Holiday homes in Australia: good investment, great lifestyle choice, or both?
November 20, 2023
Let's be honest, if money wasn’t a consideration, most of us would jump at the chance to own a holiday home. Just me, or does the idea of driving to your own private getaway to recalibrate at the end of a long week seem the perfect antidote to our busy lives?
Holiday homes have the power to create irreplaceable family memories and experiences
With the increasing costs of flights, hotels and holiday packages, knowing exactly where you’re going, what you're getting, and having your own stuff around you is highly appealing. And if fear of the unknown is not what tempts you about the idea of a holiday home, surely the luxury of packing a small bag on a whim to head off to a property with all your creature comforts is not to be sniffed at?
Holiday homes remove much of the stress of travelling which makes them a great lifestyle choice with the power to create unforgettable family memories and experiences, but what about their potential to make money?
Are holiday homes a good investment as well?
Well, that depends on several factors, and perhaps the first question to ask yourself before you buy your holiday home is exactly what you hope to gain from it.
Is it simply a lifestyle choice, i.e., a second home that will become your holiday mainstay for most of the year, or are you hoping to make a return on your investment, either by renting it out (when you’re not using it) or through any capital gains when you sell it?
Careful planning is key to a healthy return on any investment
With any substantial investment like this, there's a lot to think about and good research is fundamental to your chances of success. We recommend you consider the following carefully before you buy:
The location of the property – Research carefully the areas you are considering, from the landscape and climate to the local infrastructure and any imminent changes. Make sure the property is easily accessible for your needs and the needs of potential renters if you intend to rent out your property for part of the year. Be objective: the hinterland may tick all your boxes, for example, but most short-term renters will want accessibility to local amenities such as cafes, restaurants, and shops.
Your property’s appeal – Your renter's first impression of your holiday home will be online so make sure you don't skimp on your property's presentation or the photos for your marketing. You are selling a lifestyle and most renters will want a property that typifies that lifestyle, i.e., Hamptons, Boho, or sustainably-styled properties in Byron Bay are more desirable because that is part of the package that influencers and celebrities have sold to them about the town. If you do intend to rent it out, style the property according to its rental potential, but do it practically, because it may sit empty for certain weeks of the year and during peak periods, it will get a lot of wear and tear.
Your overall costs – If you're concerned about the costs, you've come to the right place because buying an off-market property from Listing Loop is one way to reduce them. You may not be aware, for example, that the conditions of loans for holiday homes can differ from those of a regular home loan in terms of the amount the bank is willing to lend against the value of the property, so it is important to shop around for the best deal. Securing a team you trust to help you with the legalities and financing of buying your property is a must and our sister company, Lending Loop, specialises in these areas. Get in touch with their fabulous team today here.
Rental costs – With the excitement of buying a second property, it is easy to overlook "hidden" costs such as public liability insurance, short-term rental insurance, accommodation platform fees, landlord insurance, cleaning fees, maintenance and management costs, but you must factor all of these into your cost spreadsheet for a true picture of your investment's potential.
Usage and rental potential of the property – Be aware that rental demand varies from season to season, and some states are now looking to reduce the number of dates you can rent out your property short term. A market analysis of vacancy rates during the times you hope to rent out your property is advisable and if creating wealth is your main priority, understand that you are unlikely to spend the peak holiday periods in your home if you want to capitalise. Don't forget, however, that you will be making huge savings on your own holiday costs if your holiday home is close to where you live.
Your tax implications – Stamp duty is obviously a consideration when you purchase your property, although the amount varies from state to state. If you decide to rent the property out, you may also be liable for Land tax and when you sell, there is obviously capital gains tax. But remember, your holiday home is a long-term investment and there are also some costs you can claim back as a tax deduction.
Your local community – A caring, local community is a mine of information when you settle into a new area and an important support for potential renters. Great neighbours can prove a godsend when you are absent from the property for long periods of time.
Property maintenance – Maintaining a property from a distance can be a little trickier, but there are ways to reduce any potential issues. Building sustainably will pay off in terms of maintenance, energy costs, and carbon footprint. By choosing more sustainable construction materials, methods of insulation, and native plants for your landscaping, you reduce the risk of costly repairs.
The potentialreturn on your investment - If you need your holiday home to make money for you, be prepared to get down to the real nitty gritty of your costs. Energy usage, the durability of furniture and materials, those pesky "hidden" costs, and seasonal rental rates could affect your profit margin.
Your time – Time is money, and if you decide to rent out your property, think about what your time is worth. Organising bookings, cleaners and maintenance may take up more time than you think.
In other words...
Holiday homes can be a good investment, so long as you do the maths and put in the work!
But what is undisputed is that they are a fantastic lifestyle choice for those who can afford them and as Australia’s leading marketplace for property buyers seeking to uncover off-market and pre-market properties, Listing Loop is here to help you find and secure your dream second home.
Sign up today and we'll provideyou with access to a range of services that include home loans, conveyancing, utility connections and specialised property financing solutions to help younavigate each step of the buying process with confidence. For first dibs on your perfect holiday home or investment property from our portfolio of thousands of stunning off-market properties, get in the loop!
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