Holiday House

Why buying a holiday home could be a valuable investment

We all love to take a holiday, and what better time to do it than summer? Roy Morgan research from August found that in the following 12 months, some 70 per cent of Australians were heading away from home. On top of that, 56 per cent of people would be venturing somewhere within the country.

This means there is a huge market for investors to buy a beach house to let out to these holidaymakers. Not convinced? Here are a few more reasons to think about it.

Save on vacations
A holiday home often replaces vacation trips. If you think about how much a holiday costs on flights, accommodation, restaurants and attractions, it’s a lot of money for a week or two of vacation. Accommodation alone will an average of $140 for Airbnb and an average of $185 for a hotel. Depending on how long and who you are vacationing with, then it is going to be at least a few grand.

However with a holiday home, that is where your vacation time is spent. Of course you’re paying for the mortgage and house expenses but the money saved on flights, attractions and dining out will be huge over the years.

Renting it out

If you buy a holiday home, you will only be using it for just that – a holiday. The rest of the time you are not there you can rent it out. At first you will have to plan in advance the times you will most likely be there throughout the year. Once that is solved you can start renting it to travellers or residents who need a place for a couple of months at a time.

MoneySmart suggests that you consider the following key property choices. Make sure that it is in a neighbourhood that has a wide appeal to all sorts of buyers, so that it is easier to rent out. Also try make choose a property with very little maintenance. It may be some distance from the home you live in so try and avoid more work.

Second home tax deduction
According to Australian tax law, there are deductions that come with buying a holiday home because of negative gearing. This is when the income from the house is less than the cost of the house to maintain and run. Of course, a way to avoid negative gearing on your property is to rent out at a price that covers the expenses and gives you a profit.

The important thing to do is talk to your lender about this and then a property agent. The experts in the field will be able to tell you if your holiday home is worth renting out at some point.

The team at Police Bank will lead you in the right direction for home loan and financial planning advice.