Need extra cash to buy a car, renovate your kitchen or fund any other expense? If you’ve been chipping away at your home loan, it’s worth checking to see if there’s equity in your property you can use for a home loan top up. It might be better than swiping your credit card or taking […]
Buying a Holiday House? Here’s What You Need to Know
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 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.
Enquire Now
Find Your Perfect Finance Solution
Let's discuss your finance needs. We’re here to help.
More posts from Deltos Finance
Top Tips on Saving for a House Deposit
Did you know it takes an average-income household around six years to save for a house deposit in Tasmania and about seven in New South Wales & other areas? Saving for a house deposit is often the biggest hurdle for first-time home buyers in Australia. With property prices continuing to climb in many areas, it […]
Things to Consider Before You Build Your Home
Building a home sounds exciting, as it allows you to create your dream home from scratch and ensure every room suits your unique needs, preferences and lifestyle. However, it is a major decision that requires thorough planning and thoughtful consideration. So, before you get too excited and don a hard hat, let us help you […]
A Guide to Financing Your Home Renovations
Are you dreaming of a sleek new kitchen, a beautiful outdoor deck, a luxurious bathroom, or perhaps an extra bedroom for your growing family? Home renovations can transform your living space and increase your property’s value. But let’s face it— renovations can be costly. The good news? There are several ways to finance your home […]
Ultimate Guide to Home Loan Redraw Facility
You’ve been diligently making extra repayments on your home loan, watching your balance shrink faster than expected. But then, life throws you a curveball with an unexpected expense, or you suddenly get a time-sensitive investment opportunity. Wouldn’t it be great if you could access those extra funds you’ve paid into your mortgage? You could if […]
Guide to Home Loans for Self-Employed Borrowers
You’ve taken the bold step of being your own boss, and now, you’re ready to take another significant leap—buying a home. But you might wonder, ‘Can I get a home loan if I’m self-employed?’ The answer is a resounding yes! While your experience might differ from getting a standard mortgage, you can successfully secure a […]
Pros and Cons of Buying Your First Home While You Rent
These days, first-time home buyers are increasingly exploring innovative strategies to enter the real estate game. One such approach gaining traction is buying your first home while continuing to rent. This strategy, often called “rentvesting,” offers an investment opportunity and lifestyle flexibility. But is it the right move for you? Let us help you decide […]
The Different Types of Property: Which One is Right For You?
Buying a property is more than a big-ticket purchase—it’s an investment and a lifestyle choice. So, it pays to consider various factors when finding the right property. Do you prefer a four-bedroom home in the suburbs, a townhouse in the inner city, or an apartment in the CBD? How about a fixer-upper? So, before you […]
A Comprehensive Guide to Buying Your Second Property
Over two million Australians own a second property. Some do it to invest in real estate and increase their wealth, while others simply want to improve their lifestyle with a holiday home. Whether you share the same sentiment or not, purchasing a second home is a huge decision not to be taken lightly. Continue reading […]
Bridging the Gap: Bridging Loans for Property Development
In property investment, timing is everything. Whether you’re eyeing a prime development opportunity or planning to flip houses to upgrade your portfolio, the ability to move quickly can make all the difference. This is where bridging loans may come into play. They offer a fast, flexible financing solution to bridge your financial gap between property […]