What are lodges and how are they changing the perception of country real estate in Russia?

Introduction to the concept of lodge

Ekaterina Orlova from Intermark (Savills) explains an interesting and relatively new term that has become relevant in the real estate market - "lodge." She starts by noting that even some professionals in this field may not fully understand the meaning of this word.

“This is a modular building made in a factory,” shares Ekaterina, who then clarifies her point of view. Lodges can be perceived as cottages located in eco-friendly accommodations in attractive vacation spots. Such locations usually include:

• coastal areas;
• surroundings of historical sites;
• cathedrals;
• national parks;
• golf clubs.

In many eco-lodges, you can find a pond or another water feature that offers opportunities for fishing.

Technical specifications

From a technical standpoint, lodges are modular homes that are manufactured in factories. For many, the word "cottage" implies something more grand and luxurious. However, the perception of this term can vary greatly. Personally, Ekaterina believes that a cottage is a country house.

Lodges include a wide range of options:

• simpler, basic models that are similar to those created using Finnish technology;
• more premium lodges that, thanks to their design and finishing, approach the levels of penthouses in major cities.

Although these houses may seem unremarkable on the outside, they often have a modern and cozy interior, including a fitted kitchen and other important amenities. These buildings must comply with British standards.BS3632for permanent residence, which allows for their use throughout the entire year.

The evolution of the term "lodge"

An interesting detail is that the word "lodge" was originally used by the British to refer to summer houses or hunting cabins. Over time, the term has expanded and in a modern context can imply country hotels located at resorts or within protected areas. In the Russian context, the equivalents of lodges are separate cabins located at tourist bases.

Investment aspects

When it comes to investments, it usually refers to a project that includes several lodges combined in one location, which can be characterized as“recreation park”In the United Kingdom, there are distinctions such as:

• holiday park (recreation park);
• residential park (residential park).

Each of these parks has its own legal features. A residential park corresponds to the image of a cottage village, where residents can live permanently; such complexes can contain up to ten thousand houses on one territory.

In the case of a holiday park, its owner obtains a license for short-term or medium-term rental. Such parks typically have a smaller area, although the number of lodges can reach up to a thousand. Naturally, the fewer properties on the premises, the more attractive it is for tenants and, consequently, for investors. Legally, lodges are still officially referred to as holiday lodges, despite the changed perception of their concept.

When investing in real estate in the UK, the buyer acquires not only the property itself but also a plot of land, the size of which ranges from 1.5 to 2.5 hundredths of a hectare. This information is recorded in the UK land registry, known as HM Land Registry. The opportunities for generating income in the British real estate market are not limited to standard houses; there is also a wide selection of student accommodations and leisure properties available. Lodges with terraces attract the attention of many buyers. Based on your descriptions, they may resemble high-end campsites. This statement is supported by numerous consulting studies focused on the tourism industry, particularly the so-called "staycation" — a vacation at home. These studies often draw parallels between campsites, lodges, and other types of temporary housing, such as summer houses, caravans, and cottages.

Advantages of loggias

Nevertheless, it should be noted that camping — or, as it is called today, glamping — implies a completely different standard of quality for accommodation. There are strict legal requirements for lodges, as they must meet the characteristics necessary for permanent housing. These structures, like new homes, come with a ten-year warranty from the manufacturer.

You are absolutely right that staying in lodges really offers a high level of comfort. These resort areas have a well-developed infrastructure, which includes:

• Public spaces
• Restaurants
• Gyms
• Cinemas
• Conference rooms
• The possibility of renting boats and hunting gear

Essentially, loggias can be viewed as separate hotel rooms that can be booked through online platforms like Booking, similar to traditional hotels.

Structure and dimensions of loggias

It should be noted that we are talking about stationary structures, although their sizes can be quite compact. Loggias are modular constructions, which makes them partially mobile. They are manufactured in a factory and then delivered to the installation site on a trailer. In theory, such structures can be moved to another location, but in practice, this happens very rarely.

Standard balcony options have an area of approximately 40 square meters. They usually include:

• Kitchen-living room
• Two bedrooms
• Bathroom

There are also more spacious options, reaching 70-80 square meters, designed to higher standards. The largest models can exceed 100 square meters. Even the basic balconies are equipped with...terrace with a jacuzziandbarbecue areathat adds to the appeal.

Interior finishing and services

The modern lodges available on the UK market impress with their design. As for the interior finishing, its completeness is maintained even when the lodge is relocated. Yes, that's true. The management company provides the lodges with a full set of furniture, produced both by their own specialists and by third-party manufacturers. Each room is equipped with everything necessary for short-term rentals, including textiles and kitchenware.

Professional help

If you are interested in purchasing property in the UK, we recommend reaching out to professionals in this field. We offer the opportunity to fill out a feedback form to receive detailed information and analysis about overseas real estate. Subscribe to our updates to stay informed about all changes and news in the market!

The Closed Industry of Country Leisure

The country leisure industry continues to operate in a rather closed format. I would like to focus more on the locations of lodges. Is it true that such projects are impossible to implement in central London? — Yes, that is indeed the case, and the reason lies in legal aspects. Such parks are not common in large cities, but within a few hours' drive from them, you can find many alternative options.

The History of the Emergence of Family Parks

When did these parks start to appear? How long has this industry been around? — The first family parks were created in 1931 under the Warners brand. Currently, about 70-80% of this industry is controlled by closed family businesses. Some of them own only one park, which is passed down from generation to generation, while others are successfully expanding by acquiring less efficient competing establishments. At the same time, there is no major and well-known brand in this market, similar to companies like Marriott or Hilton in the hotel business. This is why investments in this area and the creation of a recognizable brand represent a promising direction.

Lodges: High-Class Vacation or Affordable Option?

Historically, lodges have been places for high-class relaxation? — There are different aspects to consider: there are both elite resorts and more affordable options. The main audience for such places is the middle class. During peak seasons, accommodation prices range from £250 to £400 per night. For families with many children, this is a great deal, especially considering that they don't have to spend money on flights.

Domestic Tourism and Public Opinion

You mentioned that lodges are primarily focused on domestic tourism. Why is that? And does it matter that almost nothing is known about them outside the country? — Yes, it is indeed important. Most tourists coming to the UK prefer to explore major cities like London and Edinburgh. As a tourist, I would hardly choose to visit lesser-known areas, bypassing the capital. However, according to data from Barclays Bank in 2019:

• 52% of Britons prefer to travel exclusively within their own country.
• 28% combine domestic trips with international ones.
• Only 20% travel abroad.

Investor Rights: Residence and Conditions

Is there a right for an investor to live in their house like the owners do? — The company we collaborate with offers investors the opportunity to stay in their house for two weeks a year. This can be done in any lodge within their network. This significantly eases the lives of those who travel frequently, as the parks are located all over the country. However, it is important to note that this option is only available during the low season — from October to May, excluding school holidays and New Year celebrations.

The business model of British Lodges

What does a typical business model look like for British landscape lodge businesses? "A lodge, with proper management, can provide an income of 12 to 18%." How is the business model of a specific project structured? For example, 50 lodges are brought in, and then each of the 50 investors buys one? — Generally, that's the case, although it's important to remember that new parks appear on the market quite rarely. We observe that this sector is at the intersection of active business development and unique investment opportunities, which attracts many people to this exciting and diverse world.

Introduction to the Leisure Industry

The industry we will be discussing has a long history. Most popular locations are situated near the coast, golf clubs, and national parks that are actively used.

Opportunities for investors

Nevertheless, there is a chance to acquire a new lodge in the existing park. This allows the investor to start earning profits immediately after signing the contract and making the payment.

Business model for development and management

The developer and the management company are closely interconnected. This allows them to earn both from the sale of new properties and from their management, thereby creating an effective two-tier business model. All income that exceeds the established return level for the investor goes to the profit of the management company.

Expected return

As for the level of returns one can expect, we recommend focusing on specific projects.

The impact of the coronavirus pandemic on the rental real estate market has been the subject of in-depth analysis, and research results have shown that rental income has increased by approximately 15%. This increase persists even amid ongoing restrictions on international travel.

Investments in loggias

Regarding interior design projects in loggias, it is worth noting that three independent studies have confirmed the feasibility of such investments. As a result, potential investors can explore various options and analyze their capabilities before making a purchasing decision. Yes, this is indeed true. In my opinion, investing in this area represents quite an enticing prospect. At the same time, it is important to consider that existing investment options can vary significantly.

Factors for collaboration

One of the factors explaining our company's partnership with specific sellers and managers is three independent reports confirming the significance of the investments. The first report was compiled by major players in the market, and its results indicate that the lodges are indeed being rented out at the stated prices, have a consistent occupancy rate, and provide stable annual income. For example:

• A standard balcony can generate rental income of £45,000 per year.
• The net profit, after accounting for all operating expenses, is around 25,000 pounds sterling per year.

RICS valuation

The second study is an analysis by the accredited organization RICS (Royal Institution of Chartered Surveyors). The valuations in this review are generally quite conservative and often show prices lower than the actual ones. According to the analysis conducted:

• Developers are offering properties at 10% below their market price.

Future value of loggias

The third report allowed for a deeper assessment of the future value of balconies. We initiated the evaluation through the British office of Savills, which has experience working with such complexes. The study showed that the value of the properties could increase by 1.5 times over the next three years.

Investment risks

For an investor interested in both generating rental income and increasing the capitalization of their assets, this situation looks promising. But what risks could actually arise in this process? In my opinion, there are a limited number of threats for investors:

• In the event that the management company fails to fulfill its obligations or delays payments, the investor will not incur any losses.
• The investor can terminate the contract without resorting to legal proceedings, simply by sending an email.
• After that, you should turn to another management company to start earning real income, which ranges from 12% to 18%, minus a 20% commission.

Available income

Of course, an 8% annual return is quite a favorable figure. But what about the chance of getting a higher return, say, 9%? The mentioned 8% is an offer from a specific company we are collaborating with. It is one of the most well-known family businesses in this industry, managing resorts for four decades and spanning three generations. In this family, there are four brothers, and although they work in the same field, each conducts their activities differently.

Terms of cooperation with partners

Agreements have been established with our partners that guarantee a return at the level of8%throughoutten yearsAt the same time, the offers from another colleague of ours are significantly higher — they reach one and a half times the level, however, his terms imply the same maximum yield.8%, but only for a period offive years.

What will happen when the deadlines are over?

It's important to keep in mind what happens after these deadlines — in ...ten or five yearsDepending on the signed contract. If no notice of termination is received upon the expiration of the agreement, it will be automatically extended under the terms that suit the management company. This explains why, throughout the duration of the contract, the investor can refuse the services of the management company; however, they will have to pay a penalty for doing so.

Rights of the owner upon expiration of the contract

After the contract expires, the owner will be able to manage their property independently: they have full rights to do so.

• Rent it out.
• Looking for new partners;
• Just to live in it, if he wishes to.

To better understand, it is helpful to consider a specific example of a successful project.

Financial relations between the investor and the management company

As for management, clients receive fixed cash transfers every three months. How is the interaction between the investor and the management company structured? It's quite simple. At the time of purchase, a number of documents are signed, which include:

• Agreement for the purchase of a plot of land;
• Contract for the purchase of a house;
• Option to buy back;
• Contract with the management company.

The last document outlines her obligations, which in our case include payment.8%annual, full maintenance and repair of the facility, as well as addressing all related insurance matters.

Periodic payments to investors

Every quarter, investors receive2%on their accounts, and that’s all the information they need — no further interactions are required. The participants in these projects do not deal with determining rental costs and do not worry about the maintenance of the building, right? Yes, that’s absolutely correct.

Responsibilities of participants and expenses

Their only obligation remains the expenses for the maintenance of common areas. For example, if we take one of the project examples, this amount will be£1200 + VAT (20%)that will result in£1440per year for any individual residential property. The specified figure, like other expenses, is already included in the fixed income.

Change of management company

You touched on the topic of a possible bankruptcy of the management company, and in that case, I will be able to replace it with another one. How does this process work? It is similar to what happens in apartment buildings. In a holiday park, there can be two management companies. One of them will be responsible for managing the common areas, and it is appointed by the landowner. The investor pays for the services according to the specified...£1440 per year.

Additional management companies

It is also possible to transfer the management of the object to another management company that will handle:

• Searching for tenants;
• Managing their interaction through the internet;
• Advertising.

When the tenant arrives, they are greeted and settled into the house, explains the reception.

The cost of services of the new management company

You mentioned that the owner can change the management company. What is the cost of services from the new organization? Usually, firms that offer a fixed income retain all funds received above the established limit. If partners from the market are involved, they typically earn around20%from gross revenue, that is, after accounting for operating expenses. This aspect should be considered when looking at investment opportunities.

Searching for a new management company

One of the frequently asked questions is the difficulty of finding a new management company if the previous one failed to meet your expectations or went bankrupt. There are many management organizations in the UK. Among them, two main companies stand out, managing 16,000 and 32,000 properties, respectively. These properties include not only holiday homes but also various resort complexes, which proves that solutions to this problem can indeed be found.

Professional consultation

If you are considering investing in real estate, especially in vacation homes, experts from Savills are happy to offer a service such as professional consultation. You can start the conversation by filling out a simple form with your name, email, and phone number. This way, you will gain access to all the necessary information in no time.

Issues with the management company

It's no secret that finding the perfect management company can be a real challenge, especially when unexpected issues arise with the current organization. However, in the UK, there is a wide selection, and the chances of finding a reliable partner are much higher than in other countries. Moreover, the presence of several large companies with significant assets under management indicates high competition in the market, which is an advantage for clients.

Important aspects of choice

It is important to remember that choosing a management company requires careful analysis. Be sure to assess the organization's reputation as well as its experience in managing properties similar to yours. This may include:

• studying reviews from actual customers;
• the assessment of the company's financial position;

Openness in communication is also important: a reliable management company is always ready to answer all your questions and provide up-to-date information about the status of your properties.

Additional services

In addition, management service companies often offer additional services such as:

• marketing;
• customer service;
• legal support;

These aspects can be very helpful for effectively managing your property and increasing its occupancy. Therefore, it makes sense to take a closer look at all the possible additional services that potential management companies can offer.

Real estate investments

If you are planning to invest in real estate, this step could turn out to be quite successful. The real estate market in the United Kingdom remains one of the most stable and high-yielding. Savills professionals have extensive experience in consulting and can help you determine the best strategy for your investments. Their professional recommendations can be a crucial factor in successful collaboration and profit generation in the future.

Quality of service

When choosing a management company, you shouldn't overlook its approach to clients and the quality of service. Many clients value a personalized approach and attention to detail, so it's important to establish a trusting relationship with your manager. This will help you feel confident and at ease throughout the entire period of managing your property.

Conclusion

In conclusion, it is worth noting that the question of how to find a suitable management company when difficulties arise with the current organization is quite solvable. With many available resources and professionals ready to help, you can be confident that you will find a reliable partner to manage your property.

Conclusion

In concluding our conversation about such an interesting and unique format as lodges, I want to emphasize that they are not just modular homes, but true oases of comfort and coziness in picturesque corners of nature. They offer the opportunity not only to enjoy the beauty of the surrounding world but also to spend time with family or friends, all while ensuring a high standard of living and relaxation.

LodgesAs we discussed, this is not only an attractive place for temporary living but also a great investment opportunity. Every year, domestic tourism in Russia is becoming increasingly popular, and lodges can be an excellent choice for those seeking a combination of nature and comfort. Even the basic models offer modern finishes and amenities that will make your stay as comfortable as possible.

Ecological and investment aspects of lodges

We live in a world where ecology and harmony with nature are becoming increasingly important aspects of our lives. Lodges, as a type of property, meet these demands by allowing people to enjoy quality relaxation while still being mindful of nature. The presence of infrastructure around lodges is another advantage:

• various services;
• extensive areas for recreation and entertainment;
• a comfortable getaway in harmony with nature.

The legal aspect is also important: proper registration of properties, compliance with legal norms, and safety standards ensure that every owner is protected in their rights and interests.

Advantages of lodges

Thus, lodges are the perfect solution for:

• those who want to invest in real estate;
• those who see it as a source of income;
• those who are looking for a comfortable place for a family vacation.

I hope this information has been helpful, and that each of you can find the perfect place for relaxation or investment in the future. Thank you for your attention!