5 Things to Consider when Investing in Holiday Homes
Investing in holiday homes is a dream many South Africans have. Who doesn't want a house near the ocean or a cottage in the Drakensberg? The tranquillity it offers is unmatched, especially for those living in busy cities.
However, with the current financial climate of the country, many people are wondering whether they should be investing in holiday homes when they have the extra money. The short answer is: yes! Any property that you buy remains an excellent investment.
But, of course, just like buying a house as your primary residence, there are some things you need to consider. Let's have a look.
1) Think about the purpose of your holiday home investment
The first thing you need to ask yourself is what the purpose of your holiday home is going to be. Is this a place that you are solely going to use when you are on holiday? Will you spend half the year there and half the year at your current residence? Or will you rent it out as an extra source of income?
If you are going to buy it for personal use, consider the fact that it will remain empty for a good chunk of the year. You might have to fork out a few extra bucks on security features and security companies unless you buy a lock-up-and-go.
On the other hand, if you are going to let it out, then your extra income will depend on the holiday season. You might not make any money at all during off-peak times.
A good middle ground for this dilemma is to let out your holiday home during the time you won't be there. Then you still make some income, the unit is not empty all the time, and you can enjoy it when you are on holiday, too.
2) Location is the backbone of a good property investment
When investing in holiday homes, this is the most important thing to remember (as with all other property investments). The purpose of your holiday home will also determine its location.
If you are going to use it for personal use, you might want to buy it a bit further away from a busy area. The purpose is, after all, to relax. But if you are going to buy it to let it out, you might want to purchase a property that is a bit closer to amenities and entertainment spots.
If you are buying down the coast, the obvious location would be as close to the beach as possible. If you are buying inland, then you might want to opt for a unit with picturesque views of a mountain range or valleys.
Whatever the purpose of your holiday home, ensure that you research market-related trends and selling prices in the area.
3) Determine the size before investing in a holiday home
Holiday homes come in all shapes and sizes. You can choose to purchase a smaller unit within a residential estate, a flat in an apartment building, or a freestanding house.
A bigger house means more maintenance and maybe even a higher mortgage payment each month. But that also means that you can rent it out at a higher price if that is the route you are going to take.
If you have a big family or you want to promote it as a family holiday home, a bigger property would be better. If it is only you and your partner or you want to promote it as a romantic cottage for two, then a smaller unit would be ideal.
4) Consider the ongoing maintenance before investing in a holiday home
Unfortunately, maintenance is never seasonal. You might find yourself having to travel to your holiday home to repair or replace something.
If you are letting it to holidaymakers, repairs and maintenance have to be done immediately. Will you be able to drive to your holiday home to do repairs yourself?
If not, you'll have to appoint someone to maintain the place for you.
5) Be practical when furnishing the home
When you finally decide on the perfect holiday home, you get to the exciting part: furnishing it. When deciding on interior décor and furniture, be practical and tasteful at the same time.
Many people opt for a sleeper couch in the living room so that there is space for two more people. You can also install a small TV in the lounge for those pesky rainy days indoors. If the winters are super cold, then a fireplace would also be a perfect addition. This often adds an extra cosy element to any holiday home.
Furthermore, you should make sure that you have all the small things people tend to forget. These can be things like extra plus, soap, shampoo, extra blankets, cutlery, and bedding.
Final thoughts
Investing in a holiday home is a wonderful way to expand your real estate portfolio. At the same time you know you always have a place to stay when the city becomes too much.