Are Lodges a Good Investment?
The Jay: 2-3 Bed Park Home / Holiday Lodge
Lodge Investment: The Lowdown
Investing in property is a popular choice for many people looking to secure their financial future. One potential investment option that has been gaining traction as the Staycation boom continues, is the purchase of lodges. These unique properties can offer a range of benefits for investors, including strong returns and environmental advantages. In this article, we will discuss the investment potential of lodges, the differences between purchasing basic and luxury lodges, the benefits of an eco-friendly, energy-efficient lodge, potential running costs, and the income you might expect from a lodge in the UK, taking into consideration average occupancy rates.
Investment Potential for your Lodge
Lodges have become increasingly popular in recent years as more people seek out unique, affordable holiday experiences in the UK. As a result, the demand for lodges has grown, and so has their investment potential. A well-located and well-managed lodge can provide strong rental returns and the potential for capital appreciation over time, whilst offering lodge owners a wonderful getaway location for their own enjoyment. Additionally, lodges are often situated in areas of natural beauty, which can provide added appeal to potential holidaymakers and increase demand. With the difficulty that people are finding with the buy-to-let market, and house prices decreasing, the argument to invest in a lodge is getting more interesting.
Basic Lodges vs Luxury Lodges
When considering a lodge investment, it's important to weigh up the pros and cons of purchasing a more generic or basic lodge versus a luxury lodge. Basic lodges are often more affordable and can offer investors a lower entry point into the market, whilst offering lower annual yields. They can also be easier to maintain but have higher running costs in particular to energy costs. Some positives may be that they can attract a broader range of holidaymakers who are seeking budget-friendly accommodation, which isn’t the typical Shepherds hut and are looking for more space for a family getaway or a trip away with friends.
Energy costs for ‘basic’ lodges, which run off gas, may be high in the long-term, and if the government does outlaw LPG or natural gas, then there may be considerable retrofitting costs in the future, to an all-electric system, adding costs down the line.
On the other hand, luxury lodges can command higher rental rates and may attract a more discerning clientele. These lodges often come with additional features, such as hot tubs, saunas, or high-end furnishings, which all can make them more appealing to potential guests and their overall holiday experience. However, luxury lodges also come with higher purchase prices which is easily offset when you compare lower running costs, lower energy bills and a longer-lasting lodge.
Ultimately, the decision between a basic lodge and a luxury lodge will depend on your investment goals and budget. It's essential to carefully consider your target market, potential rental rates, and ongoing costs before making a decision.
Benefits of an Eco-Friendly, Energy-Efficient Lodge
An eco-friendly, energy-efficient lodge can provide several benefits for both investors and holidaymakers. For investors, these lodges can be more cost-effective to run due to their reduced energy consumption. This can translate into lower utility bills and potentially higher profit margins. When you take into account the substantial running costs of a lodge, and it’s associated energy costs, eco-friendly materials & energy saving options, such as solar panels, solar thermal, heat pumps and mechanical ventilation systems that provide clean, fresh air all provide not only a better guest experience but save significant amounts of money on heating too. With a ‘passive-house principle’ lodge, that utilises the ‘solar gain’, i.e the natural heating ability of the sun as it traverses the sky, with super-insulated walls and triple glazing, will naturally and comfortably heat the lodge reducing further the requirement to put on any form of heating.
It helps to ensure that guests can be warm and comfortable all year round, ensuring a higher rental yield come rain or shine. If you take into consideration that solar panels could also reduce the energy bills of a luxury lodge by up to 80%, whilst adding more value to the lodge’s sale value, providing more USPs to your lodge sales.
From a guest's perspective, staying in an eco-friendly lodge can be an appealing selling point. More and more travellers are becoming conscious of their environmental impact and are seeking out sustainable accommodation options. By offering an eco-friendly lodge, you can tap into this growing market and potentially attract a higher occupancy rate. Many reports, from Sykes, AirBnB & Booking.com all point to a growing trend of individuals looking to spend their ‘green £s’ on sustainable holidays, or greener investments, so being one of the leaders in this space could really set yourself apart from other lodge investments.
Potential Running Costs
When evaluating a lodge investment, it's crucial to consider the potential running costs. These can include:
Maintenance and Repairs: Lodges will require ongoing maintenance, and repairs may be needed from time to time. It's essential to budget for these costs, as they can impact your overall profitability. Luxury lodges may require more extensive maintenance due to their additional features and high-end finishes.
Utilities: Depending on the energy efficiency of your lodge, utility bills can vary. An energy-efficient lodge may help you save on electricity and gas costs. Additionally, consider the cost of water and waste management, as these can also contribute to your ongoing expenses.
Insurance: You'll need to purchase appropriate insurance coverage for your lodge, including building and contents insurance, as well as public liability insurance to protect you against potential claims from guests.
Marketing and Advertising: To attract guests to your lodge, you'll need to invest in marketing and advertising. This could include creating a website, running social media campaigns, and listing your property on popular holiday rental platforms.
Management Fees: If you decide to hire a property management company to handle bookings, cleaning, and maintenance, you'll need to budget for their fees. These can vary, so it's important to research the market and factor this into your overall running costs.
Potential Income from a Lodge in the UK
The potential income from a lodge in the UK can vary depending on several factors, such as location, size, amenities, and demand. To give you an idea of what you might expect, let's consider an average occupancy rate of around 60%. This figure can change based on factors such as seasonality, local events, and your marketing efforts. However, it's a reasonable starting point for estimating potential income.
To determine potential income, you'll need to calculate the nightly rental rate for your lodge. For a basic lodge, this might range from £75 to £150 per night, while luxury lodges could command between £200 and £400 per night or more, depending on the features and location. Keep in mind that these figures are approximate and may not represent the exact rental rates in your specific area.
Using these figures and assuming a 60% occupancy rate, a basic lodge could generate annual gross income between £16,425 and £32,850, while a luxury lodge could bring in between £43,800 and £87,600. Remember that these figures are before accounting for running costs and taxes, which will need to be deducted to determine your net income.
Conclusion
Lodges can offer a unique investment opportunity for those looking to diversify their property portfolio or seeking an alternative holiday accommodation investment. By carefully considering factors such as lodge type, eco-friendliness, running costs, and potential income, investors can make informed decisions about whether a lodge investment is right for them.
While there is no guarantee of success, a well-located and well-managed lodge with unique features and sustainable credentials can provide strong returns and capital appreciation over time. By staying informed about market trends and continually evaluating and adjusting your investment strategy, you can maximize the potential.
If you’d like to know more about our beautifully-crafted, sustainable lodges, then get in touch today or view our range of models below;
