House of the rising sum

Today’s second-home buyers are seeking more than pleasure from their properties – they want an income, too, reports Catherine Moye.

St Emilion château and vineyard.
St Emilion château and vineyard.

Increasingly, it’s not panoramas of glistening bays or hills strewn with olive groves that melt the hearts of high-end second-home seekers. It is prestige properties that generate wealth in financial as much as lifestyle terms. “We’ve seen a big rise in high-end buyers looking to acquire property that will produce an income stream,” says Joanna Leverett, international network manager for estate agent Savills International. “At the very least, they want it to cover all its running costs.”

American former property developer David Stein reaped personal and business rewards when he turned his home on the island of Mallorca into a boutique hotel. In 1990 Stein bought Son Net, a 17th-century estate in the Tramuntana Mountains 25 minutes from Palma, the island’s capital. He returned the house to its former splendour and for more than eight years it served as Stein’s idyllic retreat.

But with the family scattering around the world and Stein spending more time in the US as president of the Robert F Kennedy Memorial Foundation, Son Net was lying idle for long periods. “It was frustrating because we had a big staff and, besides having to pay for them, if staff aren’t working they aren’t motivated,” says Stein. There were also the legion problems of trying to run a large estate from across the world. The solution was to use his expertise as a resort developer and turn Son Net into a boutique hotel that he could still live in for much of the year. This involved converting an olive mill into a gourmet restaurant and installing two swimming pools, among other improvements.

David Stein outside Son Net, the Mallorca home that he turned into a boutique hotel.
David Stein outside Son Net, the Mallorca home that he turned into a boutique hotel. | Image: Matt Munro

Stein’s chief concern was how he would feel about opening up his home to strangers. The answer was a change in attitude. “One reason this has worked is because we decided from the start to view the people who stay here as ‘house guests’ rather than as ‘hotel guests’,” says Stein. To preserve his privacy, Stein built himself a separate house adjacent to the estate but he often stays in the main hotel. Little wonder when his list of “house guests” reads like a Hollywood after-party meets the Davos economic forum. Francis Ford Coppola, Oprah Winfrey, Lord Mandelson, Gerhard Schroeder and members of the Kennedy family have all stayed here. Indeed, the experience was so positive that Stein decided to expand his professional remit to include the development and operation of small luxury hotels.

Son Net is poised gracefully on the tip of an escarpment, some of its outer walls painted the soft pink of a ballerina’s tutu. Each of its 31 rooms and suites has a view overlooking the slopes of the Tramuntana Mountains where Tour de France winner Alberto Condator and the rest of Team Saxo Bank-SunGard trained in February while staying at Son Net. Quite which “house guests” are paying visitors and which are Stein’s friends is unclear. For the line between making money out of his home and simply enjoying it is a fine one. “It really works as a barter system,” says Stein, who now spends three days a week at Son Net and the rest of his time at another home in Barcelona. “For example, I just got back from a travel show where I invited 20 people to come and stay. In return they invited me to their hotels and resorts. And it’s always better to stay at a hotel as a guest of the owner.”

Stein even reckons that his own lifestyle works out cheaper. “You are eating in your own gourmet restaurant each day and not paying for it retail,” he says. “Not only do you get to enjoy this splendid home, it’s all being paid for by other people. And, best of all, I can share in their enjoyment.”


When businesswoman Sarah Newman bought an expensive field in the Swiss ski resort of Zermatt with the intention of building an upscale ski chalet, her thinking was crystal clear: any personal benefits had to have a rock-solid business base. “Right from the start I intended that the chalet be fully staffed and serviced so that it would appeal to the high-end rental market,” says Newman, a former “dragon” on the Irish version of Dragons’ Den. Not only did Newman want a chalet that made an architectural statement, she knew that today’s affluent Alpine sports fanatics demand a more stylish décor than a few cowhide rugs and stag-antler chandeliers.

With that in mind, she set about persuading the local authorities to relax their stringent planning regulations regarding Alpine architecture. “The thing that caused me the most frustration was wanting one big window that would give uninterrupted views of the Matterhorn,” says Newman. Initially, the authorities demanded traditional Swiss latticed-style windows but, eventually, Newman prevailed.

In 2008 Chalet Grace, named after her daughter, was born. It is a showpiece with a highly contemporary interior that has quite literally raised the bar in Zermatt where the heights of ceilings and door-frames are concerned, and which has a level of luxury more commonly found in Manhattan penthouses than Matterhorn pastures. Chalet Grace spans three levels totalling 450sq m with five en-suite bedrooms, and its gargantuan windows effectively incorporate the Matterhorn into the design. Additional features include a cinema and a wellness centre. Newman rents Chalet Grace fully staffed in peak season for £42,800 per week (sleeps 10). Perhaps unsurprisingly, she says, “If we get a late booking, we cancel our trip.”

This historic villa in Tuscany comes with its own wine estate.
This historic villa in Tuscany comes with its own wine estate.

Ever the businesswoman, Newman also has an eye on her investment. “I love Chalet Grace, but every entrepreneur I know has assets up for sale in the current climate,” she says (Chalet Grace is on sale at SFr15m, about £10.2m, through Savills Alpine Homes).

According to Leverett, Chalet Grace’s success is partly thanks to prosperous families increasingly preferring to rent a sumptuous private home rather than rooms in a hotel. Consequently, the earnings from some homes, especially in prime markets such as Barbados, the Côte d’Azur and the Italian Lakes, can now be too great to refuse. Added to this, there has been a shift in attitude, with owners of multiple homes no longer as resistant to the idea of strangers using them during their absence.

“More and more people are renting at the high end of the market: people who would never have considered doing so in the past,” says Paddy Dring, head of international residential at estate agent Knight Frank. “In the current economic climate people want all their assets to pay their way. They no longer regard second or third homes as inviolable sanctuaries.”

The Matterhorn, seen from Chalet Grace, Zermatt.
The Matterhorn, seen from Chalet Grace, Zermatt. | Image: Joe Condron/

Running a second home as a commercial concern can also be extremely tax-efficient, as Kevin Austin and his partner, Geoffrey Flanders, found with their holiday home close to the picturesque mountain village of Gaucin in southern Spain. They run it as a boutique hotel through Equus Hair, their prestigious hair salon in London’s Knightsbridge. “It’s tax-efficient because if you have a mortgage on your property as a small hotel, your running costs to do with the hotel and your mortgage interest are legitimate tax-deductible expenses,” explains Austin.

Having acquired a 16-hectare plot of land with a few cottages plus flowering mimosa, wild orchids and almond and olive trees, the couple built their 800sq m home, La Santera, in a traditional rustic style. They are now selling (€2.5m; Savills International) partly to fund the relaunch and refurbishment of Equus, but also because they don’t have as much time to spend in Spain.

“We built it with a commercial view in mind, with seven bedrooms and en-suite bathrooms, and designed it so the guests don’t view the staff and the laundry,” says Austin, adding that La Santera runs at a profit. “We’d rather have the house full of people than sitting empty and in high season it’s too hot for us there, but a lot of people love the heat.” It can be rented from June-October for ¤10,000 per week including food and drink, for a maximum of 14 people.

The bar area of Chalet L Raphael in Verbier.
The bar area of Chalet L Raphael in Verbier.

Although EU laws permit running a working property as a British business, in the past it has been commonplace to use loopholes in indigenous tax laws. In France, for example, someone operating a château and vineyard as a farm would avoid paying wealth tax, even if vineyard production were subcontracted.

The combination of high mountains and low taxes has always drawn wealthy individuals to the Swiss Alps. Now, as Sergio Martinez, manager of Aylesford International’s Geneva office, points out, buying a second home in some prime cantons is only possible if owners are prepared to run it largely as a commercial venture. Verbier in the Valais region is a case in point. “In Verbier they can’t sell any more residential chalets to foreigners because of strict laws governing the number of permits given to non-residents,” he explains.

The only way round this is to acquire a commercial licence. One American employed this manoeuvre to astonishing effect at Chalet L Raphael, a 3,000sq m trophy chalet that has gone off-piste in terms of its price tag and luxury. Its facilities include a 15m onyx swimming pool, a cigar room, and a sushi and vodka bar. It currently rents for SFr90,000 (about £61,000) per week in peak season (through Aylesford International).

Las Herrerias del Rio Madera estate, Andalucia.
Las Herrerias del Rio Madera estate, Andalucia.

The economic downturn’s squeeze on property prices in even the most tantalising parts of Europe has also produced some unique opportunities to buy into and profit from some of the Continent’s finest estates, especially vineyards. “We are seeing a real mix of nationalities looking to acquire vineyards right now, especially in Bordeaux,” says Leverett. “But the highest level of interest is coming from China.” The big factor here is the explosion in Chinese demand for fine wine (see The New Red Army), with buyers looking to export the recent red vintages back to China. But the château itself is also coveted. “Owning a historic château is seen as a huge status symbol and the stunning French countryside is a discovery they want to share with friends and family,” says Leverett.

Among the Bordeaux wineries up for sale is St Emilion Grand Cru, an 18th-century château set in a hectare of parkland and with 6.3 hectares of vines. Cradled at the heart of a gorgeous valley in the Dordogne, the château itself encompasses more than 300sq m (€5.45m, through Savills).

The prestige that a château confers upon its owners, especially one set within the terroir of majestic grand cru, has qualities that translate into all languages. “The biggest selling point is having your own name on the label,” says Gemma Bruce, Aylesford International’s Italian consultant, based in the Chianti region of Tuscany. Americans with Italian ancestry in particular are eyeing up mansions such as a 17th-century 13-bedroom villa near Siena extending over 296 acres, including 29 acres of Chianti Classico vineyards (€16m, through Aylesford International).

La Santera in southern Spain.
La Santera in southern Spain.

The expectation that holiday properties should pay for themselves has seen the market shift in favour of traditional estates across Europe, asserts Charles Weston-Baker, head of international residential at Savills. “Owning a working vineyard or olive grove has never been so fashionable,” he says.

A family home in a serene natural setting that would also pay for itself is what Daniel Kaminski was seeking when he chanced upon the 650-hectare Las Herrerias de Rio Madera estate in a remote part of Andalucia. “It struck me as the embodiment of ‘The Lost World’,” says Kaminski, formerly an accountant with Peat Marwick Mitchell (now KPMG), who bought the estate with a friend and business partner in 2008. “It was for pleasure, investment and business in that order,” says Kaminski, who runs the estate as an upmarket rural tourism business and also profits from logging. “We have no noise or light pollution here. As the light goes down you can watch the deer come to feed, and when it’s dark it’s as if you can reach up and touch the stars.”

Crucially, from the agro-tourism point of view, Las Herrerias de Rio Madera is surrounded by a state forest with trails for mountain biking, walking, trekking and four-wheel driving. “We set the whole thing up as a business in 2008 and treated ourselves as normal clients,” says Kaminski. Unfortunately, his business partner now needs to sell the estate, whose eight-bedroom, six-bathroom farmhouse rents for €5,000 per week during peak season. Other income includes €20,000 per annum from hunting rights and €80,000 from subcontracted pine harvesting. There is also a second house on the property and permission for more buildings (€6.3m, through Savills International).


From status symbols to income generators with lifestyle benefits, nowadays the deciding factor when choosing an overseas home is finding one that “works for you” in more ways than one.

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