Holiday homes are not the popular investment they once were.
The GFC and the strong Aussie dollar means both internationaql and home-grown tourists are finding it cheaper to holiday abroad. So does that mean it could be a good time to buy? Maybe…
But there are pros and cons to owning a holiday home.
Nowadays a holiday home will rarely be a great investment from a financial point of view but it’s a great lifestyle investment, especially if you’ll make regular use of it.
But that means going back to the same place year after year, which doesn’t suit everyone.
Unlike a regular house, buying a holiday home means a high initial outlay, as you’ll need a 20% deposit if you want to avoid expensive mortgage insurance.
And in order to claim interest on your loan as a tax deduction, you’ll need to rent it out for part of the year. This does help pay off the mortgage, but popular holiday periods are when you’ll make the most cash. So if you need to make money be prepared to take your holidays off peak.
And don’t forget to factor in the cost of cleaners and a management agency – they all eat into your profits.
Next, you need to decide where you want to be. The rising tide of sea and tree changers means you’ll pay more for properties within commuting distance of cities, so consider places two to three hours away in less popular locations.
Lastly, what facilities do you want and how much time will you spend there? Often you can snap up a bargain if you’re prepared to take on an older property, but you may have to spend your holiday doing it up! But if you’re time poor you may be better off with a low maintenance unit or villa.
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