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static caravan buy to let

15 replies

Josie1968 · 30/09/2020 23:35

Hi there

My husband has inherited some money and as current interest rates are so poor I have been wondering whether it would be an idea to buy a caravan with the purpose of letting it out? I have seen on the internet that it can provide you with an additional income. Can anyone give any advice on this please, and advise whether it is worth it?

Many thanks
Josie

OP posts:
maxelly · 01/10/2020 10:47

I don't really know anything about caravans specifically but you will need to consider as with any investment:

(a) Your annual potential rental income, less any costs. This will give you a rough % interest rate - you will want to consider how this compares to what you could earn putting the money into a more passive investment like stocks and shares or an ISA or a pension fund. I assume you will have quite high costs if it will be parked up on a nice park with facilities etc., you use an agency to let it and as it gets older it will need more maintenance. Make sure you aren't too optimistic about rental income in the off season as I can only imagine not too many people want to rent a caravan in the middle of winter! Also remember to account for paying tax on any income - which you wouldn't on an ISA or pension.

(b) how well the van will hold its value after 5 years, 10 years, 20 years - your capital appreciation/depreciation. As I say I don't absolutely know for sure, but I have heard caravans depreciate quite badly and in the long term you might actually be left with no asset at all.

If between them these 2 don't add up (so even if for interest you earn 10% interest annually over 10 years compared to 2% in an ISA, if the asset/caravan is worth nothing after that 10 years whereas the ISA would still be worth £20k, it's not a good deal, you're only just breaking even on the caravan whereas with compound interest you've made a modest profit on the ISA).

Of course, if you really want a caravan for yourselves, and will use it a lot for holidays, friends/family etc., and any rental income is effectively a bonus, that's a different equation and it's not really an investment then... even so I'm not sure the sums really add up if the caravans depreciate as badly as I've heard!

HRT135 · 03/10/2020 12:57

A depreciating asset is never a good investment for me.

Would it be a better option looking at a holiday home, use the cash as a deposit and take an interest only mortgage. I think staycations could be more popular going forward and property will hold value better than a caravan.

mrsnec · 03/10/2020 13:05

I looked into it with Haven. The site fees were astronomical. It all worked out much more expensive than I thought. It was not an attractive proposition at all. And even in these uncertain times I'd sooner invest in an apartment somewhere else in Europe than a static caravan.

Having said that I do know people who own them but it's not for the investment it's for their own enjoyment because if they spend a lot of time there the use of the leisure facilities is worth the fees to them.

Picassosfriend · 03/10/2020 13:28

Please don't do this. A family member bought a static for about £30,000 seven years ago. It has now been valued at £4,000 by the site owners. Static caravans depreciate hugely and shouldn't be bought for investment purposes.

Veiaola · 03/10/2020 13:31

No don't even consider it a caravan on a site is a money pit, you will also lose money on any van u buy. Buy a property with it an rent it out. Do your homework on the rental an who you have in to rent it. Your investment will still be there when all this covid malarkey has passed.

Josie1968 · 03/10/2020 19:02

Ok thank you everyone for your advice. I won’t be doing it.. saved me from making a mistake. Would a holiday lodge be better? Or an actual brick and mortar property..? I don’t really know how but to let’s work!

Thanks again x

OP posts:
Josie1968 · 03/10/2020 19:09

*buy to let, not but to let!!

OP posts:
TattyMcBab · 03/10/2020 19:13

I’ve looked into it but any of those lodge/caravan type places basically come with such huge strings attached you’re not going to make any money out of it. And may well be lumbered with an asset you have to pay to get rid of in 10-20 years time...

Sorry!

OhioOhioOhio · 03/10/2020 19:14

A static caravan is a lifestyle choice. Not an investment.

mrsnec · 04/10/2020 05:46

Buy to let is just simply that. In the UK you used to be able to get a specific kind of mortgage if this was your intention on a property I'm not sure how it was different from a standard repayment mortgage though. And you have to look at rental values etc to see if you can make money. When we had a rental property it was only an intrest only mortgage. The property was worth 95k and the repayments were around the same as the rental value per month. We sold in negative equity.

I inherited a similar ammount to the value of a static caravan a few years ago. In the end I bought a boat and a car. I live abroad and at the time you could buy an apartment here for about 20K. I didn't do it because I've had trouble with management agents in the past but I wish I'd done it now because the apartments have doubled in value and I never use the boat. My point is do you ever travel? You might be able to buy something outright somewhere else.

Soozikinzii · 04/10/2020 19:21

I would have thought a flat to let would be a much better idea than a caravan

NotExactlyMrsCurrentAffairs · 04/10/2020 19:24

I wouldn't. Site fees, depreciation, everyone you know expecting a cheap holiday.
That said, a holiday flat would be better, likely to go up in value.

maxelly · 05/10/2020 21:40

What is your priority - somewhere you can use for holidays, or short term income or long term protection of capital/capital growth? And how much time/work are you prepared to put in yourself?

If you want somewhere you can use yourself for holidays a small well maintained cottage or flat in a tourist-y area may be a good bet, if you choose carefully somewhere that will cover its costs for most of the year (including agency and cleaning fees unless you are local and will manage yourself) and you off-set what you would otherwise have spent on accommodation for your own holidays it may even be profitable but bear in mind that unless you have enough capital to buy outright you'll need a specialist mortgage which may have high costs, plus the 'headline' rent you can charge in the summer months will usually be much less or nil in the winter (in the UK anyway). Also the kind of holidays you want now may not be the same in 10 years time, do you really want to tie yourself down to holidaying in the same place every time forever more?

If monthly income or long term capital growth is more a priority for you then a regular buy to let may be a better bet. If you have at least a 25% deposit you can get a buy to let mortgage so you don't have to have the full purchase price in cash (although obviously the bigger the mortgage the more interest you pay/less monthly income you get). When doing your sums you will need to include agents fees, maintenance costs, insurance, allowance for void periods/tenants not paying rent, and of course tax (people often forget this because you used to be able to tax deduct a lot more, now you have to pay tax on pretty much the whole income) on any rental income before you are into 'profit'. BTL is not the cash cow it used to be but still can be profitable if you are savvy about the area/type property you buy (look for areas where property prices will increase due to investment, development or transport improvements) and particularly if you are able to do management and improvement or maintenance work yourselves.

Otherwise there are plenty of other sensible things you can do with the money where it will be perfectly safe and you won't have to do much/anything about it on a monthly basis as you would with any kind of property investment. Depending on your circumstances, paying off your residential mortgage, maxing out pensions, buying premium or government bonds, ISAs and/or stocks and shares (via a managed fund, don't pick yourself unless you know what you are doing) can be sensible, safe, tax efficient investments... Depending on how much you have it might be sensible to see an independent financial adviser, yes you have to pay but money well spent to ensure you pick the best investment for you?

Viviennemary · 05/10/2020 21:45

No I wouldnt. Caravans unlike most houses don't appreciate in value but depreciate. There are site fees to consider. Insurance costs. Costs for periods it isn't let out. Not good. Small flat if you can afford it would be much better. But not sure if this is the right time to be investing. I'd hang on.

ScribblingPixie · 14/11/2020 23:13

We bought an inexpensive holiday lodge a few years ago & are probably going to sell it now. We've not made any money on it, but each year renting it out paid enough for fees, maintenance and to cover costs on our holidays there. We haven't lost money but it wasn't a good investment. It was also tricky to look after as we live quite a way from it. We had some brilliant times there, but after a while we visited less & went to other places instead so it's become a bit of an albatross.

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