New business finance - guessing impossible at these figures

[sidekickdmr]

Hello,

Is like to come out straight away and say I'm expecting you all to say "no chance in hell" but on the off chance I'll ask anyway.

Me and my OH are really ready to start a new business, we both are willing to stop our well paid jobs, and work our arses off to make this business to work, it's the lifestyle and income we dream of.

We just need 3.5 million pound to make it work

But hear me out.

Every year, sometimes twice a year me and my friends all get together and rent a huge mansion, we're talking 9 bedrooms, swimming pools, games rooms, acres of land, home cinemas etc etc.

For just 3 nights we pay about £4,000 and trust me, all of the ones that are only half decent get booked up months and months in advance.

On top of this, me and my wife, with the dogs try and go away once a year (not a holiday, just a quiet weekend) we always look for a 1-2 bed modern but characterful cottage, but again looking at £600 for 3 nights and can't find anywhere decent as they are all fully booked.

Finally, we got married last weekend, we ended up having an outside style wedding
In an amazing farm, which was just the grounds of a (very impressive) private house. We paid a total of about £5,000 for a patch of grass (and a power supply) for just one night, again, only had 2 weekends free when we enquires over a year ago.

So, this brings me onto my idea.

In Cornwall/Devon, in a nice and picturesque location, we would love to buy a very grand and very impressive 8 bed mansion, for say 2.5 million pound, this would
Come with say 70 acres of land.

The home alone, based on a 70% occupancy rate would bring in £135,000 annually, this is based on weekends only and no peak rates for summer/Xmas.

We would then need an additional 2 million to build/convert 4 2-3 bed cottages on the land, each bringing in £600-800 a weekend, more for a whole week.

Finally, a spa centre would be built central to all 5 properties, bookable exclusively (3 hour slots, each house at a time). This would have pool, treatment rooms, hot tubs, gym, sauna, steam room etc.

We would live in the gate house, and be on hand to keep a bit of an eye on things and sort out any issues.

There are also lots and lots of opportunities to up sell, offer things like local produce breakfast hampers delivered to your door, cocktail making classes, chef hire etc etc

Back of fag packet calcs work out as

£140,000 income from the main house

£130,000 income from the cottages

£40,000 income from weddings on land

£20,000 from unsold packages and add ons.

Total £230,000 income based on a worst case low occupancy, no week time bookings.

Now, considering the banks money is all secured against the asserts, which would (should) actually be worth more than the total lent, it's relatively low risk, easy to show its already a proven business model, and great returns.

Any possibility at all of this being a remote possibility t o finance?

I can handle the disappointment, I've prepared myself for it!

Thanks

[southendpier]

sidekickdmr said:

Hello,

Is like to come out straight away and say I'm expecting you all to say "no chance in hell" but on the off chance I'll ask anyway.

Me and my OH are really ready to start a new business, we both are willing to stop our well paid jobs, and work our arses off to make this business to work, it's the lifestyle and income we dream of.

We just need 3.5 million pound to make it work

But hear me out.

Every year, sometimes twice a year me and my friends all get together and rent a huge mansion, we're talking 9 bedrooms, swimming pools, games rooms, acres of land, home cinemas etc etc.

For just 3 nights we pay about £4,000 and trust me, all of the ones that are only half decent get booked up months and months in advance.

On top of this, me and my wife, with the dogs try and go away once a year (not a holiday, just a quiet weekend) we always look for a 1-2 bed modern but characterful cottage, but again looking at £600 for 3 nights and can't find anywhere decent as they are all fully booked.

Finally, we got married last weekend, we ended up having an outside style wedding
In an amazing farm, which was just the grounds of a (very impressive) private house. We paid a total of about £5,000 for a patch of grass (and a power supply) for just one night, again, only had 2 weekends free when we enquires over a year ago.

So, this brings me onto my idea.

In Cornwall/Devon, in a nice and picturesque location, we would love to buy a very grand and very impressive 8 bed mansion, for say 2.5 million pound, this would
Come with say 70 acres of land.

The home alone, based on a 70% occupancy rate would bring in £135,000 annually, this is based on weekends only and no peak rates for summer/Xmas.

We would then need an additional 2 million to build/convert 4 2-3 bed cottages on the land, each bringing in £600-800 a weekend, more for a whole week.

Finally, a spa centre would be built central to all 5 properties, bookable exclusively (3 hour slots, each house at a time). This would have pool, treatment rooms, hot tubs, gym, sauna, steam room etc.

We would live in the gate house, and be on hand to keep a bit of an eye on things and sort out any issues.

There are also lots and lots of opportunities to up sell, offer things like local produce breakfast hampers delivered to your door, cocktail making classes, chef hire etc etc

Back of fag packet calcs work out as

£140,000 income from the main house

£130,000 income from the cottages

£40,000 income from weddings on land

£20,000 from unsold packages and add ons.

Total £230,000 income based on a worst case low occupancy, no week time bookings.

Now, considering the banks money is all secured against the asserts, which would (should) actually be worth more than the total lent, it's relatively low risk, easy to show its already a proven business model, and great returns.

Any possibility at all of this being a remote possibility t o finance?

I can handle the disappointment, I've prepared myself for it!

Thanks

I think you need £4.5m+ unless you are putting in £1m+

Income is irrelevant without costs.

"Turnover is vanity - profit is sanity"

Work it out again I expect you will need far more money than you have put in.

What you can do is put together a proposal:

"I am buying a house, once I get planning to covert it the site will be worth £X
if I then invest £X and build A, B and C buildings, at a cost of £X the site will be worth £X"

Therefore any investor will have an exit value to their investment.

[Griff Boy]

1. The bank would want a considerable contribution / deposit from yourselves to even consider it, otherwise they will take on 100% of the risk
2. The bank will not include in the cost exercises 100% of the figures, they will allow for 'fire sale' values on property and stock, and they will also allow for worst case scenario turnover figures
3. The biggy! Interest rates! If the interest rates go up, and they will, then they will work on a worst case scenario 5-6% base rate, and then then see how your figures stack up against your income, less costs and wages

[sidekickdmr]

southendpier said:

Therefore any investor will have an exit value to their investment.

This is what I'm banking on being the only small possibility that someone might consider it! If I was asking for 4.5 million to hire staff, get machinery, rent a premises I wouldn't have even considered asking, as I know what the answer would have been.

But if I put a lot (A LOT) of time and effort into a business plan to show the potential, competition turnover etc, as well as plough every penny we have after the sale of our house, combined with the fact that the value of the property will always match or exceed the Invested value (bar a rescission/war).

I'm wondering if there is a small chance of someone considering it.


Re:costs and profit, I know it needs a lot of work, this is just fag packet calcs before I invest a lot of time and effort into a loosing battle if peeps think it's impossible.

Edited by sidekickdmr on Tuesday 25th August 20:00

[grumbas]

I imagine the income will be very quickly eroded by costs, what are you budgeting for:

Heat/power
Wages
Maintenance/upkeep
Interest

That's without thinking too hard, profit levels look tiny as a % of capital invested.

[hajaba123]

correct, you have no chance.

4.5M purchase price/ set up costs assume you're putting in 1.35M makes it 70% loan to cost which is probably higher than a lender would consider leaves 3.15m to finance. Spread this over 15 years even without interest costs (which I would expect to be, say 4-8%) and your proposed cashflow is eaten up.

That's before you get into sector/credit crunch/appetite issues.

Sorry, it won't work unless you throw loads of your own money into it

What have you got to put in?

[footnote]Edited due to inability to read, type and operate a calculator/footnote]

Edited by hajaba123 on Tuesday 25th August 18:08

[akirk]

good luck
it does look good based on some simple man maths...

but... knowing people with large houses etc... it is an absolute money sink
pop back 100 - 150 years and a 20 bedroom house needed a 2,000 acre estate to run it (i.e. 100 acres per bedroom) - and that was with a large amount of staff...
now, it is 10 times the land needed, so a 20 bedroom house now needs a 20,000 acres estate to run it - land is now farmed more efficiently, so the ratio is even higher in real terms and staff, where a house that size might have had 10 house staff and 20 garden staff, plus estate staff - might now have a housekeeper / cleaner, often on a part time basis - and maybe only one or two outside staff - so once again the ratio is even higher...

Yes, renting out brings in some money, but it is not as simple as you say, the occupancy rates you suggest are high - a big house will rent really well at Christmas / New Year / maybe Easter, a few weeks in the summer, and then Fri - Sunday weekends during the year - the rest of the time it is more likely to be empty... it will definitely not be 70% - weekends is only 2 days / nights of a week - so every weekend is only 28% occupancy - you are way off

So you are talking about an investment in the least profitable part of an estate (the house) with a challenging income stream...
why do you think that big house owners are trying every kind of business to keep their houses - because the house means something to them as a family, so the businesses are run to keep the house - the house doesn't make the money - except in rare circumstances...

weddings are one of the few exceptions - if you can become high on the list for weddings you can make money - but other than that - not going to do your bank balance much good

[Monkeylegend]

sidekickdmr said:

Hello,

Is like to come out straight away and say I'm expecting you all to say "no chance in hell" but on the off chance I'll ask anyway.

Me and my OH are really ready to start a new business, we both are willing to stop our well paid jobs, and work our arses off to make this business to work, it's the lifestyle and income we dream of.

We just need 3.5 million pound to make it work

But hear me out.

Every year, sometimes twice a year me and my friends all get together and rent a huge mansion, we're talking 9 bedrooms, swimming pools, games rooms, acres of land, home cinemas etc etc.

For just 3 nights we pay about £4,000 and trust me, all of the ones that are only half decent get booked up months and months in advance.

On top of this, me and my wife, with the dogs try and go away once a year (not a holiday, just a quiet weekend) we always look for a 1-2 bed modern but characterful cottage, but again looking at £600 for 3 nights and can't find anywhere decent as they are all fully booked.

Finally, we got married last weekend, we ended up having an outside style wedding
In an amazing farm, which was just the grounds of a (very impressive) private house. We paid a total of about £5,000 for a patch of grass (and a power supply) for just one night, again, only had 2 weekends free when we enquires over a year ago.

So, this brings me onto my idea.

In Cornwall/Devon, in a nice and picturesque location, we would love to buy a very grand and very impressive 8 bed mansion, for say 2.5 million pound, this would
Come with say 70 acres of land.

The home alone, based on a 70% occupancy rate would bring in £135,000 annually, this is based on weekends only and no peak rates for summer/Xmas.

We would then need an additional 2 million to build/convert 4 2-3 bed cottages on the land, each bringing in £600-800 a weekend, more for a whole week.

Finally, a spa centre would be built central to all 5 properties, bookable exclusively (3 hour slots, each house at a time). This would have pool, treatment rooms, hot tubs, gym, sauna, steam room etc.

We would live in the gate house, and be on hand to keep a bit of an eye on things and sort out any issues

There are also lots and lots of opportunities to up sell, offer things like local produce breakfast hampers delivered to your door, cocktail making classes, chef hire etc etc

Back of fag packet calcs work out as

£140,000 income from the main house

£130,000 income from the cottages

£40,000 income from weddings on land

£20,000 from unsold packages and add ons.

Total £230,000 income based on a worst case low occupancy, no week time bookings.

Now, considering the banks money is all secured against the asserts, which would (should) actually be worth more than the total lent, it's relatively low risk, easy to show its already a proven business model, and great returns.

Any possibility at all of this being a remote possibility t o finance?

I can handle the disappointment, I've prepared myself for it!

Thanks

How many staff are you going to need to run all this?

Is your projected £230k income turnover or gross/net profit?

[sidekickdmr]

No staff, me and the OH would be marketing, cleaning, gardening, key handovers etc, basically the day to day running of the properties.

We would need a handyman/builder for repairs and upkeep and a gardener for perhaps a weekly visit.

[Monkeylegend]

sidekickdmr said:

No staff, me and the OH would be marketing, cleaning, gardening, key handovers etc, basically the day to day running of the properties.

We would need a handyman/builder for repairs and upkeep and a gardener for perhaps a weekly visit.

All that with no staff, you are joking, it's not possible. Will you be running the Spa centre as well?

Not being rude but you are living in cloud cuckoo land.

[sidekickdmr]

Monkeylegend said:

All that with no staff, you are joking, it's not possible. Will you be running the Spa centre as well?

Not being rude but you are living in cloud cuckoo land.

My other half will be managing the cleaning and turnover side of things, most weeks we will have 3 whole days to prepare and clean the properties. In summer, additional help may be bought in to speed up the turnovers.

Paperwork, marketing, and back office can be done in downtime/evenings.

Spa is un-managed, yes it needs cleaning and tidying, with a daily water treatment, but there is no staff present at all times.

This leaves key hand over, general maintenance, queries and assistance, and gardening to me.

When we stay in our mansion we stay Friday to Monday, and we don't see a single member of staff or owner once in our whole stay, it's self catering, self cleaning, self managed.

Only time I needed someone was when we couldn't get the hot tub to come on, called him and 20 mins later he popped in and sorted it, was gone within 5 mins.

So it's basically, Monday - Thursday cleaning and gardening, plus any property maintaince, Friday to Monday, being on hand to oversee and assist in any queries, plus tidy/treat spa between bookings.

Please feel free to tell me anything I've missed

[Frio3535]

Running things together detracts from any 'lifestyle' you might wish to have as without staff it'll quickly consume your life. You'll still have bullst to deal with, just it'll be a different kind, and you'll be in a different place... If that's your ideal then fair enough.

I did a similar switch from a lifestyle perspective but I have a load of staff so I can enjoy my surroundings and not have to be present all day every day. I think a multi stage approach (House first, smaller lets second, etc) to this would be more realistic.

[sidekickdmr]

Oh and by the way, the occupancy figs I have quoted (70%) wasn't occupancy of the full year, that was based on weekends only.

So for example, the £140,000 income was based only on Friday to Monday bookings, based on 37 weekends out of 52, week long, or week day only bookings would be on top of this.

[sidekickdmr]

Frio3535 said:

Running things together detracts from any 'lifestyle' you might wish to have as without staff it'll quickly consume your life. You'll still have bullst to deal with, just it'll be a different kind, and you'll be in a different place... If that's your ideal then fair enough.

I did a similar switch from a lifestyle perspective but I have a load of staff so I can enjoy my surroundings and not have to be present all day every day. I think a multi stage approach (House first, smaller lets second, etc) to this would be more realistic.

That's the thing, this is the lifestyle I want!

I don't want an easy ride, I'm only 28 and I have a very aggressive work ethic, my idea of a great lifestyle is me and the dogs, out all day, in the defender, running errands, gardening, meeting customers, painting, running to the local butchers, calling out a plumber for a broken boiler etc.

I absolutely love property, love arranging events and an a very people's person, this seems to combine all of my passions and things I'm good at, hence I'd be happy to work 24 hours a day for it.

I wouldn't mind being woken up at 3am as the power has tripped, or putting up a spare bed as an extra guest showed up.

I think I could make it work!

[Tampon]

Sounds like a nice little business for you and your partner, real dream goal to aim for. The only issue is the finance.

Why not readjust your goals and save a bit for the dream. Consider places in France or else where, large houses are available cheap here, land is also cheap. Renovations are always needed though.

Start smaller with a largeish house build a small business round that and then grow it. Might be able to get going for less than a million, then see how good the business is, if it works you can grow it, add cottages, Sheppard huts or what ever and then build on that.

Much more likely to get a decent percentage of the capital yourself, a mortgage if one of you is working and a investor to get you started.

Going all out from the start with no capital, experience or idea of costs just isn't going to get you any where. We as a family rent a 7 bed house in France with swimming pool and games room with extra barns to convert, also a 4 bed modern build in swanage during the holidays both self catering, just with a ckeaner coming in to turnover houses at end of the week, they bring in a couple of grand a week each, but it is a big job sorting and organizing everything as well as the upkeep.

Tax takes a big chunk to start, then costs, pool cover motor went last week and that cost 700 euros. Heating for the pool and house mean two air source heat pumps, 8k a pop each, had a infestation of flying ants in swanage, cost 140 quid for a extermination man to sort it as guests were terrified, constant replacement of glasses plate, renewing furniture so it looks good, repainting walls and updating bed etc all cost money and eat into profits Etc etc and we just do it to help with costs of the places.

Keep dreaming and working to get there, just get some grasp on costs and what is really viable and you will get there. Jesus 5 years ago 120,000 euros would have bought a whole village down the road here in the dordogne with 10 houses fields stables château the lot. A tonne of work as it is a abandoned village and falling down but goes to show what people can get.

[sidekickdmr]

But yes, all of your points are correct, and I knew it was un realistic to hit the ground running with 4.5 mill in my pocket to make it work.

So, something like this may be a good starting point

Martin Street, Baltonsborough, Glastonbury, Somerset
http://www.rightmove.co.uk/property-for-sale/prope...

£375,000, needs about 200k spent on it, including converting the outbuildings to games rooms, plant rooms and landscaping the land etc.

We could possibly just about get this mortgage personally.

Rent a little cottage around the corner, and give it a go.

Once done, (in a very funky farmhouse farrow and ball style) with hot tub, perhaps small outside pool etc, I reckon we could get £3,000 a weekend, £4,500 a week in the summer.

Pretty decent starting point and would be a great project!

[Monkeylegend]

sidekickdmr said:

Monkeylegend said:

All that with no staff, you are joking, it's not possible. Will you be running the Spa centre as well?

Not being rude but you are living in cloud cuckoo land.

My other half will be managing the cleaning and turnover side of things, most weeks we will have 3 whole days to prepare and clean the properties. In summer, additional help may be bought in to speed up the turnovers.

Paperwork, marketing, and back office can be done in downtime/evenings.

Spa is un-managed, yes it needs cleaning and tidying, with a daily water treatment, but there is no staff present at all times.

This leaves key hand over, general maintenance, queries and assistance, and gardening to me.

When we stay in our mansion we stay Friday to Monday, and we don't see a single member of staff or owner once in our whole stay, it's self catering, self cleaning, self managed.

Only time I needed someone was when we couldn't get the hot tub to come on, called him and 20 mins later he popped in and sorted it, was gone within 5 mins.

So it's basically, Monday - Thursday cleaning and gardening, plus any property maintaince, Friday to Monday, being on hand to oversee and assist in any queries, plus tidy/treat spa between bookings.

Please feel free to tell me anything I've missed

I admire your vision and enthusiasm but I think you are being a little bit unrealistic to think you can sit back and manage from a distance. This venture will involve far more input from yourselves than you are anticipating if you intend to go it alone, and will put a tremendous strain on your relationship.

I speak from personal experience

Good luck anyway.

[sgrimshaw]

How much capital of yours is there?

The numbers don't really make sense.

In the case of the small house of around £575K inc renovations you say you might just about get the mortgage personally.

For the mansion though you say you need £3.5M to fund a £4.5M project ... where's the other £1M coming from?

[sidekickdmr]

Wouldn't be managing from a distance and I certainly wouldn't be sitting back , we would be living there and be at the property/grounds all day every day, just a more "out of site out of mind" way when guests are staying.

Re the figs, that was a typo, should have said 4.5 needed, I don't have a million pounds unfortunately.

Have about 200k tied up in current house, so once sold, that and a mortgage could be used towards the smaller place.

Edited by sidekickdmr on Wednesday 26th August 11:50

[singlecoil]

According to the aerial view on Bing maps, (and if I've got the right place) that house is next door to a large agricultural establishment that has many pens with lots of what looks very like like pigs in them.

Pigs in that quantity and concentration can be a bit niffy.

But the basic idea is fine and I think you should continue to investigate it.