With demand for private retreats from home increasing during and post COVID-19 lockdowns, buyers are being warned not to ignore the hidden costs and pitfall associated with an emotional purchase.
From an investment point of view, holiday homes don’t always make the best buys. Many times they are bought with the heart and not the head.
Before buying, it’s important to look at any rental yields, the upkeep, which in many cases can be costly particularly if in a costal location, and the costs associated with management fees and regular cleaning which can eat significantly into profits.
Here are REBAA’s top tips to consider when buying a holiday home:
- Never buy a holiday home at the peak of the market
When the property market is flat, a quality property in a good location will always find a buyer. The properties that struggle are those that have major flaws or are in more unusual locations. A good question to ask yourself is: ‘Would this property generate loads of interest in a buyer’s market?’ If the answer is no, be very careful what you pay for it.
- Ensure you have a buffer to cover unforeseen expenses
Even partially leasing during the tenure to other holiday-makers can incur costs, as these tenants can be more hard-wearing than long-term tenants. Consider having an emergency buffer for common items that may break down more quickly or require replacement due to increased wear and tear.
- Consider ALL realistic costs
Many holiday home buyers forget that a second home incurs a second lot of expenses: electricity, water and council rates, maintenance, cleaning, annual pest inspections, land tax, insurances. Be realistic and seek professional advice if unsure of financial ramifications.
- Is it cheaper to holiday lease yourself?
Consider the long-term benefits of holidaying in the same place on a long-term basis. Is it really what you want? Financially would you be better off holiday leasing rather than carrying the costs (and potential stress) of a holiday investment?