Should you buy a Castle?

In the new series “Should you ….”, today the question should you buy a castle? All of us have probably dreamed of staying or owning a castle. But does it make financial sense? And how do you finance a castle? Those are the questions I’ll try to answer today in this post.

Should you buy a Castle?

I’m not sure about you, but I always like the idea of living/staying in a castle. But they are generally expensive to purchase and maintenance does not appear to be very cheap (understatement of the year). Also heating is not particularly low either! So in todays case, let’s have a look what is out there in the market and what it would cost to own/operate a castle.

When we know how much is costs, I also want to look at (alternative) ways to finance. This came up in various discussions on our Dutch FIRE slack group (see here if you want to join, it’s in Dutch thou!). Since these various discussions we are now also considering renting one for a (long) weekend and doing a FIRE meetup! Getting HOT at the FIRE place/pit 😉 Will see if we can make this happen in the coming year.

Should you buy a castle?
Should you buy a castle?

French Castles

For this case study I’m going to look at French castles. Here are two sites (1 & 2) that feature several castles for sale. From “basic” stuff to full blown major ones. Seriously addicted to these sites! I know, bad habit.

We will be looking at a castle that complies to the following:

  • priced at less than €1.000.000
  • potential to be used as a B&B or wedding/business venue (e.g. focus on many rooms and “curb appeal”)
  • close to/ready to move in/operate (no major renovations required)
  • Needs to have turrets and/or towers (otherwise it’s not a castle!)

Based on these high level criteria, I selected this one. (For future references, if the property goes offline, here is the screenshot of the main webpage for download). A quick summary:

  • It looks like a castle!
  • Comes with a guest house
  • 710m² total living space
  • 12 bedrooms total
  • has got a swimming pool & it’s own chapel
  • Priced at €898.000

Operating Expenses

When you read this article, you get confirmation that owning a castle is not cheap. Here is another fun one. This article is not any better, but gives an indication of the operating cost per m² livings space per year from someone that has one. Which for this particular castle in Germany was estimated between €66-€106/m²/year (€5.000-8.000/month – 900m² living space). This included maintenance, heating and (support) staff.

Let’s assume that we run similar numbers (say average €90/m²/year) for our property noted above. That means a total operating costs of about €63.900. Add in insurance, property taxes and unforeseen items and we round it off to €70.000 per year (7.7% of property value per year).

Guess the aforementioned makes financial sense when you assume that maintenance is easily 5% of the property value per year (twice that of a regular home). The idea is that staff costs here include support with the garden, cleaning and minor maintenance, which would be hard to do all by yourself.

Assuming we finance this place for 5% per year at 75% of the property value. That would mean financing costs of €33.750 per year. Cashflow is higher at around €43.482 (30 year amortization). I’m going to ignore lost opportunity costs here on the money used to buy the property.

That means a total cash-flow operation expense of about €113.500 per year. Oh wow, that’s a lot money. About 12.6% of the purchase price per year. Ouch. Starting to look like a yacht!

Should you buy a castle?
Should you buy a castle? Perhaps!

Rental Income

Now that we have a sense (would not call it an exact number) of the operating expenses, how much could we make from this property? It is a niche market as you would provide luxury accommodation with private pool in a castle! My assumption is that the room rates would be high(er) but occupancy somewhat lower. Add in the possibility to provide food and you might be able to make some decent money. That being said, the operating expenses are significant, so you need this income to be that too.

What kind of rates do you need to think about? I found this via Tripadvisor and this via Airbnb for France. Seems that the price range is roughly between €50 and €400 per night depending on how long you stay, how fancy the place is and it’s location. Let’s assume that we can get an average €150 per night per bedroom (location is not brilliant, but the pool adds some value here).

The properties have a total of 12 bedrooms, but let’s assume that you live in the guest house yourself and the rest is rented out (that’s up to 7 bedrooms including using the attics; shared kitchen/living room). Let’s assume you have an occupancy rate of 30% throughout the year for each bedroom. That is a total revenue of €114.975.

With the above operational expenses of €113.500 per year, you’d break even on the cash-flow expenses, but would have worked your butt off almost the entire year. That does not sound very good (HOT?). However, if you’d been able to jack-up the occupancy rate to 40% with the same average nightly rate, you’d make about €38.000 before taxes. You should be able to live of that! Perhaps when adding food and/or wedding ceremonies (you have a private chapel!), you could up the income. This might just work!

Financing

How do you finance this castle? Albeit I don’t know the ins and outs of the French real estate finance market, here are some ideas that come to mind:

  • Regular mortgage, albeit you probably need to bring a lot of money yourself. You probably also will need approval from the bank to allow for short term rentals, which is often not allowed in the Netherlands. As noted, not sure how that works in France (and my French is not good enough to figure this out).
  • Business loan/mortgage: in this case you have to have a business plan and show viability of making money renting our rooms in your castle. Likely a higher interest rate too. There are specialized companies for real estate. Like this one I thought was funny, a lending company called “Castle Trust”. I also found this one, which specializes in “different” real estate loan options. They are in the wrong country though, but is shows you there are creative financing options for “special” real estate. There will have to be similar companies in France. It will all come with a price I would assume.
  • Private loans: try to find private investor(s) that want to lend you the money to purchase the property. Depending on how much money your friends and connections have, this might be difficult or really easy. You definitely need a good network of people for this.
  • Crowdfunding: the popular “new” way to raise money for your business. Probably expensive, but you do have collateral in the form of the property, so that should help in limiting the interest rates. You can do this via a platform or with lots of friends (as was suggested in the slack group). But you need a lot of wealthy friends in this case!
  • Timesharing: with such a financial construction you could divvy up the property in for example 52 time shares. Each owner would pay 1/52th of the property and maintenance/operating costs per year. With the ability to either use his/her portion for a stay or rent it out to cover costs. In this case you’d be looking at around €19.000-20.000 in initial fees and around €1350 in yearly fees. That is not bad for an entire castle + guest house and a pool for a week! But that initial investment is not cheap and timeshare don’t easily change hands apparently.
  • Cash: if I only was that “lucky”…..

Conclusion

There might actually be options to buy a castle and actually have some money left at the end of the day. But this will really depend on purchase price, state of maintenance and ability to use it commercially. Just living in one would be really expensive and not a bright idea financially. Or is it?

An ECO Castle?

Why not build and ECO castle? When I proposed this option to a few friends I got some strange looks at first, and many laughter thereafter. Even Mrs CF, who knows me well, looked at me in amazement. She is used to my crazy ideas, but this one really hit the top spot. However, I think I’m on to something.

Should you buy a castle?
Should you buy a castle?
No, build an ECO castle!

The idea is to get about 16-24 40ft sea containers, stack them up to 3 high and into a U shape (or whatever configuration you prefer). Next start to cut out parts of the sides to connect them and create living spaces. Insulate the lot with at least 20-30cm of insulation on the outside (maximizing the space on the inside. Something like this, but thicker insulation. Than you finish off the outside with these type of fake stone bricks. Add some double/triple glas windows and you have a basic energie neutral (ECO?) castle!

Next you can add some turrets on the top (or on the side to house the staircases to the different levels) and complete with crenellations. Finish it off with a moat and a cantilever bridge and you got the full works! Develop a permaculture garden around it for fruits and vegetables and you are set! Easy peasy!

The price for all this? Not sure, but a back of the envelope calculation got me to around €400.000-500.000 including land. But you would have to do a lot of this work yourself to keep it in this range. I might break this down in another post. Would not be a bad price for a property in the range of 400-550m² living space! Operational costs would also be very manageable. However, getting a building permit for this in the Netherlands would be a lot of fun 😉

Anyone interested in building one with me?! Don’t hesitate to drop me a comment!

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21 Comments

  1. I really like your should you buy X series. This is really fun and very informative. I’m actually quite impressed by the castle you chose. It’s quite nice and the pricing is not so bad, especially from a Swiss Real Estate point of view. I should consider buying a castle in France 😛

    1. Thanks! We have two new ones in the pipeline, with credits going to HaltCatchFire and Mrs CF for suggestions. Stay tuned 😉
      Have fun castle shopping in France!

  2. I also was daydreaming about this ever since. It was not until later when I visited real castles that I realized their inefficiency in terms of economical maintenance. Still, you did something evil here. Until now it was on my totally impossible list and your numbers just showed that it is not a total insanity at all.
    If that seacan castle ever will be built let me know. If you provide accommodation and food (and some beer) I would happily help with the building work for a couple of weeks.
    Funny Fact: not far from the place I live there is(was) a newly built castle for sale. The price is around €500k but the building has 715m2 living space, a lake, and 50k m2 arboretum around with thousands of plants, bushes, and trees. As you said “if I only was that “lucky”. Have no idea why did my wife rolling her eyes when I asked if we should buy it somehow 🙂

    Please do a “Should I buy an island?” episode next! Another longtime daydream. 🙂

    1. Hey HCF, this is the first time someone told me I did something evil. And I’m proud of that! 😉
      So why did you not buy that castle? Seems like a bargain for a new build!
      Will take a dive into that island story, perhaps I can have some more fun with that.
      Thanks mate

  3. Why not a small (European) island? Can be cool to stay with friends. It’s even possible to buy it with a group op friends (can also be applied to other things like holiday appartments/villas/castles), as a sort of private timeshare.

  4. Man, I always wanted a castle ruin when I was young! They came cheap then … And realizing I never would be able to bear the renovation costs my plan was to just plunk some containers in the middle of the courtyard an go live in those …
    So a bit of a hybrid between a proper castle and your eco-castle idea …
    Looking at it 20 years later it wasn’t that of a stupid idea, even castle ruins are expensive now!! I would have made a nice profit …

    1. Interesting idea here Sloth, and good point about the ruins being expensive. That being said, there are still a few good deals to be found if you are flexible where you want to live!

  5. haha cool post.

    The castle would be cool, but i can barely keep my 2400sq ft home clean. That castle would be a mess! kids would love it though.

    Wish you all the best with the seacan castle, that would be cool to see =)

    cheers

    1. Thanks Rob, I might actually put that seacan castle on paper. I’ve been fascinated by it for a while. And since I really need a new hobby/project, this might be a fun one 😉

  6. I think there’s a very good reason people aren’t building many new castles. They might look cool, but there’s definitely more efficient forms of housing around.

    Still, owning a castle is a neat daydream to have!

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