Pros And Cons of Investing In Holiday Homes

Airbnb, Stayz, exclusive escapes are just a few places you can rent a holiday home. Many people are opting to purchase units or homes and using these platforms to maximise their return. However, is it as lucrative as everyone thinks?

What is classified a “Holiday Home”

The type of dwelling does not really matter, it can be a house, apartment, unit, townhouse. Generally, it is all about the location, such as close to the beach, or located in a secluded rural property. It needs to stand out and be attractive to the “get away” crowd. Normally it would be about a 2-2.5 hour drive from the CBD.

How does it work?

The properties are always fully furnished, what this means is all cutlery, plates, beds and televisions etc. You might also want to consider providing a linen service as well as other perks such as Wi-Fi and Pay Tv. Cleaning and Gardening need to be completed regularly as you will be the sole person responsible for this.

Why Holiday Let?

Most people choose to Holiday let for a few reasons. One, you can use the property for yourself should you want to. It also presents an opportunity to make a business out of your asset. The return over the financial year would be greater. It may also secure a property for you in the future to retire or move to should your circumstances change.

Negatives Involved:

To maintain a good reputation and booking rate you need to make sure the property is managed well. This might involve hiring a property manager if you are not in the immediate area and it may incur higher fees for that service. If it is located close to your home, then you need to consider the time that it will take out of your regular routine.

Most people renting the property for a short-term stay are there for ‘a good time.’ This can mean they may be loud, or they may utilise every aspect of the property. Not only this co-ordinating cleaning, gardening, furniture, bonds, and keys can be a daunting task if you are not using a professional service. The downside if you self-manage and leave large gaps in between reservations then you run the risk of the property not being more profitable than a longer term stay scenario.

Where to buy a Holiday Rental

There are guidelines when purchasing a holiday rental that can help assist you. Firstly, try and stay withing 2 - 2.5hours of the CBD. Choose areas that have year-round attractions and activities. If you choose a location that is only appealing in the summer months, then in Winter you will need to drop rates drastically to try and attract clients. Choose locations where people are likely to want to stay for up to a week at a time in peak, or weekends in off-peak. Make sure your location has some amenities close by for example a pub, a café, a bakery, and a community playground at minimum. Get as close to these amenities or local attractions as possible. It is just like if you are booking a holiday for a specific location, you always choose the property closest to where you want to be.

Ready to commit – what to look for…

Have a good understanding for areas, rental rates and other properties/ competition. Also keep an eye on other accommodation formats such as hotels, motels and caravan parks. They are part of the competition. Target a specific type of tenant such as families and make sure you look at what they would expect and priorities in a property.

Make sure you calculate all ongoing costs in maintain a property (this can include council rates, water rates, water usage etc) in comparison to your income to have a good understanding of the true return.