The mis-selling of holiday homes in caravan parks has been in the news (again) recently.
This article from the BBC contains three case studies of people who bought static caravans as investments, having been told they would make enough money in rental income to cover the finance costs of the caravans.
Those finance costs include the dreaded fees the parks charge for maintaining the site and services such as laundry, and also anything else on site that costs something to run.
The typical story goes something like this:
- The buyers come into a large sum of money, around £60-£100K, through an inheritance or a pension lump sum.
- They think a holiday home will be a good middle-income investment with the additional perk that they can also stay there and offer it to friends and families.
- The sales people bullshit them about how much money they can make renting the caravan out for, say half the year and the maths seems to work out.
- They may have a good first year, but then the maintenance charges go up and the private owners can't compete with the rates offered by the Park itself, which has a stock of caravans just for rentals.
- The owners end up selling their caravans back to the park at a MASSIVE LOSS. You might get £20K back on an initial £70K Vest after just a couple of years, for example.
And these parks just don't care whether the reason you sell is because you've been diagnosed with cancer, they don't care whether they've just sucked your entire pension pot out from you if you're in your 70s, they don't give a shit!
The problem...
Is that people just dive in without doing due diligence, they trust what the sales people tell them, what they should do is get independent advice and get any projections down in writing, of course the later would never happen as they are BS, at which point you would hopefully decided not to buy.
Oh of course the Parks have documents in writing saying you shouldn't buy these homes as an investment, but that's glossed over in the sales pitch itself....
The lesson...
I learned this when I lived in a flat, because I had to really, but now I'm out the lesson is this: DO NOT INVEST IN ANYTHING THAT HAS MASSIVE MAINTENANCE FEES WHICH YOU CAN'T GET OUT OF EASILY!
That means anything leasehold and especially anything on a park home. They are just the worst kind of investments.