Buying a holiday home can be part of your long-term investment plan: David Airey

David AireyAugust 13, 2013

Many people reading this column might be relaxing at a beachside getaway, a wine region in the south-west, a great fishing spot in the Kimberly or perhaps in a heritage town in the wheat belt.

Over summer many people will be enjoying Western Australia's delightful holiday spots, particularly along the coast. Places like Dunsborough, Denmark, Dongara, Lancelin, Cervantes, Albany and beyond. Over the years many people have bought holiday homes in these places.

Today, holiday homes are being purchased as far apart as Exmouth and Esperance. It all depends on people’s budget, allowable travel time and their strategy behind the purchase.

The ideal holiday home for most people is one that is always available for short stays, but this is a costly option for people who need to take out a mortgage on a second home. They are not the inexpensive country option they once were, particularly on the coast.

However, these days an increasing number of buyers are choosing to combine the purchase of a holiday home with long-term investment plans. This is possible because many favoured holiday locations have developed viable rental markets with local tenants leasing properties for extended periods, often beyond the summer holiday.

Some of these places might include Albany, Harvey, Busselton, Margaret River, Gin Gin, York  and Cervantes, for example.

Homes initially purchased as investments in these locations can later be used for holiday purposes.

In places where demand for rental accommodation is seasonal, such as fishing towns, windsurfing spots and agricultural areas, there is a greater likelihood of vacancies for rental properties outside the peak holiday or industry period. However, the rentals are normally much higher in properties leased for short periods and this can partly offset the loss of rental income when the place is vacant.

The benefit of this strategy is that the owner can then take advantage of the seasonal rental market by using the property off season.

Another option for holiday homebuyers is to purchase a unit in a resort development. Some resort operators will guarantee a rental income for a fixed period. In many cases the purchaser is acquiring a share of a managed investment scheme, which includes a stake in the total income and expenses incurred by the resort.

Either way, the most important consideration when buying a holiday home is, as far as possible, to set aside the emotional reactions and approach the purchase with a clear understanding of the real value of the property, its ongoing costs and the likely rental income.

If you are travelling around the state this holiday season and maybe thinking of a holiday home investment, why not drop into the nearest REIWA agency office and talk to the staff about opportunities?

David Airey is president of the Real Estate Institute of Western Australia.This article was originally published on reiwa.com.


David Airey

David Airey is president of the Real Estate Institute of Western Australia.

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