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It may be a good reason to buy a property: to give your family a place to holiday, where you can store all your holiday toys and not have to cart them across the country.
But when buying a holiday home it’s crucial to decide what the property is for, what it will achieve and over what time frame.
Typically, people buying holiday homes think they’ll use the house for holidaying three or four weeks of the year, and for the rest of the time, it’ll be a rental property.
So, the family has occasional holidays and the mortgage is subsidised by rental income.
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However, property is an expensive purchase so always look closer at the financial assumptions:
- Holiday rentals may be high in the area you’re buying in, but how long is the holiday season? Does the planned rental income in this short window pay enough of the mortgage to make it worth it?
- Is your property high-demand and therefore high-occupancy? The holiday house you love may not be the house that someone wants to rent unless it has some marketable features (lots of rooms, sea views, close to ski field etc.)
- You’ll have management costs to meet. It’s fairly normal for an agency doing holiday rentals to charge 15 – 20 per cent of the rental income to manage the property.
- You’ll also have ongoing costs to rent-out your property, such as providing linens, replacing broken chattels, as well as gardening and lawn-mowing to keep the property at a marketable standard.
Remember also that you should have expert advice on the tax implications of the holiday home, because tax benefits generally only accrue when the property is being rented. Good advice is also recommended so you get the optimum mortgage for the property purchase (eg. interest-only, fixed interest etc.)