Pros and cons of a holiday home
Most of us have dreams about owning a holiday home in a place we love, but those thinking of buying a second home need to remove the rose tinted spectacles and do some serious homework before signing on the dotted line.
The first thing is to decide who will be staying on the property. Is it going to be earmarked strictly for family holidays or will it be rented out to holidaymakers? If the latter, what sort of rates are charged in the area in which you want to buy, and will demand be such that you’ll be able to rent out the home throughout the year to cover your costs?
There are pros and cons to owning a second home
The positives include being able to visit your destination of choice whenever you feel like it;
having a home where friends and family can share magical holidays without breaking the bank;
and owning something that can generate enough income to pay for itself. These second properties are also often viewed as the ideal place to retire.
The negatives include the cost of maintaining the property, and the possibility of abuse by friends and family who assume that they can use the home whenever they like, without having to pay.
Also read: Tips on how to pay off your home loan faster
What you should find out before investing
The average price of property in the area in which you wish to buy. Don’t be fooled into paying too much, do your homework first in order to determine what other people have recently paid for property in the area
Rental returns for the area
The costs associated with owning such a property, including rental agents, garden services, general maintenance and levies. Some properties require more maintenance than others.
Beach properties for example often take a pounding from the sea air and may need more regular maintenance than would a property situated further inland.
The tax implications of renting out a holiday home
Never let your heart rule your head, and if you are buying a holiday home in order to make money, you need to be sensible. A beautiful home won’t necessarily appeal to holidaymakers if the views aren’t that great, or if it’s far away from amenities.
Advertising a seaside property which doesn’t boast a sea view or is kilometers from the beach can also backfire and although the property may be rented out, you might be forced to drop your rates out of season.
Don’t rush into a purchase. Circumstances have a way of clouding your judgement, you’re on holiday, you love the area, you’re having a terrific time and want to buy something immediately in the hopes of recreating this idyll in the future.
Do the maths
Chat to local rental agents to discuss the average rates charged and perhaps more importantly, to gauge the demand for holiday rentals in the area. All holiday hotspots have peak seasons, but you may want to reconsider buying if the area dies out of season and there are a plethora of holiday homes available. Ask yourself if you can realistically afford to keep a second home running if it’s not being rented out.
Don’t lose sight of why you bought the home and try and make use of it yourself at least once a year. Use this time to relax, explore the area and carry out any running repairs needed to keep the property in a condition likely to appeal to those in the holiday rental market.
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