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costs of running gites


matty
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Hello

We intend moving to Normandy inthe new year.  I have been trying to put together a business plan but have not been able to find an average percentage as to actual costs of running 2 2bedroom gites.  I thought around 25% is about right could anyone confirm this or deny. please. 

thank you

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It's not possible to use a blanket percentage. You'll need to work out what your expected income and expenditure will be in a bit more detail. The running costs are likely to be anything between about 35% and 200% depending on how successful you are.  The following model is a very basic  income / expenditure  projection based upon the information you have provided. Use this model for your calculations updating figures in line with your own expectations. Remember however to be realistic.

INCOME (for two two bed gites)

twelve weeks @ 600€                        7200.00 €

six weeks @ 400€                             2400.00 €

four weeks @ 250€                            1000.00 €

misc. income                                      400.00 €

                                                         -------.---

                                                       11,000.00 €

 

EXPENDITURE

hospitality

(flowers/wine/beer etc)            200.00 €

general maintenance                             1500.00 €

renewals / additions / projects                2000.00 €

utilities

(electric/gas/water/refuse etc.)    2500.00

marketing                                             1000.00 €

Insurance                                               400.00 €

accountancy                                           600.00 €

misc.                                                      100.00 €

                                                             ------.---

                                                            8,300.00 €

Operating Profit:                                 2,700.00 €

Percentage running costs

against income = 75%

Don't forget that there will be other deductable costs, including many of your own living costs which can be claimed. The most significant of these will be cotisations, top-up insurance, motoring expenses, other travel expenses (ferry crossings etc.) all of which will amount to another seven or eight thousand Euros.  Then there will also be non-deductable expenses such as taxes fonciere, d'habitation, professionelle, etc.  

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As Eslier says, your % running costs will depend on what your income is from the gites - your absolute running costs excl. utilities are mainly fixed, but your income is variable.

One cost which can't be shown in Eslier's list is the cost of the initial set-up of the gites, which should be taken into account when calculating the potential return on investment (at its most basic, how long will it take to recoup the investment cost - until then your income is zero). 

We worked out that we would be better off putting a lump sum into another form of investment rather than doing gites.

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Thank you both for your input.  I have been trying to explain to my solicitor, there are so many variables, the percentage is almost impossible to come by. But he insisted I try.  It has taken months for me to try to make sense of the french taxation system, education, health, social taxes, etc. etc. so I could explain it to him, then he came up with this new challenge for me at the 11th hour!  I had rough estimates of income and expenditure, as you showed, but it's not enough apparently, I needed the figures from 'an independant source'.

oh well, i'm sure it will all be worth it in the end.

thanks again

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I'm a bit puzzled as to why your solicitor has so much power over you :-)

I could understand a bank or other lender insisting on a viable business plan, but a lawyer?

Quite honestly, saying that you need to provide a percentage like this does not make sense. By all means calculate one from your own cost & income data, but it is totally meaningless to say that any business will always have X% cost:earnings ratio.

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I didn't really explain, I am having to go to court to be able to take my daughter (from a previous marriage) out of the country, so I have to prove I am doing right by her as her father is flatly refusing to even discuss it let alone allow her to go.  The main reason for wanting to go is for her education, but I need to prove myself in every aspect of the move.
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Do you really know that much about french education? I cannot think of much to recommend it just like that. If she is brighter, (preferably than average) and is the sort of girl to fit into the very strict system well, then as with any other child that can do just that, she will be fine. But even for french kids, when they don't fit these criteria, it can be very very difficult.

 

I'm sorry but citing education here as any sort of reason for coming always staggers me.

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Thanks. Didn't mean to pry. I'm interested that you want her to move to France "for her education". If this is because you perceive French schools and the system to be superior to the UK's I hope you have done lots of homework. If you are already very familiar with the French education system I apologise, but I've got nephews & nieces in France and it's not all better than the UK. If you haven't seen it already I suggest that you read this thread all the way through. http://www.completefrance.com/cs/forums/780373/ShowPost.aspx I don't know how old your daughter is, but the comments in that thread have something for all ages. Going back to the Gite question, I think you need to actually have solid information about length of season and local typical price and occupancy data. For running costs use Eslier's template and find out real costs. I'm not a gite owner, although I was looking at it as a serious option. I very much doubt that a 2 gite setup in Normandy would actually be any better than putting the money in a decent interest account. As you are talking of moving in the new year you may already own the premises, so your startup costs would be lower, but it may still make more sense to sell and invest. I'm not telling you what to do because I don't know anything about your personal & financial situation, but I'd be very careful about doing detailed research.
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I'm not quite as pessimistic as TU, but it is true to say that the French education system is largely 'one-size-fits-all' and if your kid is the wrong size, pretty much tough cheese. Provision for special needs at either end of the spectrum is hit and miss to put it kindly.

I would never have brought my kids into the system. The language barrier alone would wreck their chances of making normal progress, they are not good at languages and to try to pick up both a new country and a new language - I bottled that one.

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Always best to err on the cautious side when trying to make predictions about proposed new businesses, but I would suggest that Eslier's cost figures are way too pessimistic.  In your first year or two you might find your fixed costs running at a relatively high percentage of turnover, but soon you should be able to achieve higher sales while increasing costs only marginally.  Of course it will depend on where you are, what your marketing is like, and, frankly, whether you're any good at managing a business.  

Our biggest cost category is Marketing/Advertising.  Our total running costs are comfortably less than 20% of sales, and it's worth remembering that the French tax system treats income from renting out holiday accomodation much more favourably than it does unearned income. 

The net return after tax, therefore, on your holiday cottage business should be vastly better than the net interest you might earn by investing the capital in other ways.  On top of that, if you invest sensibly in good properties, and maintain them well, you can expect reasonable capital growth as well as income.

To earn a resonable living, though, you are likely to need more than two cottages.

Patrick 

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On the other hand, though, Eslier's occupancy figures seem rather optimistic to me, particularly for a start-up operation in Normandy. 12 weeks in total for each cottage is more generally reckoned to be realistic - some people haven't even been achieving that. Of course you can get more, but that's once you are established, and means a lot more effort in sales and marketing (which can count for much more than money alone, but does take up a lot of time, plus expense to advertise in the right places).
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[quote user="Will "]On the other hand, though, Eslier's occupancy figures seem rather optimistic to me, particularly for a start-up operation in Normandy. 12 weeks in total for each cottage is more generally reckoned to be realistic - some people haven't even been achieving that. Of course you can get more, but that's once you are established, and means a lot more effort in sales and marketing (which can count for much more than money alone, but does take up a lot of time, plus expense to advertise in the right places).[/quote]

I'm disappointed to hear that, because we have been considering extending our business into Normandy.  Is just 12 weeks occupancy truly the realistic expectation there?

I think Eslier is suggesting ten weeks for each cottage, though, which seems cautious even by your yardstick.

Patrick

  

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Agree about location being an important consideration.

We are in rural Normandy, but only 2 hours from Calais, and therefore we are able to cater for off-peak breaks as well as the school holidays. We have just one gite, but our occupancy so far has been:
year 1: 27 weeks
year 2: 29 weeks
year 3 (this year): 39 weeks

So it is possible to do well, but you really do have to work at it. Whereabouts in Normandy are you going to be?

Good Luck, I sincerely hope you are successful.  

PS: We too were seriously considering to move out to France 3 years ago (children 9 and 6 at the time), but decided against it, mainly because of the children's schooling. Son is mildly dyslexic and I didn't want to make life even more difficult for him than it already was! We've since moved out of London to rural East Sussex and I feel we have the best of both worlds now...

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I can't agree more stromgly with the location aspect - Normandy's a big place; letting projections vary vastly according to where you are. A property within half-an-hour of the sea, or with a pool, will let twice or three times as many weeks as one at the inland end of Orne or Eure. We're 25 minutes from the coast and over the last fifteen years we've had a consistent 25 - 35 weeks with no special effort. A friend only a further 20 mins away struggles to find 10, with a massive advertising budget (and an above-ground pool). Where is your property, and how are you planning to market it?

Jo

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