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Is a Holiday Home a Good Investment?

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is buying a holiday house a wise investment?

It’s already November and many of us are already planning our Summer holidays. Going abroad can be a wonderful way to holiday, but so too can staying closer to home and retreating somewhere without having to board a plane. Perhaps you’re even lucky enough to not need to book accommodation if you happen to own a weekender or holiday house. 

There are a number of benefits of investing in a holiday home or weekender. It’s not always financially lucrative, though it can be if you do your research and have a plan in place to make the venture profitable.  Here are just a few pros and cons to investing in a holiday house and tips to make it more financially viable.

Pros: 

  • More Relaxing: Knowing where you are headed, somewhere familiar yet still a novelty, having your own weekender can be a great way to ensure you and your family take regular breaks away from the day to day, helping to reduce stress levels and increase quality time with loved ones. Having a place set up with all the familiar essentials for you to relax and replenish your energy can also take the stress out of planning your break. Its likely you won’t have to bring too much to your own weekender, as you can leave as much or as little there as you like.
  • Flexibility: Having your own property means you can visit whenever suits you and of course you can also invite family and friends to stay too. You have the choice of charging rent to people to know to help cover the costs of maintaining the property or letting loved ones visit free of charge, it all depends on your personal situation.
  • Potential Income: To make a weekender financially viable, you should consider making it available as a holiday rental at least during peak seasons as a way to help offset some of the costs of holding the property. If you invest in a property located somewhere popular and busy at certain times of year (ideally with demand for accommodation being higher than supply) you also have the benefit of being able to charge a premium, helping you to keep on top of mortgage repayments (if there are any) and other costs. To make a profit, obviously you need all costs associated with the property covered. Generally a holiday rental won’t match the potential income earnings from a conventional investment property, it can help you to justify and make financially viable, the purchase of a holiday home. Millions of people seek out holiday homes every single year. With the outstanding global success of recreation accommodation websites such as Air BnB and Stayz more and more people are making their personal weekenders publicly available with much to gain financially. Smaller coastal towns can have good entry level prices yet are still popular holiday destinations. Look for a region with beautiful scenery and a mild climate with easy access to beaches, local attractions as well as plenty of nature.
  • A Solid Investment: You may be able to claim certain tax deductions applicable to holiday rentals. And if you purchase wisely your property may appreciate in value enjoying long term capital growth. 
A solid investment will usually require the following: Be in a high demand area with limited accommodation options and be close to amenities and local attractions. Ideally your property will also be located close enough to be able to access major centres in an area with a viable and stable local economy.
  • As a Retirement Plan: Perhaps you have found a place you love to visit from time to time now, but would like to make your home later on in life during retirement. Investing in a retirement property now, when you have income to help pay it off as well as the potential to earn income from the property before you move in, makes it a more viable long term investment. Ensure the property is close enough to shops, a hospital and health or aged care facilities as well as a local community. And consider maintenance and accessibility factors that might impact you in retirement such as stairs or a large garden.

Cons: 

Some things to consider before you take the leap.

  • Tennants: If planning to make your property available for tennants, consider the cost of advetising, setting up a website (not essential if listed on third party sites such as Stayz and Air B&B), will you be able to find tenants for periods when you won’t be staying at the property yourself? Keep in mind many holiday destinations rely on a healthy economy and tourism to drive new visitors to the area, both these can fluctuate and may impact the profitability of your investment,
  • As a holiday home: Perhaps the novelty of having your own holiday home will diminish over time and you won’t want to go to the same place each time. Perhaps you won’t use it as much as you initially thought, and it becomes a financial (and emotional) burden.
  • Bad investment: All property investment involve some level of risk, and there is always the chance that your weekender declines in value rather than appreciating sufficiently to offset the costs of keeping the property.

Costs to consider:

  • Mortgage repayments if applicable.
  • Advertising and marketing for your holiday home on third party websites, local holiday guides and through local real estate agents.
  • Management of the property either this is something you undertake yourself, if you have the time and understanding of the role, or you outsource this to a real estate agent, holiday letting agent or a property manager. 
  • Council and water rates and other bills such as electricity, cleaning services, maintenance and repairs costs as well as the expense of furnishing your property. Consider if you will you need to undertake any renovations to make it liveable? This could be an additional cost to budget for.

Investing in a holiday home is a significant financial commitment, and the best way to make it a rewarding investment is to carefully research the local property market as well as all costs involved before you make a purchase. Also ensure you research locations that will give you a healthy rental yield and long term growth potential.

Buying a property can be overwhelming whether its your first home or you’re looking to buy a little weekender, but Endeavour Mutual Bank can assist you to act quickly when the right property presents itself. Endeavour Mutual Bank can provide continued support and up to date information along your journey to make the process as simple as possible.  To find out more about getting a loan through Endeavour contact us or explore our easy to follow Home Buyers Guide for some more handy hints and tips.

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.