Looking To Buy A Holiday Home
The Good and Bad When Purchasing a Holiday House
Investing vs. Choosing a Lifestyle. – Purchasing a vacation home is a highly emotional decision. And having your own slice of paradise may provide many years of fun, relaxation, and great memories, not to mention the flexibility of being able to escape to the seaside or the mountains on the spur of the moment.
It’s time for a reality check if you assume a vacation home will also be a good investment. Metropolitan markets have routinely outpaced regional markets in the past, and this trend is unlikely to change in the post-COVID economy. It’s a nice side benefit if you receive high capital appreciation or rental returns, but it shouldn’t be your primary goal.
You’ll need to budget for additional expenses for everything you already pay for at your primary property, including electricity and gas, as well as internet, rates, and maintenance. Also keep in mind that during a downturn, a vacation house is generally the first item people who are struggling financially try to sell – often at a loss.
Do The Figures Add Up? – So you’re paying cash for the house? Congratulations. Borrowing money to finance a purchase implies being exposed to the vagaries of interest rates for the rest of us. Only if the property generates revenue may you claim a tax deduction for costs like rates, upkeep, and interest. This may force you to rent it out, depending on your financial circumstances.
There is a risk of putting too much of your assets in the residential property basket, and there’s a chance that the land tax on a second house would push you into a higher land-tax rate, affecting other properties you own. If the money you planned to spend on the beach home was instead placed in a high-quality share trust, you would almost likely get a considerably greater return over time.
The Renting Agreement. – Renting out a vacation home to offset the cost of ownership might be a wise move, but it also brings with it a slew of problems. Due to the continual turnover of renters, some of whom may not treat the property well, you will need to furnish everything from plates to a washing machine, all of which will likely suffer greater wear and tear. Worse, the managing agent may be entitled to 12.5 percent of the gross rents. Renting it out during high seasons like Christmas and Easter might make you a lot of money, but it means you won’t be able to use the property yourself.
Many others, on the other hand, believe the numbers stack up. Robin Knight, a real estate agent in Melbourne, believes renting out her beach house was the key to realising her goal. She and her husband rent out their home for part of the year but reserve the summer months for themselves. “It’s the best of all worlds since we have someone to look after it throughout the winter and get to enjoy it during the vacations.”
The year is the same, but the location is different. – Do you want to travel around Australia or even the world if COVID permits? In such instances, being bound to a single location may appear to be a constraining option. Holidaying at your own home year after year, on the other hand, permits you to form bonds with a new community. You can see your children grow up together, and it transforms into a very wonderful location. Knowing a place inside and out gives you a sense of liberation. We don’t have to worry about the kids if they walk off with their small group.
Stay away from a property that is a lemon. When it comes to picking a holiday home that isn’t a pricey error, doing your homework goes a long way. Landchecker, a property data website, will give a free report providing vital information about properties across Victoria and New South Wales, including any floodways and bushfire zones, planning limitations, and cultural heritage indicators, as well as prior sales histories. You should also examine the development limits on your next-door neighbor’s property to see if your view may be obstructed in the future. It’s a good idea to look into the area’s most recent permit filings and approvals. For instance, a home may be on the market because a recently issued development permission next door would obscure the view.
Purchasing a product. It’s critical to comprehend the real estate market in the location where you’re considering purchasing. Although a home may appear to be affordable, you might be unwittingly purchasing in the incorrect part of town. To gain a sense of worth, do your homework and look at sales of similar residences in the neighbourhood. Another element to consider is the purchase’s timing: Wait till after the holidays. On the Mornington Peninsula, for example, Easter is the last hurrah before everyone packs up and heads home. A market is dictated by supply and demand, therefore expect the COVID-induced market frenzy to last until mid-2021.
Factors related to the family. – When the kids are young, nothing makes them happier than spending time with you, but in the not-too-distant future, you may have to endure the humiliation of hearing them grumble about having to spend another dull weekend at the beach. Make your vacation home ideas more future-proof by taking a realistic look at what life could be like in five, ten, and fifteen years. Consider the impact of sporting activities and the benefits of keeping the family in the city as the kids get older, but keep in mind the unifying power of a much-loved vacation home. It’s possible that here is where soft-focus memories begin.
