Investing in a Holiday Home
April 4th, 2014
With the Easter break fast approaching, you may find yourself lingering about the real estate window a little longer than usual – ticking off features and calculating costs.
It’s not uncommon for most holidaymakers to want to own their piece of paradise. In fact, many Aussies believe owning your own holiday home is the second step in achieving the ‘Great Australian Dream’. That said, owning a slice of heaven is not like managing an ordinary investment property. In fact, there’s an entire different living and occupancy criteria to consider. Here’s a few key areas to mull over before you buy.
Make a decision and stick to it
No matter what your final gain is, always have a strategy prepared for your new investment. This is standard for all investments, not just your favourite getaway.
Most holiday homes are bought for personal use, financial benefit, or both. There are certainly advantages and disadvantages associated with each game plan. For instance, if you’re looking for financial and personal gains, then be willing to give up holidaying when the surfs up and the weather is prime during peak seasons. If you’re taking the financial road, then be prepared for peaks and troughs when it comes to tenancy. And if you’re just looking for personal benefit, get comfortable with the idea that your second home may lie uninhabited for most of the year at the likely cost of a near fortune.
Always invest with your head – not your heart.
If you’re planning on renting out your holiday home, then before you buy, consider not only what the property can offer you, but also what it can provide for potential holidaying tenants. While it may be obvious to you that the house in the hills with the goat track is a dream escape, it may not be as evident to anyone who’s looking to rent it for a holiday.
Bear in mind that most tourists prefer to rent in areas where recreational activities and attractions are close by. A safe bet, is to invest in properties that boast location appeal – whether it be beach views or close proximity to trendy restaurants, cafes, and other shops.
If you’re not looking to renovate, consider homes that are newly built, or that are in good shape. You don’t want to be forking out extra cash on repairs for a home that’s designed for rest and relaxation.
Get familiar with the area before you buy
Be aware of the social, environmental and commercial features of your chosen location before you buy. Talk to the local shop owners and property developers; see what makes the area attractive to tourists. Ask the neighbours about the weather as well as the local fauna.
If you’re looking at beach front properties, make enquiries about the frequency of cyclones and king tides in the area. Alternatively, if you’re thinking about a cabin in the bush, find out if there are any venomous animals and insects habituating close by. If necessary, provide information cards with your property regarding what type of wildlife a tenant should expect or avoid.
It’s always a good idea to spend a few weeks holidaying in the area where you want to buy before committing on paper. Organise stays during peak and off seasons so you’re armed with a clear and informed idea of what’s on offer now and in the future.
Be prepared financially for the down times.
The returns from a holiday home can fluctuate significantly. On average, the high demand period for holidays rentals extends for about 8-10 weeks per year. Regions where the weather is warmer and more consistent will often see a slightly higher occupancy rate. Most see a massive decrease in winter, particularly in much southern areas where temperatures can be quite cool and dry.
For most people, a holiday home is their second primary residence, so make sure you do all your sums before you buy. Plan your rent price for months during peak and off seasons; take extra consideration with the costs of maintenance (fees cost around 4 to 5 percent of the total rental income) particularly if you own a pool or tennis court; and ensure you’re prepared for any costs associated with long vacancy periods. Always budget for the replacement costs of appliances as well – long periods of non use and high use can often lead to premature failures.
Consider having your property professionally managed
Good marketing for your property is essential – particularly in peak holiday seasons. If you’re running a tight schedule, then it’s certainly a good idea to hire a professional to manage your investment. Most rental agencies will handle many of the aspects regarding rental properties; from marketing and tenant management, to maintenance and rent collection. On average, professional management costs around 15 percent of the total rental income.
If a professional channel is not for you however, be careful when it comes to taking on the extra responsibilities of your new property. Always hire a professional photographer to help you capture your property in all in glory, and use local billboards and trusted websites to advertise your holiday home.
Guarantee your property will dissolve any holiday stresses
If your hoping to rent out your property, equip your holiday home with household appliances and features that will ease the stresses of a holiday. For instance, most tourists prefer to save money on food by cooking at home, so offer a good spread of cooking utensils and they’re more likely to return next year.
Other attractive options might include the supply of linen or sporting equipment, such as bikes, kayaks, skateboards, tennis racquets and cricket sets.
For any further queries regarding holiday property management, please contact CBS Property Group.
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