Buying a Holiday House? Here’s What You Need to Know

By Deltos Finance on January 16, 2024
buying a holiday house

Buying a holiday house in Australia can be an enticing prospect, as it offers both rental income and a personal escape should you decide to use it for your own trip. However, it’s essential to approach this investment with a clear understanding. Start by focusing on its financial aspects rather than just the lifestyle appeal. You should also ask yourself why you’re investing in real estate and what you expect from this specific property. To help you make a more informed decision, here are some things you must know about buying a vacation house & getting into the rental business. 

Location Matters

The success of a holiday property investment heavily depends on its location. Pick prime spots with beach views and proximity to essential amenities like restaurants, cafes, and tourist attractions. You can also consider properties in towns or cities with significant infrastructure, as they are less likely to suffer from occupancy fluctuations during off-peak seasons. Here are some of the best locations to buy holiday houses to rent out:

  • The Gold Coast

A premier destination in Australia, the Gold Coast is a coastal city that offers strong growth potential. Its beautiful beaches and waterways, like Currumbin Creek, make it ideal for those seeking luxury holiday properties or second homes that can be usable and attractive to short and long-term tenants throughout the year.

  • Cairns

Cairns, a popular vacation spot, draws visitors globally, so it is a solid property investment choice. Its year-round tropical climate also appeals to those desiring sunshine and a break from colder climates.

  • Hobart

As Tasmania’s capital, Hobart stands out as a top tourist destination in Australia. It offers a unique blend of experiences, from viewing internationally acclaimed art to enjoying fresh seafood and exploring mountainous landscapes—all within a single day. Hobart’s real estate market is promising, especially if you want to buy a vacation home you can rent out when you’re not there. 

holiday houses to rent

Holiday Rentals Work Differently

Unlike in apartments and condos in the suburbs, rental returns can fluctuate widely in vacation homes. That is especially true in coastal cities and other areas where demand peaks for about eight to ten weeks annually. Properties in warmer locations or those with beach access and sea views tend to have more consistent demand. So, before buying a holiday house, consider the type of rental—short-term holiday letting or permanent tenancy—based on the property’s location and features.

Self-Contained Apartments Can Be Advantageous

When buying a vacation house, you’ll likely encounter motel-style apartments. They are built for short-term rentals; they usually have small rooms and other amenities. Consider exploring self-contained apartments instead. They often have larger rooms and separate facilities (kitchen, laundry, bathroom), which make them more preferable to long-term tenants and other types of renters. Moreover, they offer better capital growth potential, and you can comfortably move to a self-contained apartment if you wish to do so.

Holiday Home Values Can Be Volatile

Keep in mind that holiday home values can be highly volatile, booming in prosperous times and plummeting during economic downturns. Historically, these properties are often among the first to be sold off during financial hardships, making them a less stable investment than urban properties. So, before signing the dotted line, make sure you’re fully aware of the property values’ volatility of holiday homes.

Buying a Holiday House Has Tax Implications

Investing in a holiday home comes with specific tax considerations, including declaring rental income and understanding deductions for personal use versus investment purposes. Capital gains tax may also apply upon selling or transferring the property, and travel expenses for property inspection or maintenance are not always deductible. Consult with finance experts to understand all the tax implications of owning a holiday house before signing the purchase contract.

Buying a Second Home Using Equity is Possible

Many homeowners might not realise that the equity built up in their current home can be a powerful tool for purchasing a second property like a holiday house. This approach is particularly useful if you’re short on cash savings or prefer to allocate your liquid assets elsewhere. Typically, lenders permit borrowing up to 80% of your home’s value by tapping into your equity. That amount can be used in acquiring a second property, helping you build your investment portfolio and wealth. 

Working with Local Real Estate Broker Can Be Beneficial

Engaging a local real estate broker can provide invaluable insights into your target holiday home market. They know the local real estate market like the back of their hands. They may also have access to investment properties that aren’t publicly listed yet. Their expertise also ensures you make informed decisions, from selecting the right property to understanding the financial and tax implications of your investment.

Engage Deltos Finance Today

Buying a holiday home can be enticing, but it requires careful consideration of location, rental returns and other crucial factors. If you’re planning to purchase a vacation house in Hobart, don’t hesitate to leverage the expertise of Deltos Finance.

Our mortgage brokers in Hobart are ready to guide you in your property purchase. We can help you acquire an investment loan for your holiday home or tap into your equity to get a loan for a second home. Contact us today to get started.

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