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Villa running costs needed
Villa running costs needed
Hi,
I am considering purchasing a 4 bed/4 on-suite villa in CVO, and want to know more details on the costs of utility bills.
The villa will be for short term rental only (not permanent residence).
The villa has (amongst other things):
pool (NOT heated)
under floor heating
solar heating
NO air con (as yet)
I'm interested in:
Electricity
Gas
Water
TV/Sat
Also,
what's the local property tax rate - I've seen quotes of 1.1 to 1.3% per year of property value?
how much are management costs? (I know they vary a lot)
Many thanks,
Dave J
I am considering purchasing a 4 bed/4 on-suite villa in CVO, and want to know more details on the costs of utility bills.
The villa will be for short term rental only (not permanent residence).
The villa has (amongst other things):
pool (NOT heated)
under floor heating
solar heating
NO air con (as yet)
I'm interested in:
Electricity
Gas
Water
TV/Sat
Also,
what's the local property tax rate - I've seen quotes of 1.1 to 1.3% per year of property value?
how much are management costs? (I know they vary a lot)
Many thanks,
Dave J
-
Bruce Wallis
- CVO Oracle
- Posts: 5505
- Joined: Fri Mar 10, 2006 7:35 am
- Location: Wroxham, Norfolk/ Vale de Centiannes
villa running costs
My experience suggests that you need to make £10K a year in rentals to cover costs
Mangement company cost abour E125 a month x 12 + commission on lettings (10-15%)
Maid E130 a month x 13 (the extra month holiday pay..a Portuguese quirk) A decent maid will want fulltime employment so you will also carry her NI costs.
Gardener E125 a month x 12
Poolman E60 a month x12
You can get Portuguese Cable TV quite cheaply...but it'd crap!
Technically it's illegal to have SKY outside the UK, but everybody does. There are local installers who will set you up. You need a bigger dish than the UK, and a more powerful SKY Digi-box
There are also running repairs and cleaning materials etc to factor in.
Utilities:
I cant remember my electricity costs.
Gas is bottled and getting progressively more expensive
Water is metered, and if you have a large garden it will need automatic irrigation. That can cost about E1000 a year...very expensive.
You will need insurance. Buildings/furniture and 3rd party liability. I also have earthquake cover, because if there is a tremor, your pool can crack and that repair could cost an arm an a leg.
You also need to be aware of the fact that the Portuguese Govt are going to bring in a Villa licensing system. No hard figures yet, but the rumour I hear is about E2000-2500 a year.
Im sure some people will challenge my figures, if so maybe Ill pick up some tips.
I dont know if you have bought yet, if not remember the old maxim. Location, location, location. You need to consider your rental market which will mean different criteria than buying for yourself to live there.
Estate Agents will offer you lovely places, but will they rent? The Estate Agents will always eulogise about "Rental potential" Ask to see the evidence of that.
You wont make a fortune unless you can rent from April to October...which you probably wont, and dont forget your costs are year round, let or not!
Having said that, we are in our 4th year. We dont make much actual profit, but we get 4 trips a year out of it, the property values are increasing and we dont regret buying for a moment.
Good luck
PS If you are going to furnish your villa, we found it easier to buy virtually everything in the UK and ship it over in a container. Depends upon what you want
There's always IKEA in Seville!
Mangement company cost abour E125 a month x 12 + commission on lettings (10-15%)
Maid E130 a month x 13 (the extra month holiday pay..a Portuguese quirk) A decent maid will want fulltime employment so you will also carry her NI costs.
Gardener E125 a month x 12
Poolman E60 a month x12
You can get Portuguese Cable TV quite cheaply...but it'd crap!
Technically it's illegal to have SKY outside the UK, but everybody does. There are local installers who will set you up. You need a bigger dish than the UK, and a more powerful SKY Digi-box
There are also running repairs and cleaning materials etc to factor in.
Utilities:
I cant remember my electricity costs.
Gas is bottled and getting progressively more expensive
Water is metered, and if you have a large garden it will need automatic irrigation. That can cost about E1000 a year...very expensive.
You will need insurance. Buildings/furniture and 3rd party liability. I also have earthquake cover, because if there is a tremor, your pool can crack and that repair could cost an arm an a leg.
You also need to be aware of the fact that the Portuguese Govt are going to bring in a Villa licensing system. No hard figures yet, but the rumour I hear is about E2000-2500 a year.
Im sure some people will challenge my figures, if so maybe Ill pick up some tips.
I dont know if you have bought yet, if not remember the old maxim. Location, location, location. You need to consider your rental market which will mean different criteria than buying for yourself to live there.
Estate Agents will offer you lovely places, but will they rent? The Estate Agents will always eulogise about "Rental potential" Ask to see the evidence of that.
You wont make a fortune unless you can rent from April to October...which you probably wont, and dont forget your costs are year round, let or not!
Having said that, we are in our 4th year. We dont make much actual profit, but we get 4 trips a year out of it, the property values are increasing and we dont regret buying for a moment.
Good luck
PS If you are going to furnish your villa, we found it easier to buy virtually everything in the UK and ship it over in a container. Depends upon what you want
There's always IKEA in Seville!-
Bruce Wallis
- CVO Oracle
- Posts: 5505
- Joined: Fri Mar 10, 2006 7:35 am
- Location: Wroxham, Norfolk/ Vale de Centiannes
-
Bruce Wallis
- CVO Oracle
- Posts: 5505
- Joined: Fri Mar 10, 2006 7:35 am
- Location: Wroxham, Norfolk/ Vale de Centiannes
Something else to bear in mind when buying.
Declaring the property as being much less than it's real value will help the sellers tax position. It wont necessarily help you later on A) If it gets assessed B) If you declare the full value when you sell, as you will be deemed to have made a higher profit than you actually have!
Declaring the property as being much less than it's real value will help the sellers tax position. It wont necessarily help you later on A) If it gets assessed B) If you declare the full value when you sell, as you will be deemed to have made a higher profit than you actually have!
I agree with Bruce's assessment of running costs & rental income prospects. I have a similar property to the one you are buying and my costs are broadly in line with Bruce's.
Pay a bit more for the maid and the pool man and a lot more for insurance ( will need to look at that )!
Water is undoubtedly the most expensive utility.
You may need a contract with a burglar alarm company for maintenance, it's also easy to overlook routine maintenance costs, essential to keep villa in good order if you want renters to return.
I reckon that twelve weeks rent high season - net of agents commission - covers the annual running costs.
Itt doesn't cover the set up costs or cost of capital !!
Pay a bit more for the maid and the pool man and a lot more for insurance ( will need to look at that )!
Water is undoubtedly the most expensive utility.
You may need a contract with a burglar alarm company for maintenance, it's also easy to overlook routine maintenance costs, essential to keep villa in good order if you want renters to return.
I reckon that twelve weeks rent high season - net of agents commission - covers the annual running costs.
Itt doesn't cover the set up costs or cost of capital !!
In have now come to the conclusion that when people refer to running costs/profit they do not include cost of ownership (borrowing or captial invested)
My 'costs' (bills) come to around £10,000 but the cost of my borrowing alone comes to around £8500.
Even if I use the villas a number of times a year, that makes it an expensive hoilday home!
The only way you could justify doing this would be look at the house value increase at resale.
Do you agree?
Cheers,
Dave J
My 'costs' (bills) come to around £10,000 but the cost of my borrowing alone comes to around £8500.
Even if I use the villas a number of times a year, that makes it an expensive hoilday home!
The only way you could justify doing this would be look at the house value increase at resale.
Do you agree?
Cheers,
Dave J
-
Bruce Wallis
- CVO Oracle
- Posts: 5505
- Joined: Fri Mar 10, 2006 7:35 am
- Location: Wroxham, Norfolk/ Vale de Centiannes
Telling my Grandma how to suck eggs, maybe, but you need to do a business plan. IE realistic annual running costs+ your interest payments set against your net rental income.
My yardstick would be that if I needed to send money out from the UK to prop up the villa....it aint working!
A good local agent/manager can certainly help there. Ill let you have the number of mine if you wish. E-mail me.
One thing we have learned is that even with a successful letting villa, as ours is, we dont make any more profit than spending money whilst we are out there.
I had planned to use the villa profits to pay a large part of my UK income tax bill. That has never happened because every year something has come up to eat up any anticipated profit. EG, a good year last year, and I had to spend E3000 getting the outside of the house painted.....
The year before the pool surround started to crack up and lift...E2000 !
So our eventual profit will be in the increase of capital value of the property...which to be fair, according to the Sunday Times, Algarve property investment shows the 4th best return in Europe over 10 years.
I know this sounds a bit discouraging, but knowing all this, we did it, and dont regret it for a moment.
SO....eyes wide open...Go for it!
My yardstick would be that if I needed to send money out from the UK to prop up the villa....it aint working!
A good local agent/manager can certainly help there. Ill let you have the number of mine if you wish. E-mail me.
One thing we have learned is that even with a successful letting villa, as ours is, we dont make any more profit than spending money whilst we are out there.
I had planned to use the villa profits to pay a large part of my UK income tax bill. That has never happened because every year something has come up to eat up any anticipated profit. EG, a good year last year, and I had to spend E3000 getting the outside of the house painted.....
The year before the pool surround started to crack up and lift...E2000 !
So our eventual profit will be in the increase of capital value of the property...which to be fair, according to the Sunday Times, Algarve property investment shows the 4th best return in Europe over 10 years.
I know this sounds a bit discouraging, but knowing all this, we did it, and dont regret it for a moment.
SO....eyes wide open...Go for it!
Bruce's assessment is spot on and my experience identical.
Remember year one you incur cost of purchase, imt tax, legal costs etc. Set up costs - Furniture, bedding,etc and year one running costs probably without any rental income at all. Net csh outflow ex purchase costs c.E50k!
Year two you may break even assuming you didn't have any borrowing costs.
If you did make a profit remember you have to declare all rental income to the taxman and only certain costs can be offset against this.
Finally assuming - no borrowings- the cost of say E700k in lost interest net of basic rate tax is c.E28k per annum. Your property has to increase in value by at least this much every year to not be out of pocket further.
Is it a good investment - no probably not but it's a great lifestyle and more fun than leaving money in the bank!
Remember year one you incur cost of purchase, imt tax, legal costs etc. Set up costs - Furniture, bedding,etc and year one running costs probably without any rental income at all. Net csh outflow ex purchase costs c.E50k!
Year two you may break even assuming you didn't have any borrowing costs.
If you did make a profit remember you have to declare all rental income to the taxman and only certain costs can be offset against this.
Finally assuming - no borrowings- the cost of say E700k in lost interest net of basic rate tax is c.E28k per annum. Your property has to increase in value by at least this much every year to not be out of pocket further.
Is it a good investment - no probably not but it's a great lifestyle and more fun than leaving money in the bank!
Running costs are variable. There's a British surveyor I used who'll look at any property you are considering + give a report on pros and cons of maintenance costs, heating options etc. I found comments very useful-
C Thomas MRICS e-mail: carlthom@lycos.com
C Thomas MRICS e-mail: carlthom@lycos.com