For many it would be a dream come true to own a holiday home somewhere beautiful by the coast. Here’s how to do so without it turning into a nightmare.
It’s that time of the year when most of us start thinking about our Christmas holiday on the coast.
Whether it is down south or up on our northern coastline, there is nothing better than sitting back on the veranda with family watching the kids play on the beach. It’s usually times like this that the conversation drifts to buying a property in our own special holiday town.
“Wouldn’t it be great to have our own special piece of heaven?” we muse. I am sure we have all had these thoughts or heard these words spoken.
Owning a holiday home is a very common thing to do for Australians. I have read that there are over 500,000 of us who have done exactly that. But before we all rush out and buy that fantastic place on the beach let’s have a look at some of the questions you need to ask yourself.
One of the first things to consider is whether you can actually afford to buy it and what you plan to do with the house.
Once the dream turns into a bit of reality you need to work out how you are actually going to pay for the house. If you can afford to pay cash for the property then there are not too many problems, but most people tend to take out another mortgage to pay for the new place. This is where you need to be very clear on what you want to get out of the property.
Many people buy a holiday home with a view to renting out the property when they are not using it. Sounds like a great idea – “we only will be using it for a couple of month’s of a year so we will rent it out to holidaymakers for the rest of the time” – you say.
This is great in theory but have you considered that the time that you want to use the property is no doubt the time other people will want to rent it off you? Summer holidays are a peak time for holidays for a reason. This is the time you will earn peak rent on the property, after all, and if you are occupying it yourself, no rent is coming in to pay for the property.
Also consider that non-peak months tend to have a very low occupancy rate for holidaymakers – again it is called non-peak for a reason.
If you plan to rent the property out, you need to get advice from your accountant on what tax claims you can and can’t make on the property.
You need to make sure that you are making the correct claims for the correct time periods.
As a very general guide you cannot claim a tax deduction for something you are using for personal use, which means when you are using the property for your own purposes.
You will also need to get professional advice on insurances to ensure you are covered if something goes wrong with the property or to people occupying it. If you need to rely on the rent coming into the property to make it work from a financial point of view, then you could possibly better off by purchasing an investment property and renting it out normally.
One of the reasons some people buy a holiday home is to have a place to live once they retire and the holiday home is a trial run for this time.
Just make sure if this is the case, that the town you choose has all the facilities to cover your retirement plans. As we get older we become more reliant on having good infrastructure such as health facilities around us, so make sure you take this into your plans as well. However, this can be a great way of slowly moving into a new community.
These are only a few of the considerations to be made when looking at a holiday home. Many people have invested in a holiday home over the years and have had a fantastic experience and have made lifelong great memories with their friends and family.
These are things money cannot buy. Done correctly, a holiday home could be one the most enjoyable investments you make.