Buying a gite complex in Normandy

Query

The property for sale is in Lower Normandy, currently owned by an elderly couple who are retiring due to poor health/ age etc. I am intending to run the gites from the UK, by using a local French company to do changeovers, maintenance etc. One such company comes highly recommended by the current owners and charge about €20/ hr.

The property itself is a house divided into 4 gites (1 x 3-bed, 3 x 2-bed). It sits in about 1 acre of land. The property is about 1 hour from ferry and 30 mins from beaches. The (unverified) current income is about €27,000 pa They are asking about €200,000 for the property.

Comments

If true, this sounds like an unmissable bargain! Because all the figures below are estimates you will need to substitute your own more accurate figures as these become available.

No description or photos are supplied so I am assuming that the property is in reasonably good condition with no significant renovation work required, and it is a building in a style traditional to the region in a pleasant setting.

Having looked at a few holiday properties in the area on the internet, it seems that a likely price mid-summer for a 2 bedroom property is about 400 euros per week, and for a 3 bedroom property 550 euros. Prices are often marked higher in adverts but these properties are usually either quite luxurious or not very well booked. The prices I have used are probably a bit on the low side, but with three of the gites forming part of the same building, that is probably a reasonable assumption.

A low booking rate seemed common to many of the properties I looked at, suggesting that it may be quite difficult to get holidaymakers in the region outside the summer eight weeks. Small gites tend to rent better out of season than large gites, so that could well be an advantage here.

So if we assume 8 weeks of bookings, total income per week 1,750 euros, that suggests gross income of 14,000 euros per year. But the current owners have suggested they earn 27,000 euros. Given that prices outside high season are much lower than those shown above, either the gites are booked for 25+ weeks a year, or there is a reason why the prices being charged are higher than other gites in the area.

If the former, how are they doing that? More importantly, can you do the same. Most gite owners can't - the average gite is booked 6 - 12 weeks per year. And if it is the latter, that the gites are extra special in some way, the sale price seems even more reasonable

Costs involved will include:

Cleaning and maintenance, 20 euros per hour, presumably at least 8 hours work to clean 4 properties, assuming 15 weeks booked per year, suggests costs of 2,400 euros. Then a further one hour per week out of season for general maintenance, adding a further 740 euros per year.  So estimated total for cleaning and maintenance of  3,140 euros.

Marketing the properties - perhaps three internet holiday listing sites at a total cost of £300 per year. Marketing could alternatively or additionally be done through a company such as VillaRenters, where a 10% charge is made for each booking actualy made, rather than a fixed annual charge.

General repairs, assume 1,000 euros per year

Local taxes and water, electricity, etc assume 1,000 euros per year.

The mortgage payments will be an additional cost, say 175,000 euros at 5% makes 8,750 euros per year (interest only).

The convenient location should act in the properties favour.

Conclusion

All taken together, it seems probable that this property would be a very good investment, if income really can be verified as 27,000 euros, and that income is generated in a way you can replicate. Even if the income is only 17,000 euros it would still seem to be a reasonable investment.

It seems to be almost too much of a bargain in fact, which would raise my suspicions a little. But very well worth proceeding with further investigation.