Boscoe

Saw this a while ago discussing the 'What ifs' http://www.financialdirector.co.uk/financial-director/news/1744911/the-effects-uk-business-euro-fails basically the strong euro zone countries (Germany, Finland etc) 'new' currency would appreciate against sterling but the weak would depreciate - “The currency movements could be very large,” says ING’s Bright. He sees Spain, Portugal and Ireland devaluing 65 percent against sterling, Italy depreciating 45 percent, France 40 percent and Benelux, Austria and Finland falling 30 percent against the pound.  

If it crawled away it wasn't a snake... Sorry couldn't resist :)

Just a quick question on the insurance side of things... If a friend is doing you a favour (for no money) and has an accident then would there be trouble? Or am I to believe that the only person that can work on my house without papers is me? BTW - I was quoted 3000 euros to paint my holiday home in the SW by a French artisan, he also insisted that this price was for cash (no receipt) the job took me four days and wasn't difficult, the whole house is white (ceilings and walls so no cutting in even).

There aren't that many I can find with it, but they all appear to have pools and views, not sure if this is in the criteria though...

This is new? I Know it was discussed as 'possibly but not in my lifetime' here http://www.completefrance.com/cs/forums/1/1829391/ShowPost.aspx However as now it look like it has materialised, does anyone within the GDF system have the criteria for attaining this classification? http://www.gites-de-france.com/gites/smileservice/recherche?langue=439&produit=408&LREG=2&ENV=H&RAYON=10&COMMUNE=Town&CODE_INSEE=false&NBEPI[]=%3D5&ITEA=0

We’re back from our ‘spying trip’ and it was to say the least, eye opening!   First the bad news, the buyer for our existing French house hasn’t been able to get a mortgage so it’s now back on the market, it wasn’t on long last time so hopefully it’ll sell quick and the house we’ve seen will still be available.   Thank you all for the responses, as always some great comments and things to think about, sorry this is a lengthy reply but as you all took the time to post and offer advice I believe it would be ungrateful not to reply in full…   Babbles, (great comments thanks!) having done some spying (competitor analysis for Dordogne Landlady) I have to say you are indeed correct, it’s not that any of the places we stayed were terrible, but we couldn’t find anywhere that offered that bit extra. We stayed at places ranging from 60 – 90 euros and really there was little differentiation between them with regard to standards of accommodation or their ‘offer’. In fact in our opinion the best place we stayed for standard of accommodation, breakfast, dinner and location was run by a french couple and were at the lower end of the bracket.   I stood in the middle of the largest ‘town’ in the area we are looking and did a small straw poll survey of visitors (I have to admit with my not perfect French I did sway towards the non French as much as I could) What I discovered is that  many of the non French found their accommodation on the internet, and although generally happy with their accommodation, did express surprise at a lack of  choice for ‘better level’ accommodation, be that CDH or Hotels and indeed said that within reason they would have been prepared to paid more for better. The French I talked to were generally happier with their accommodation, but those staying at a CDH put a high priority of how they perceived their satisfaction regarding their stay on the local knowledge of the host, in fact 9 out of the 11 French I talked to mentioned this against 3 out of 19 non French.   So although I think it will raise the cost of the renovation and obviously the COS we do now feel that this is the way we will go. Having looked at the plans again of the proposed property we will look at offering three suites and two large rooms. It will mean loosing the main salon for a bedroom, but we have a smaller area that will comfortably seat 6 that has a fireplace in addition to the dining room so this isn’t a massive compromise.   Quillan & Babbles regarding occupancy – I understand, and take on board all your comments on this however we did speak with two lots of English owners and (you’ll be happy to hear Dordogne Landlady) told them what we were looking to do. We found them very helpful and open, one offering his help in the future if we do go ahead and advice ‘anytime I want it’ over the telephone. Both owners said their main season was Summer and expected to be full from July through to September with September being a great month as many ‘older’ visitors stayed this month as it was less crowded as the schools had started back and it’s also a bit cooler if you are walking in the mountains.   They both also said that the winter season was much shorter than they had anticipate but have high occupancy Christmas/New year, in February for the school holidays (and a week either side) and at weekends.   Both claimed a ‘normal’ occupancy of around 60% (more in a good year) so I think that is around the level we’ll target, however as advised we are working our breakeven lower at 33% and with the higher price we hope to charge this is doable.   The Pyrenees is defiantly a tourist destination and other than the obvious attraction of the natural beauty, skiing, walking, cycling etc there are many other touristy attractions, wild life parks, aquariums, adventure parks, Lourdes etc etc all with in a 20 minute drive from the place. With this comes competition but we did have trouble getting into every place we wanted to as they were full and this is obviously encouraging. Also each place we did stay were either full or had just one room left.     Will, an accountant is already in the costs, but on your next point you’re right I was trying to squeeze the business idea into the AE regime, the reason being the research I’ve done tends to throw up some nasty flags regarding cotisations requested based on nothing but a figure someone has plucked out of the air. I have yet to talk to another Accountant but I will of course, my current thinking is to  suggest to him the idea of starting as an AE and then ‘upgrading’ hopefully when we see the turnover is possible and that we have our offer and pricing right. This will also allow us some real figures to run some numbers to assertain which regime will be best for the business.   Quillan –Renovation. The place we have in mind is actually structurally sound with a good roof and floors. The windows are all solid although they are only single glazed to replace them all with double glazing will be a major cost and I’ve still not decided if this is something I’d do, only one of the places we stayed had double glazing although I’d hate to think what their heating bills are in winter! It’ll need rewiring and re plumbing and a new kitchen. We wouldn’t need to knock down any walls but would need to erect some internal partitions for bathrooms etc Other than that it’s decoration and furnishing. I’ll do much of the non technical work myself and we have budgeted for the time the renovations will take. I’ll be honest I don’t have any where near 1500 per m2 budgeted but I have done renovations before and can’t imagine how it could cost that much unless you are going from a ruin!   I found this site http://www.france-renovation.com/costs-of-property-renovation/16 and I’m going with his estimates plus 30% (+10% contingency) as the prices are a few years old.   Dordogne Landlady – I used the term ‘spying’ tongue in cheek. In every business I’ve been involved in this is standard practice… IKEA call it ‘competitive shopping’ Motorola call it ‘competitor analysis’ Swissotel called it BCTA (brand, cost, trend analysis) In my former life I’d receive a twenty page report every month on my competitors, what they were doing, why they were doing it, how much they were spending and what return they were getting, the report was compiled by a large market research company and cost thousands… it’s business!   The Dordogne is full of B&Bs, more so than the Pyeneese, however some market research has indicated to me that the visitor numbers and the extended season justify an investment, maybe you should have done some?   I’m not willing to invest a significant amount of money and time into a business that I haven’t done my research into, succeed or fail at least I will be making an informed choice. Having said that I was open with the people I stayed with when appropriate (ie, they actually talked to me) and as I have said the results were positive, we will introduce ourselves around and try and build relationships (that goes without saying) however it’s still business and they will still be competitors.   A small anecdote for Dordogne Landlady A client’s competitor once organised a conference at considerable cost, flying in delegates from around the world. On behalf of my client I bought all the advertising billboard space around the venue, booked the foyer of the venue for an expo of their products and employed people to hand out merchandise around the venue area. This gorilla marketing cost my client 10% of what it cost the competitor but the conference looked like my client had put it on. Many press reports even credited my client with the event. It’s business! Soon after the competitor sacked their agency and asked us to represent them.   I’m not saying I’d employ such tactics with the CDH, we want to become part of the community and I’m sure I’ll be referring gusts to other CDHs if we are full and would like this to be reciprocated, but staying a night it their place to check out what they are doing is hardly underhand… Quillan has the right idea, you gained the experience, charge for it!     Crazyfrog – We are looking at the end of the valley, before the climb into the mountains. I’m not thinking it’ll be a 5 month season, I’ve skied there and I know it quite well. Often the ski station is where you get the cable car up to the top and this can be another 30 minute trip. As Quillan says I’m certainly not just looking for Brits, the French are probably the biggest market (according to my research at least 50% with other nationalities taking up the other 50%) Interestingly I’m told there are as many Israelis as there are Brits, so I guess I’ll have to get my Kosher cookbook out!       Thanks again all, any feedback welcome.

Thanks all for your comments, we are off on a spying trip for a few days staying in a range of B&B's around the area. I'll respond more fully (and probably ask more questions) when we get back... Have a good week end all!

Firstly I’d like to say a big thanks, We’re considering buying a place for a B&B and all your posts/opinions/experience have been invaluable… Even having read te post we are still thinking about buying a Chambers D’Hote J… I think I’ve read every post in this forum going back 3 years and it’s been an eye-opener! Special thanks to Cassis and Quillan for some insights I’d rather have not ‘seen’!   I hope none of you feel I’m coming here with daft questions as I think I’ve read everything I can that is available  it is with this caveat I post the following…     Please pick holes in the following…   We are looking to buy a house in the Pyrenees to turn into a CDH…   We have enough capital to buy and renovate to a high standard.   The site is perfect for skiing in the winter (accesses to five stations between 5 and 20mins drive) and great for walkers/cyclists/ etc etc in the summer   Research shows me that I can charge an average of 65 Euros per room for four rooms with a family ‘suite’ going for an average of 95 Euros given the standard we will present and the fact the property is VERY picturesque and photographable. My background is in marketing so I’m confident wel’ll do as well as most and hope to do better.   The season will be…   Winter -  mid Jan to mid April for skiing Summer – June-Aug for walking/cycling/taking the air etc   I’m looking at a 53% occupancy rate for the purpose of break even analysis.   My wife is a classically (French) trained, and experienced chef  (head chef in some top hotels around the world) and combined with the ‘quality’ rooms and accommodation we envisage offering a 4/5 course evening meal for 30euros per head, with wine bought separately. This is our ‘niche’!     We are looking at at 50% take up on this offer (but see the point below regarding secondary AE) We have priced these menus in France and will make 65- 70% GP on the Table D’hôte ie 21 euros per person. We will offer wine for sale at minimal GP.   This all equates to a turnover of around 80,000 Euros.  I know what a lot of you will say – “good luck with that” however as we have two seasons and just for this exercise please stay with me…   If we do better then our estimates we will be turning over more than 80K Eureo and therefore will get into another regime.   To do better that the 53% occupancy we realize we will have to do something special… we have arranged with a number of friends/contacts many ideas for special events which we are confident we will fill (and we have been told we will fill by the people running the courses as they have been asked many times to do such).   These include   Ski and snowboard weeks. Mountain bike and cycling weeks Artist week with an internationally acclaimed artist. Photography weeks with a photographer who has been published world wide Cooking weeks with our choice of chefs from around the world who owe the other half a favor (and there are many!) Etc Etc Etc… Basically we’ll be calling in a LOT of favors!     Now this is where the advice comes in… I’m thinking that one of us can be an AE for the CDH (lets call them No1) and another can be an AE offering the ‘holidays’ (lets call them No2) whether that be a weeks skiing or a weeks photography course No2 can ‘buy’ accommodation from No1 for their holiday clients at a discount rate, keeping No 1 under the 80K turnover limit. As No2 will be offering ‘accommodation and food’ to guests, they will therefore be applicable for the 80K turnover limit even though the accommodation isn’t their own? (big question!)   As ‘No2” will be offering holidays at half board for a week at a time, our income will grow substantially as there will be in effect a 100% take up on the food all costed in at  a 65%-75% GP (before any of you laugh at this, this is the difference between what a trained and experienced chef can do and an amateur, no offence meant!)   So we’d keep the CDH income less than 80K by using No2 and ‘buying’ rooms from ‘No1’ at whatever discount was needed (and possibly others). No1 will be defiantly in the AE  <80K tax regime as they are offering “accommodation and food” No2 will also be in the <80K AE tax regime as they will be also be offering “accommodation and food” even if it isn’t owned by them?   So our plan is as above. We have talked to a French accountant who said ‘it is OK‘ but I’ll be honest he didn’t look like he cared if we either got rich or thrown in jail for tax evasion, and didn’t fill me with confidance, hence asking here if anyone can pick holes in the plan?     I know I’m thinking big and many of you will laugh and tell me I’d be lucky but I’m looking at the up side and how I can do this without paying everything in tax.  Possibly I’m asking if any of you have tried and succeeded in associating two individual AE statuses together to your benefit?   Thanks in advance…          

It basically comes down to this... If you were a reserve manager which would you rather hold, Sterling or Euro? The Eurozone has it's problems but Britain's are arguably much worse.

Sorry, but I don't understand why people don't hedge against the exchange rate???

Mark Deans, dealing manager at the brokerage Moneycorp, agreed: “If the fears of a hung Parliament were to come true, sterling could fall even further, with a risk of us reaching parity against the euro.” My guess is that we'll reach parity before the election...

A VERY risky strategy... This all works out if 1. You believe the pound is at it's lowest it will go against the Euro and will stay like that for 20 years 2. You can time the loan change to GBP and have a crystal ball to let you know what the exchange rates and interest rates will be in the future. If it goes up (and stays up for the length of your loan) then yes, no problem and you can make some money but if it then goes back down (and lower) you're in real trouble and the bank will be margin calling you... I'll keep it at 100% LTV and round numbers to illustrate, I have also not taken into account any capital appreciation although this is never guaranteed short term Year 1 (eur/gbp @ 0.87) Take loan in EUR 100,000 eur loan (87,000 gbp) 100,000 eur property value (87,000 gbp) Year 2 ( eur/gbp @ 0.7) Decide to convert to GBP loan 70,000 gbp loan (100,000 eur) 100,000 eur property value (70,000 gbp) A just a few possibilities... Possibility 1 Year 3 - 5 (eur/gbp @ 0.7) 70,000 gbp loan (100,000 eur) 100,000 eur property value (70,000 gbp) The Euro stays at 0.7 and you are 'fine' you bought a house in France and instead of borrowing in GBP you borrowed in Euro so 'saved' yourself 17,000 gbp... however your collateral (the house you bought) has devalued by 30,000 in gbp terms. Possibility 2 Year 3-5 (eur/gbp @ 0.87) 70,000 gbp loan (80,500 eur) 100,000 eur property value (87,000 gbp) Hoorah... 'made' 17,000 gbp wasn't I clever, that is until the exchange rate turns against you (see point 3) Possibility 3 Year 3 - 5 (eur/gbp @ 0.5) 70,000 gbp loan (140,000 eur) 100,000 eur property value (50,000 gbp) The bank calls you and asks for you to give them 20,000 gbp as the loan is now for more than the property is worth or they will foreclose on the property. There is also a possibility that GBP devalues again before you get to refinance, a run on the pound isn't out of the question is it? Then you end up with a property that is worth more in GBP terms but you can't afford the mortgage, taxes, insurance etc etc Another thing to consider... What happens if the housing market crashes? With a property in valued in EUR and a loan in GBP, more risk of a margin call as multi currency mortgages have small print allowing for revaluation. Also interest rate fluctuations over the next 20 years and I'm not going to get into the risk of deflation :) It amazes me why people would try and play currency markets with what is basically an illiquid asset and a leveraged one at that... There are much better (and safer) ways of betting on the price of the EUR/GBP including leverage. I know more than a couple of people who have been stung VERY heavily on multi currency mortgages including margin calls by banks when the pound devalued. I live by the rules - Keep your assets and liabilities in the same currency and if you can't hedge against an FX change. If you want to bet on FX then I do it with cash not property!

No, £10 but I wasn't using it as purely a hedge :)

velcori, Some points 1 The ECB also say they won't 'save' Greece but I don't think anyone believes that if push comes to shove they will. 2 "both stated emphatically that neither the US or GB would lose their AAA rating" should read "both stated emphatically that neither the US or GB should lose their AAA rating" and important difference 3 The agencies may have indicated they'll wait until the election result, but only last week S&P downgraded British banks and said the following in a statement - “We no longer classify the United Kingdom among the most stable and low-risk banking systems globally. “This is due to our view of the country’s weak economic environment, the reputational damage we believe has been experienced by the banking industry, and what we see as the high dependence on state-support programs of a significant proportion of the industry. "We view UK economic risk to be high relative to other major, mature banking systems. This reflects the sharp decline in economic output and our expectation that the unwinding of the high level of debt (of the government, households, and certain industrial segments) will weigh heavily on relative economic growth prospects and banks' financial performance.” Hardly a note of support! In May last year S&P said there was a "one in three" chance that Britain's rating on its sovereign debt might be cut. Is the UK economy in a much better position nine months on, or has it's debt increased? Moody's said the UK would 'bend but probably won't brake' the AAA rating (early December). Fitch gave a very blunt warning to the UK that they risk losing their AAA status unless they map out a clear path to budget discipline (late December) and as far as I know no further indication has come from S&P, so I'd be interested if you could post some links regarding your claim that the agencies have 'frequently' stated that they have no intention of changing the UK's credit rating. 4 "GB Q4 2009 growth was an estimate. The initial figures always are. Expectations are that the 0.1% figure will be revised upwards to 0.4%" Expectations by whom? With the latest retail figures and then the figures today for the non EU trade deficit being much lower than expected in Q4, who is expecting the figure to be revised upwards? (edited to address each point)

If there is any indication from the BOE that interest rates may be raised to ward off inflationary pressure, it could help Sterling, although I think this is unlikely.