Holiday homes: A Good or Bad Investment?

Buying a property to use as a holiday home is a popular idea for those in a strong enough financial position. You may be lucky enough to use it purely for leisure, but many prefer to consider it at least partially as an investment, with the home used as a holiday rental when you aren’t making use of it.

As with any property, a holiday home isn’t automatically a ‘good’ or ‘bad’ investment. A shrewd purchase can be a fantastic addition to the portfolio (and perfect for your own weekend getaways), but it’s important to carefully consider the variables and tax implications.

What is your goal?

Before you get too excited and take the plunge, ask yourself a simple question: Am I looking for a property to use for my own holidays, or do I want to use it to make a profit? There is, of course, a grey area between the two. You can make some extra cash by leasing a holiday house when you’re not using it, and you can always take a quick trip to an investment property if you need some time off. But it’s vital to decide on your primary goal and have this front of mind when deciding on a property.

Be prepared for fluctuating demand

Be careful not to assume your property will be booked year-round just because it’s an absolute gem. Particularly in southern parts of Australia, cooler months will see a dramatic drop in demand that may leave the home unoccupied for chunks of the year. This is far from the end of the world as long as you factor this into your calculations, along with how much you charge for bookings.

Consider what the property offers

When investing in a property as a holiday rental, think about what it offers in the wider context of the letting market – not just your personal preferences. There may be quirks and details that make it the perfect holiday home for you, but what about the average visitor? The ideal property has a prime location with proximity to the city or town’s cafes, takeaways, restaurants and other attractions, along with great views and a sense of privacy, exclusivity or charm. Distance from the beach is a big factor in coastal properties, and opting for self-contained accommodation may attract more visitors.

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