What to consider when buying a holiday home
If you have enjoyed a wonderful holiday, you might be tempted to splash out on a second property so you can enjoy more breaks more often but here are some things to consider before your purchase.
Thinking of investing in a second home? Before you sign on the dotted line, heed this advice from Praven Subbramoney, CEO of Private Bank Lending at FNB.
Subbramoney says many property investors consider purchasing a holiday home to either diversify their source of income or to use as an escapism haven. “However, unlike other types of investment properties available, there are a number of unique factors that should be considered when investing in a holiday home.”
- Maintenance – as any other investment, holiday homes often attract maintenance costs. However, these are to ensure that they establish and maintain a competitive edge, are well kept when vacant (if not in rental market) as well as to meet potential tenant needs and expectations.
- Rental income – it is important to consider that, with holiday homes, the stream of income is not steady but seasonal. This could be influenced by corporate and private interest, public holidays or big events amongst others. Therefore, it is essential to plan in advance and determine how to make up for the loss of income, when the property is not occupied.
- Location – location can help attract the right caliber of tenants willing to pay a suitable rental. For example, people who go on holiday at the coast, predominantly opt for accommodation that has a good view of the sea, close to amenities and entertainment.
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- Leisure – investors who are also planning to use the property for their leisure need to ensure that they communicate with their rental agent well in advance that the home is not available for rental during their stay. This however, will result in the loss of rental income when done over a peak season.
When considering attaining and retaining one’s investment, holiday homes are financed like any other investment property. Therefore, an ideal option would be that of a structured loan, as it provides secured finance for property acquisitions that allow investors to borrow against a mixture of asset classes such as a combination of property, shares, cash or investment portfolio.
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