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Should You Invest in A Holiday Home?

24th Apr, 2018 | Investor

In this article:
Holiday homes – is investing in a beach shack or bush retreat a good move?

Do you ever think about getting away from it all to your very own bush retreat or beach house? Or maybe you like the idea of a tree or sea change, but you’re still quite happy where you are. You’re not alone. That’s why so many Australians consider buying a holiday home. But is it a wise investment decision?

Buying with emotion

Buying property can be an emotional process. Whether it’s your first home, forever home, or holiday retreat, we often look at it through rose-coloured glasses. In fact, sometimes there’s even more emotion caught up in the holiday home decision. You’re thinking about falling asleep to the waves crashing on the sand or waking up with the birds (and no traffic!), rather than the usual checklist of what an investment property should have.

It’s easy to forget that it’s a significant financial decision which may tie up equity and cashflow earmarked for investment choices down the track.

What are your intentions?

Do you want to invest in a holiday house that becomes your second home? Or would you like to buy a house for investment, but one that gives you the benefit of some beach or bush time when it’s vacant?

Understanding your motivation to buy is a good starting point in deciding whether it’s a good investment decision. And it’s okay either way if it works within your overall plan. So, here are some things to consider if investing in a holiday house is on the cards for you.

  • Lifestyle choice

If it’s a lifestyle decision, you’ll want the house available whenever you need a holiday or weekend getaway. It means you’ll probably buy within 1 -2 hours drive from home, and you’ll set it up as if you were living there. A packed bag and a short drive down the road, and you’ll be ready to relax in no time at all.

Keeping this home solely for personal use means you won’t receive regular rental income. So, you’ll need to consider whether your income can support a loan on this basis. However, by choosing a property with potential for capital growth, it could still be a reasonable investment choice.

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  • Investment strategy

If you see a holiday home purchase no differently than you would any other investment decision, you may have more property options available. You won’t be limited to locations close to home, and you’ll be able to make a choice that gets the most out of your investment dollar. You’ll need to consider its proximity to restaurants and attractions, and whether tourists are drawn to the area outside of peak times.

If you use the home for a holiday now and then, you may need to seek advice on how this affects your tax deductions. It’s also important to remember that owning a holiday home is different from standard property investment.

  • Includes furniture and household items
  • Higher management fees
  • Less certainty around rental income
  • Regular cleaning and maintenance costs
  • Vacancy during off-peak seasons

So, is buying a holiday home a financial investment, or a recreational one? Do you want income, capital growth, or both? Or maybe just some downtime? Your Yellow Brick Road Mortgage Broker has helped thousands of people find a holiday home that suits their needs perfectly. How can we help you?