don't see it as a way of getting a holiday home on the cheap - either run it as a business or don't bother.


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 Post subject: Re: To buy or not to buy??
PostPosted: Wed Jul 15, 2009 12:33 pm 
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Joined: Fri Sep 05, 2008 7:10 pm
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Thanks for that Foodie.

That's interesting that you think we would only be able to rent out for 20 weeks. It that because of the current state of the economy or is that a benchmark generally?

As I have said, we have not sat down and spoke about this properly as a family so we are a way off doing it yet, but when the time comes we probably will not be needing a mortgage. That being said, I don't see it as buying a holiday home on the cheap (because it obviously isn't) but more of an investment if we can hold onto it for a while. However, I would not want it to sit empty for 7 months of the year.

Also, when you say 'do most of the hard work ourselves', what do you mean by this? Are you meaning take away the need for an agent and advertise it independantly? We obviously wouldn't be able to do the property management side of it as we are not planning to live out there (although if I had my way we would!!!). If I could guarantee 85-90% occupancy then I would certainly be running it as a business.

Again, thanks for your advice.


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 Post subject: Re: To buy or not to buy??
PostPosted: Wed Jul 15, 2009 12:47 pm 
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Joined: Mon Mar 31, 2008 2:10 pm
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Well Jan to April you will be lucky to get any - especially at £1000 as you could go AI including flights for £500 max at the same time.

Well look at the dates. Xmas and New year - 2 weeks tops, Easter hols 2 weeks. Various half term weekends 2 weeks. Summer hols 8 weeks.

Thats 14 weeks "peak" season - after that anything else is a bonus.


I just googled "3 bed villa lanzarote" 1st result was for owners direct and a luxury 3 bed with pool

http://www.ownersdirect.co.uk/canaries/C961.htm

£545-£645 was there range.

So going to be pretty tricky in current climate to get £1000 a week.

The higher the occupancy the higher your running repairs and overheads and also the less likely you will want to use it. When we rented a holiday cottage - always felt a bit "grubby" since we stopped renting it is so much nicer!


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 Post subject: Re: To buy or not to buy??
PostPosted: Wed Jul 15, 2009 4:01 pm 
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Joined: Tue May 20, 2008 9:14 pm
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i'd hang on to your cash ,the rental market is very fierce at the moment ,if u look on owners direct u will see a lot of properties with lots of vacant weeks ,after little research i found and booked 2 weeks in villa for £600 in september :D


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 Post subject: Re: To buy or not to buy??
PostPosted: Wed Jul 15, 2009 6:08 pm 
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Joined: Fri Jun 05, 2009 11:21 am
Posts: 93
Location: Lanzarote resident
It depends upon what market you are aiming at, which will depend on the location and quality of the place you buy. The cheaper end is saturated and a house bought for say €200,000 would only yield a renting potential of €8,000 a year. That´s as good a return as you´d get with the cash in the bank at the moment and in my book worth the risk, but if you need to get a mortgage then no.


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 Post subject: Re: To buy or not to buy??
PostPosted: Thu Jul 16, 2009 12:48 pm 
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Mmmm... all interesting stuff and definitely food for thought.

I had calculated the £20k at 40 weeks on an average of £500 per week. I think you'd need a very high end property to be charging £1000 per week. Certainly one I couldn't afford!!!

We're coming out at the end of August, so will see if I can put some feelers out and get more advice.

As I have said before, we prob wouldn't need a mortgage, but it's still quite a big thing for us to do as we are generally fairly steady people who normally go with the flow! I just fancy a change - I'll prob bottle it in the long run though!!

Thanks for all you comments.


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 Post subject: Re: To buy or not to buy??
PostPosted: Thu Jul 16, 2009 3:14 pm 
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40 weeks would be very optimistic - plus the wear and tear would be horrific. Most hotels would struggle to get 90% occupency.

If I was looking to do it - I would just look to shift the peak season slots say 12 or 14 weeks and enjoy it myself the rest of the time!!

Or stick it in the bank!! Combination of cash ISA and many banks doing 5% deals again.


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 Post subject: Re: To buy or not to buy??
PostPosted: Thu Jul 16, 2009 5:13 pm 
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Posts: 105
The private self-catering holiday market has shrunk alarmingly. As has been stated, you'd be lucky to get 20 weeks pa these days. A guy I spoke to who does property management and maintenance says that bookings on the villas he looks after are down 50% on last year. You can't use holiday lets to pay a mortgage anymore-and the rent would probably be too expensive for anyone working in Lanz.


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 Post subject: Re: To buy or not to buy??
PostPosted: Thu Jul 16, 2009 8:01 pm 
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A lot of statements here from people who haven't a clue what they are talking about, and really shouldn't be giving advice to people about such an important decision.

There are villas which rent out for 10 weeks or less in the year and those which rent out for 50 weeks, irrespective of whether they are at the higher or lower end of the market. It's a case of purchasing the right villa, coupled with the right marketing. You need to know what you are doing, that's all.

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http://www.luxuryvillaslanzarote.com Lanzarote's Finest Holiday Villas


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 Post subject: Re: To buy or not to buy??
PostPosted: Fri Jul 17, 2009 7:20 am 
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Cheers for that. Maybe an example would be helpful?


Did you realise that you can obtain pieces of string in different lengths......


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 Post subject: Re: To buy or not to buy??
PostPosted: Fri Jul 17, 2009 11:12 am 
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Joined: Sun Feb 24, 2008 6:45 pm
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foodie wrote:
Cheers for that. Maybe an example would be helpful?


Did you realise that you can obtain pieces of string in different lengths......

...... and different thicknesses ?
That's brilliant.

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 Post subject: Re: To buy or not to buy??
PostPosted: Fri Jul 17, 2009 1:18 pm 
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Joined: Fri Sep 05, 2008 7:10 pm
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It looks like it goes back to Foodie's original advice in that if you put the work in, you get more back. As with anything, if you market it well, you will hopefully get a better return, but if you get a company to do this for you, this will obviously eat into the profits.

I don't think it would be worth buying one to rent out for 12 weeks as I wouldn't be able to utilise it for the other 40 weeks due to work/school commitments. I could just leave it in the bank, but then there is a temptation to spend it on things you don't really need and before you know it, it's gone!

As always, thanks for taking the time to reply. It's all interesting stuff and certainly food for thought.


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 Post subject: Re: To buy or not to buy??
PostPosted: Fri Jul 17, 2009 2:24 pm 
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LV mentions 2 critical points – the right Property and marketing, though knowing the right property depends on understanding demand and that requires local knowledge and experience.

Ole


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 Post subject: Re: To buy or not to buy??
PostPosted: Fri Jul 17, 2009 3:36 pm 
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True enough. It's also true that rentals are affected by outside forces beyond the control of the owner. Like the weakness of the pound and the fact that the recession means that there's less money around.


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