Me and Mrs CF just spent a night in a large manor close to Haarlem. It was a surprise “date night” by Mrs CF. She really knows how to make my heart go a bit faster 😁. I love castles! We did a FIRE meetup once in one. But we could never make one work financially for ourselves. We could probably buy one, but it would likely bankrupt us in the long run. So here is a post I wrote a few years back if you should buy a castle (note that some of the numbers and linke might not be completely up to date!):

In the 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 in a former Dutch FIRE slack group. 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.

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 the one below one. (For future references, if the property goes offline, here is the screenshot of the main web-page 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. Cash-flow is higher at around €43.482 (30 year amortisation). 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!

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 €100 and €500 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 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.