Did you know that Melburnians are twice as likely as the rest of Australia to have a holiday home? Roy Morgan Research has highlighted that while 1 in 20 Melbourne residents (5.0%) have a holiday home the rest of Australia’s overall holiday home-ownership rate is just 1 in 40.
In fact, nearly a third of all Australian holiday home-owners live in Melbourne.
2.8% of people in Sydney or Brisbane have a holiday home, ahead of 2.7% in Adelaide and 2.4% in Perth. Only around 1 in 50 non-capital city residents have a holiday home. Nationally, including Melbourne, around 560,000 Australians 14+ (2.9%) report having a holiday home (Roy Morgan Research).
For Sale: 1/70 Kinross Avenue, Edithvale, Victoria – Stone Mornington Peninsula
Purchasing a holiday home: three things to consider
Whether it’s a weatherboard shack on the beach, a ski lodge tucked into the mountains or a country home surrounded by sprawling hills, it’s not hard to see the appeal of purchasing a holiday house. And while it’s easy to get lost in the allure of passive rental income and endless holidays, as with any property decision, it’s important to take the time to weigh up the pros and cons and really consider the bigger picture.
If your purchase is purely a lifestyle choice, there really are no rules. However, if you are looking to purchase a holiday home as a tool for wealth creation, here are three things you need to consider:
Rental vacancy periods
Perhaps one of the most overlooked factors when it comes to purchasing a holiday house, is the seasonal nature of tenancy in many popular holiday spots. The period of high demand for holiday hot spots is approximately eight to ten weeks a year – those same eight to ten weeks a year you’re most likely wanting to utilise the house. As such, if you wish to use the property to generate income, you will need to find the balance between renting it out and enjoying it for yourself. Before you buy, do your research and find out vacancy rates in peak and off-peak seasons so you can understand how this might affect both your holiday plans and your cash flow.
For Sale: 23 Nakula Street, Gaven, QLD – Stone Coomera
Location
Ideally, choose a location that tourists not only flock to during peak season, but a location that a sea of locals love all year round. It is inevitable that many popular holiday spots are going to be seasonal, however, you can aim to minimise the weeks the home is left untenanted by purchasing a property within a reasonable distance from major metropolitan areas. As a general rule of thumb, an easy two to three hour drive from the city is going to be more attractive for holiday makers, purely based on the ease at which these holiday areas can be accessed – whether it be for a couple of nights or a couple of weeks.
Deciding on location is really where purchasing with your head over your heart comes into play. While it might be a family favourite location for you, it’s important to do thorough research to understand the area’s potential for capital growth to ensure your investment is financially viable in the long run.
For Sale: 3322 Great North Road, Wollombi, NSW – Stone Hunter Valley
Upfront and ongoing costs
Beyond the standard upfront costs involved in purchasing a property such as stamp duty and land tax, you also need to factor in holding and set up costs specific to purchasing a holiday home.
If you’re planning to turn the home into a holiday rental to generate income, you need to think about property management fees, costs associated with cleaning and maintenance, and setting up the house entirely – from furniture all the way through to appliances and crockery.
Keep in mind, a holiday rental will likely suffer considerably more wear and tear than a long-term rental as there is a far higher turnover of tenants throughout the year. It’s a good idea to have an emergency kitty for out-of-pocket repairs should the unexpected happen.
Lastly, short-term holiday rentals are notorious for attracting party goers – there are no shortage of stories online about homes being trashed. Keep your property guidelines strict and make sure your management team does their due diligence prior to accepting holiday makers. Moreover, ensure you have an up to date insurance policy to mitigate significant financial fall out should anything untoward happen.
For Sale: 32 Jupiter Street, Gerringong, NSW – Stone Illawarra
For Sale: 89 Florence Terrace, Scotland Island, NSW – Stone Avalon | Palm Beach