Three Tips To Consider Before You Buy A Holiday Home
Analysts predict that real estate investment will look attractive this year, thanks to lowering interest rates. Hot on the heels of your summer holidays, you may be considering purchasing a holiday home that you can enjoy each year and rent out when you are not using it. Before you do so, consider these three tips so that your investment is one that makes you money, rather than costing you dearly.
While you are in love with the idea of a holiday home right now, just how good of an investment is it? Ask yourself the following questions before you enter into the contract:
- What is the home value history for this property? There are websites that you can use to track the trend of what the property has been worth in the past, and this will help you to determine whether the current asking price is realistic.
- Is there any reason why the value of homes in this area may fall in the foreseeable future? The seller may not be forthcoming in letting you know about the big shopping mall that is being built 1 km up the road that will increase area traffic, but a phone call to the local council will yield you this information.
- Alternatively, are there any upcoming developments that could increase the value of your property? For example, a mining operation opening up outside your town could make your property very desirable to tenants who are working for the mining company. Many mining employees operate on a three weeks on/one week off basis, and will pay good money for well looked after rentals.
No matter how much the holiday home appeals to your emotions, do not buy at the peak of market prices if you are not confident you will make money off your investment.
Many inexperienced investors buy a property without fully thinking through the additional costs that come after the purchase is made. For example:
- Do you plan to handle the rental of the property yourself? If you do not have time to do the advertising or the tenant vetting, then you need an executive leasing team like Joyce Property Investments to handle this for you. Leasing agents will charge a set fee each time a new tenant is put into place, plus a percentage of the weekly rent. New South Wales Office of Fair Trading advises that you can expect this to fall in the range of 5%-12%.
- Even when the property is empty, you still have ongoing costs that need to be covered. These include insurance, pest inspection and treatment, council rates and electricity. If you are going to let your property for short-term stays only, all of these costs are your responsibility.
- You should also make sure there is an account set aside that contains money for emergency repairs.
Are you more in love with the idea of buying the home because you want a guaranteed place to escape the world every Christmas? Or because you want to make money? If you honestly find yourself leaning more towards the first reason, purchasing a time-share or just paying for a holiday lease yourself may be the cheaper alternative.
If, however, you are buying for investment purposes, remember that the time of year that you want to holiday may be peak demand for your rental too. Are you prepared to turn down somebody's money because you want to use the property yourself? If you cannot be flexible with the times you want to use the holiday home, it is not going to be a realistic investment.
If you are still determined to proceed with your holiday home purchase, it is time to start the research on which one will suit you best. Don't forget to listen to the advice of your real estate agent while on the hunt. Sometimes the best property can be nabbed before it is even advertised on the market just because you are using an agent that is really in the know!