LOOKING TO BUY A HOLIDAY HOME?

The COVID-19 pandemic may have made you dream of a country escape or a beachside retreat.

The COVID-19 pandemic may have made you dream of a country escape or a beachside retreat.  You might have thought about purchasing a holiday house or a Perth Investment Property to fulfil your dreams. Plus, you could also earn some extra income by renting to other holidaymakers.

But before you buy that Dunsborough beach home, it is important to consider whether an investment property in Perth would be a wise investment. To help you weigh all the pros and drawbacks before deciding, Thought Leaders, your local Perth real estate agency, will walk you through the questions that you may have about buying a holiday home.

Which Type of Home is Best?

There are many properties available in Australia that can be bought or rented as holiday homes. While the most obvious property is a house, apartments, units, and cabins in holiday parks are all common options for holiday rentals.

Although the type of property is not necessarily the most important thing to consider when buying an investment property in Perth, this is something worth considering. Low maintenance properties are a great option to minimise costs and repairs.

You might choose to buy a 2-bedroom apartment over a 4-bedroom house. It is cheaper and easier to maintain. It's important to ensure that the house is comfortable to live in, especially if you plan to take holidays there or move in when you retire.

Location is Everything

When it comes to purchasing a holiday home, location is everything. Most holiday homes will earn a good return during peak seasons (Australian School holidays). However, properties that are not as desirable all year round may be less appealing.  

It is worth investing in a property with solid amenities and infrastructure close by. This will ensure that your rental home is more likely to be rented for longer periods of time.

The good and the bad when purchasing a holiday house

Owning your own slice of paradise can provide years of enjoyment, relaxation, great memories, as well as the freedom to travel to the mountains or coast at any time.

Investing vs. Choosing a Lifestyle

If you are assuming that a vacation home will be a good investment, then it is time for a reality check. In the past, the performance of metropolitan markets has been consistently better than that f regional markets. And this trend is likely to continue in the post COVID era. Although it is an attractive side benefit if there are high capital appreciations or rental returns, this should not be your primary goal. 

You will need to budget additional expenses for all the things you pay for at your primary residences, such as electricity and gas as well as rates and maintenance. Remember that a vacation home is often the first thing people sell when they are in financial trouble and sometimes at a loss.

How Do the Numbers Add Up?

So, you’re buying a house with cash? Congratulations. You are now able to borrow money to finance your purchase. You can only claim a tax deduction for costs such as rates, upkeep, interest if the property is generating revenue. This could force you to rent it out depending on your financial situation. You would likely see a much higher return if the money you intended to spend on the beach house was placed in a high-quality share trust.

The Renting Agreement

It may be smart to rent out your vacation home in order to offset the expense of purchasing it. However, this can also bring with it many problems. The property will see a lot more wear due to constant turnover of tenants, some of which may not be treating it well. You will need plates, dishes, and washing machines. Worse yet, the managing agent might be entitled at 12.5 percent to gross rents. While renting it out during peak seasons like Christmas or Easter can make you lots of money, it will also mean that you won’t be able use the property for yourself.

Or if feasible why not get the best of both worlds and rent your home out for part of the year, in winter get someone else to look after it, but keep the summer months free so you can enjoy it.

Same Year, but Different Location

Do you want to travel around Australia or even the world after COVID? In such instances, being bound to a single location may appear to be a constraining option. However, holidaying at your own home year after year, allows you to form bonds with a new community. You can see your children grow up with the neighbours, and it transforms into a very wonderful location. Knowing a place inside and out gives you a sense of liberation. You don’t have to worry about the kids if they walk off with their friends.

Stay Away From Lemons

Do your research before you decide about a holiday home. You could use a property data information website to find vital information about your property. This includes any floodways or bushfire zones, planning restrictions, cultural heritage indicators, prior sales histories, and previous sales histories. To determine if you may have a view blocked by someone else's development, it is worth checking the limits of your neighbour’s property. It is a good idea for you to check the most recent permits and approvals in your area. A recently issued development permit next door could make it difficult to see the home.

Purchasing a Product

It is essential to know the local real estate market before you consider purchasing a home. A property might appear affordable, but it may be in the wrong area. You can gain an understanding of the value of a home by looking at comparable sales in the neighbourhood. Also, consider when you plan to buy the property. Wait until after the holiday season. For example, Easter is the final hurrah before everyone heads home. A market is determined by supply and demand. So, the COVID-induced market frenzy should last until mid-2022.

Family factor

Spending time with the children when they’re young is what makes them happy. But in the not-too-distant future, you might have to listen to them complain about spending another boring weekend at home. If you want your vacation home to be more sustainable, look at how life will be in five, ten and fifteen years. You should think about the benefits of staying in the city for the kids as they get older. But don’t forget the power of a loved vacation home. It is possible that this is where soft-focus memories begin.

We are here to help

If you need help in deciding on whether to purchase a holiday property, our experts here at Thought Leaders Real Estate, a leading Perth Real Estate agency, will be happy to assist you at any time.