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How many gites to survive?


timc17

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My wife and i are thinking of buying a large house with two/three attached gites as a way of earning a living.

We would need to borrow approx 125k (euros) to fund the purchase. Obvious question - would the income from the gites be enough to cover the borrowings and likely running costs? We already have an income from the UK which is enough to live on but nothing more.

All comments positive and otherwise welcome.

 

Tim

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I was working for an Estate Agent last summer and an English family phoned with a similar query.  They were told not to even think of coming to France to make a living from a gite business without some sort of other back up.  She suggested that three gites would be the absolute minimum that would be necessary to eke out even a small income.  We have a gite that we could let out three times over for the main two holiday weeks in the summer, the rest is a struggle.  We usually let a maximum of nine weeks during the summer period.  Luckily for us it is just a hobby as we have another source of income.
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Unless the property in question is already run as a gite business, my usual view is that it is impossible to predict what income you can expect from your investment.  Some gite owners claim to be able to rent for only 12 weeks a year, another person I know says they did 20 weeks their first year from scratch.  Seems to depend on location, quality, price, competition, marketing ... averages mean nothing. 

If the net return (after deducting your labour costs, interest payments, maintenance, etc.) is likely to be under 10% of capital investment then I'd say stuff it and find a better use for your dosh.

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Hi I would not wish to be associated with doom and gloom for there are positives.  But with respect and without wishing to be anything else than helpful then go to the library and obtain one of the standard text books on economics.  It is in France pure supply and demand and history is littered with new entrants to the market and what happens is that the commodity price drops and therefore it is a struggle to fund 125000 euros.  Say the rate is 4% pa then interest without capital repayment is 5000 euros per year.  Then say 15 years to repay the capital plus insurance on each of your lives?  Plus commitment fees plus Notaires fees plus plus plus.

Finally may I suggest that you carry out research and detailed research you may not find it is for you.

rdgs

 

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First of all it depends where you will be located.  Much of France seems to be saturated with Gites and B&Bs but some parts are not.  This can make it very tough for new entrants if the area is already saturated.

 

So first piece of research.  Do an internet enquiry for your area and see how many places are still available (end February)  for July and August.  None or very few - then possibly looking good.  Lots - then you are going to need some very special unique selling point to draw the punters in.

 

Let's assume the news is good, then broaden your search to June and September - how many free places now available?  Keep going until you have the picture from Easter through to the end of October - anything outside of these periods is a bonus unless you are in a skiing region - in which case you need to reverse the logic somewhat with peaks in winter and maybe July August and the quiet periods from Easter to June and September to just before Xmas..

 

Now you have a view of what the period is where you can expect good custom.  Lets say July and August good, the rest of the year looks like plenty of availability - so not good.  Lets also take Llewncelyn's mortgage terms 125k over 15 years - repayment will be around 1300€/month.  So for an 8 week season you will need to make roughly 2000€/week - and this will only just pay of the mortgage - no monies for repairs and replacements and no money to pay for your lifestyle. 

Also 15 years is a pretty poor Return on Investment, but you could also factor in the unknown increased (hopefully) value of the property.  So 2000/week divided by the normal rental price for the period in your region will give you the number of gites you need.

 

If at the end of all this it still looks attractive, then good luck.

If not then I have saved you a lot of aggro and am prepared to accept yoou kind consultancy payment.

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My biggest grump is is that  some dont reply to emails. I asked for a 4 month stay and never got a reply.I am still waiting.I even tried a second mail..I wonder if they want my money or is this  just bad  managment on the website that they pay to advertise one ?...maybe I just picked a bad one.
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Thanks for the responses so far.

We are looking to buy near to St Jean D'Angely in the Charente Maritime which is where we currently live. I've been doing exactly what andyh4 has suggested - checking availability of existing gites on websites such as holiday rentals. The picture is somewhat mixed , some gites are pretty full between June and August while others are still available. This leads me onto another question. It's now the end of Feb so are the gites that currently show availability in the peak months likely to stay empty or do people really leave it very late to book their accomodation?

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Yes, it is possible to make a decent living from a gite complex and pay back a mortgage - just like it is with any other business.  The question is, do you have enough money to invest in the first place to give you the sort of business that will generate enough income ?  If you are going to borrow money to finance the purchase then you really are going to need an established business with a track record of healthy annual accounts. To make the sort of money you will need, gite complex businesses don't come cheap.  Take a look at http://www.jacwoodestates.co.uk/ and you wil see that they currently have 19 gite complexes on their books at over a million euros. This is the sort of money you are likely to need to invest to be assured of a decent income from day one.

Andy has given you some good advice but it is still a risk if the business is not already up and running.

I would like to explode a couple of myths:

Don't worry too much about "over saturation". The best tourist areas will always have a lot of competion but it can also be an indication of good potential.

Don't get hung up on how many weeks a property is let for - how much income it generates is the important factor. A smaller number of weeks at a higher income is preferable.

The most important factors to consider are, in this order,:

  1. Location
  2. Product
  3. Marketing
If you get these spot on then much is possible but you've still got to know what you are doing. If you get any two of the above right and mess up the third then it will all go wrong.

I speak from personal experience as I have a three gite complex  and this year, my biggest concern is whether I will excede the €76k  threshold for TVA registration.

Pancake -  there is no excuse for the people you contacted not to have responded to your enquiry. Don't be surprised however if you find some owners reluctant to accept a 4 month booking. The problem with winter lets in a gite is that the amount of money that can be made is minimal. By the time you take wear and tear into account it may not be worthwhile.

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It's now the end of Feb so are the gites that currently show availability in the peak months likely to stay empty or do people really leave it very late to book their accomodation?

I think the bookings are getting later and later, in the end peak weeks do seem to fill in the Charente-Maritime.

Look on the estate agents websites, there seem to be a lot of gite complexes for sale and I have a hunch that these are not all being sold by people who have run them for years and now wish to retire.

 

If as you say you have another income to hold body and soul together then your chances could be good.

Don't get hung up on how many weeks a property is let for - how much income it generates is the important factor. A smaller number of weeks at a higher income is preferable.
Eslier has made a good point

Bonne Chance

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Fine fewer weeks at higher rental is preferable?  Obviously the overheads have then to be met by reduced usage fine.  However if you are competing in the market place and you say you want £750 per week and the 'local' market is charging £600 and there are those in the market who are commodity buyers how do you differentiate between your gite and another?

Answer presumably is by increasing the quality and fittings of the gite.  Where does that come from investment and thus the returns on investment need to be higher.

If you wish for a hobby then not a problem but there is a need for another income stream which essentially supports the 'hobby' 

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I know it only makes a small difference, but the monthly payments on a 15 year 125000€ repayment mortgage at 4% would be less than 1100€, because you obviously don't pay interest throughout on the whole original sum borrowed. 

Unfortunately 4.5% is probably as low a rate as you'll get at the moment.

Patrick 

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[quote user="timc17"]

Thanks for the responses so far.

We are looking to buy near to St Jean D'Angely in the Charente Maritime which is where we currently live. I've been doing exactly what andyh4 has suggested - checking availability of existing gites on websites such as holiday rentals. The picture is somewhat mixed , some gites are pretty full between June and August while others are still available. This leads me onto another question. It's now the end of Feb so are the gites that currently show availability in the peak months likely to stay empty or do people really leave it very late to book their accomodation?

[/quote]

 

I think you need to look at the slightly bigger picture.  If I have understood correctly you have examined the occupancy of individual gites/gite complexes.  This is fine and we'll come back to the individual ones later, but you need to get an overall view.

First determine your catchment area - just your village?  plus the next town? plus all of the communes to the next city?  It depends on your local geography and tourist attractions.  It could be a 5km radius it could be 50km (extreme perhaps).  Basicly how far away from the local "tourist attractions" are people prepared to travel will determine the catchment area.

Now add up all of the gites in the area.  What percentage of these still have vacancies?  That's the key, because when you start you will be in competition with these empty places.  You will be trying to get the next punter's reservation at the expense of the other empty places.  Once you have done that analysis, then go to the individual places and look at the details you have already collected.  Is one always full?  What is he offering that others don't - can you copy it? can you better it?  Do some communes have higher occupancy than others? why?

But the starting point is what is the general market like?  If 75% of beds are empty, it doesn't matter that Maison Chere are always full, you are going to have an uphill struggle.   If only 10% are empty and some weeks it's Maison Chere with empty beds and others Beau Temps, then that will be a lot easier for you to break into the market.

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I'm afraid here are a couple of flaws in all this research business.

Firstly, many owners of gite complexes (much more so than owners of single gites) manipulate availability calendars (rightly or wrongly but that's another debate altogether - the fact is it happens).  For example, my largest property is still available for the first two weeks in July so I also show my middle property as being available even though it isn't - reason being that I stand a chance of selling enquirers up or, if necessay later on, doing a deal. Until a few weeks ago I hadn't even updated the calendar to show any bookings at all even though most  peak season weeks have been booked since last October - reason, it's good to get the enquiries as every one is an opportunity to sell an off season break and provides me with another valuable email addres for future marketing. So, take availability calendars in general with a pinch of salt until the end of the season when you'll get a much better idea of what was booked.

Secondly, I'm afraid I don't agree that you need to worry too much about looking at the bigger picture with overall availability space. There are an awful lot of people out there with gites who haven't got a clue how to market their properties or how to find the right "product". You shouldn't take too much notice of the failures it's the success stories that you are interested in and why they are so. You  will be better off finding a small number of places that appear to be doing exceptionally well (again don't look at the number of weeks booked, work out from the prices they are charging how much cash they are making). Once you have identified a pattern of success email  the owners and ask them for their advice. Most brits running successful businesses in France are very proud of what they've achieved and will be only to happy to share some of their experience with you. There's nothing to be lost by asking a honest question and hoping for an honest answer !    You need to find out if you can match the successful businesses.

Good luck.

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I agree with Eslier.  It's quite possible to buy a property in an area that's already saturated with gites and achieve high occupancy rates and an excellent rental income.  This is because most of your competitors are dabbling in it for pocket money and don't want to, or don't know how to, run them effectively as a business.

How many gites do you need to survive?  I have seen discussions on this forum where contributors say it is possible to live on 1000 euros a month income.  In that case the minimum number of gites needed to survive would be one, or two to be comfortable, provided a clued-up owner manages it like a proper business.

Patrick

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I am not in the gite business and am unable to answer your specific question regarding the number of gites.  In and around St Jean d'y it is popular for holidays as it is close enough to various attractions, places of interests, airport, beaches. etc

 It is possible to make any of the gites suitable for disabled people and their families (this would not need to exclude people without a disability) as a way of marketing to other client groups and perhaps generating income outside of the main holiday season.   The Conseil General de la Charente Maritime do offer upto 30% of the costs, materials and/or labour, for developing gites (financial assistance for a maximum of two gites).  Obviously, as with any use of the public purse, there are conditions to be met.  You would be able to get the relevant information from the conseil general, or you could PM me if you wanted further specific details on this or on the norms for French disability regulations. 

Best wishes

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We have just started looking again, and found a house + 2 gites business in Charentes - ideal for two 'baby boomer' couples holidaying together, but wanting separate spaces. It's forum threads like this that are such a wonderful source of information. Thanks all. Still thinking and planning ....
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  • 3 weeks later...

Well, This is my first time on here and would like to ask a couple of questions which you might be able to help me with.

 

My wife and I love France and with our children grown up and gone are looking to move to France for good. We both have good jobs here but are ready to give it all up.

We will be looking for a small gite complex with maybe 1 or 2 small gites with potential for expansion or updating. Or even a house which out buildings to convert.

 

I am not planning to look for a mortgage to finance it but to sell our existing house. Putting a little aside for emergencies and renovations. I would be looking to spend up to around £80.000 to £100.000 . I feel very positive….am I mad ?

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[quote user="Karl"]

I am not planning to look for a mortgage to finance it but to sell our existing house. Putting a little aside for emergencies and renovations. I would be looking to spend up to around £80.000 to £100.000 . I feel very positive….am I mad ?

[/quote]

I think you'll be very lucky to find a decent house, never mind a gite complex, for that sort of money.  Sorry.

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