Blog Is a holiday home a good investment property?

Is a holiday home a good investment property?

05 April 2016
Is a holiday home a good investment property?

You've just had a blissful two weeks at your favourite beachside getaway.

Days of sun and surf, balmy nights and easy laughs. The stresses of daily life and work seem a long way away.

You can't help but think it: Wouldn't it be great to have a holiday home here?

You could come to the beach whenever you wanted, maybe retire here down the track. In between visits you could rent it out and make a bit of money.

But is buying a holiday home a good idea? Well, that depends. Like all significant purchases or investment decisions, having a clear goal is crucial.

Buying a property based on nothing more than the fact that you caught a couple of decent waves and felt happy walking around in a sarong all week is not a sound basis for a major financial commitment.

There are big holding costs associated with a holiday home - rates, maintenance, cleaning, insurance, perhaps body corporate fees, water and electricity charges - and it may only attract tenants during the peak holiday periods which amount to about 12 weeks a year.

And while those lucky people who bought beachfront property at Noosa or Byron Bay 30 years ago are sitting pretty on some spectacular capital growth, there are plenty of places where growth has stagnated or slid backwards severely.

One consideration that is often overlooked is apathy. Do you really want to keep going to the same place year in and year out for the term of your natural life?

It's a big, beautiful world out there with lots of stunning places to visit for a holiday. Plenty of savvy investors will tell you it is smarter to put the money that you would have spent on a holiday home into managed funds or other investments with easy liquidity.

Then you avoid all the costs and hassles of managing a property and can holiday wherever you like using the investment earnings.

But, as with all property purchasing decisions, research is the key. If you have your heart set on owning a holiday home - and many Aussies do - find one that has good fundamentals. Well-designed buildings in desirable locations with tenancy demand growth and manageable cost imposts will always be a good buy.

Bon voyage!