For many people, buying an investment property in their favourite holiday destination presents a double dose of benefits – the chance to regularly enjoy staying there, and build wealth at the same time.
Such a property can also represent the ideal retirement destination, or somewhere to treat family and friends with affordable holidays in the meantime.
While buying a holiday property seems a great idea, consider the following before taking the plunge:
MAKE SURE YOU REALLY LIKE THE LOCATION
The first and highest priority is to know that you absolutely adore the location of your vacation property, and will be happy to adopt the area as your home away from home. Gaining such an understanding may require you staying for several weeks or longer to fully appreciate whether the location is going to stand the test of time.
Easy accessibility should also be considered. If the thought of catching two flights, or driving 1000 kilometres every time you want to take a holiday seems overwhelming, then you may wish to consider something closer.
KNOW ALL THE COSTS
A vacation property is the same as any other property investment – you need to factor in all the costs involved – rates, electricity, maintenance, property management and all other overheads involved. A dream vacation property can quickly become a nightmare if your holding costs exceed your budget.
MANAGEMENT OF THE PROPERTY
It is likely that you will only spend a few weeks a year at a holiday property, so what happens for the rest of the year in your absence?
A good property manager will not only ensure that ongoing maintenance issues are attended to quickly and effectively, but will maximise cash flow from rentals, and will also work to ensure that the property is consistently occupied and cleaned while you are not there.
Engaging a local property manager to undertake ongoing maintenance is very important, as the last thing you want to do on your holidays is to spend them repairing.
DUE DILIGENCE ON IMPORTANT INDICATORS
If your strategy for buying a holiday property includes creating more wealth as well as enjoying the benefits of staying yourself, then there are some calculations required.
Before buying a vacation property, make sure it has the capacity to attract enough holidaymakers to make the investment viable. Ask local agents about the average rental yield in the area, average rents for similar properties and occupancy rates, which can often be lower and more volatile in holiday locations.
Most holiday destinations experience “high seasons” when rent prices can be increased to accommodate increased demand. If this season clashes with your preferred holiday times, you may have to forgo earning higher rents for your own enjoyment, and this should be factored into your calculations.
You should also look at growth figures of similar properties over the past few years. This is good to keep in mind, and maybe necessary should you need to sell down the track.
TAKE SECURITY SERIOUSLY
If it’s likely that your vacation property will be left unattended for weeks or months on end, to protect your investment it is crucial to consider security.
Depending on the location and type of property, this could take the form of contracting a security firm to patrol the property regularly, or installing an alarm system.
Bottom line is, you need to be clear of all the facts before buying a holiday property.