Are holiday homes a good investment?
The Real Estate Buyers Agents Association of Australia (REBAA) has warned Queenslanders of the potential pitfalls of purchasing a holiday home, particularly if you plan to rent it out as a source of income.
REBAA said several factors impact any profits earned from a holiday home, including:
- Rental yield
- Property maintenance (particularly in coastal locations)
- Body corporate or strata fees
- Property management fees
- Cleaning costs
REBAA shared its top tips to consider before buying a holiday home.
Never buy during the peak of the market
When the property market is flat, a quality property in a good location will always find a buyer.
The properties that struggle are those that have major flaws or are in more unusual locations.
A good question to ask yourself is, “Would this property generate interest in a buyer’s market?” If the answer is no, be very careful what you pay for it.
Ensure you have a buffer to cover unforeseen expenses
Even partially leasing to other holidaymakers can incur costs as these tenants can be more hard-wearing than long-term tenants.
Consider having an emergency buffer for common items that may break down quickly or require replacement due to increased wear and tear.
Be realistic about costs
Many holiday home buyers forget that a second home incurs expenses such as electricity, water and council rates, maintenance, cleaning, annual pest inspections, land tax, and insurances.
Be realistic and seek professional advice if you’re unsure of the financial ramifications.
Is it cheaper to holiday lease yourself?
Consider the long-term benefits of holidaying in the same place on a long-term basis. Is it really what you want?
Financially would you be better off holiday leasing rather than carrying the costs (and potential stress) of a holiday investment?
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.
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The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.
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RACQ Operations Pty Ltd (ABN 80 009 663 414 AR 000234978) and Members Travel Group Pty Ltd (ABN 45 144 538 803 AR 000432492) are acting as an Authorised Representative of the issuer of the insurance, Tokio Marine & Nichido Fire Insurance Co., Ltd. (ABN 80 000 438 291 AFSL 246 548). Any advice set out above is general in nature only, and does not take into account your objectives, financial situation or needs. Before purchasing any travel products, please consider the RACQ Travel Insurance Product Disclosure Statement (PDS) and the Target Market Determinations (TMDs) that apply to these products. Whilst the PDS outlines the Terms and Conditions of these products, the TMDs outline the intended class of customers that comprise the target market for these travel products. This will allow you to consider which products best suit your objectives, financial situation and needs and consider the products appropriateness to your personal circumstances. TMDs also outline matters involving the distribution and the review of these products. The PDS, Supplementary PDS and TMDs for each travel product can be found here.