Could your next investment be in a sought-after holiday location? According to a study commissioned by ING Australia, younger Aussies prefer to live and work close to cities while they invest in property in popular holiday destinations.
The recent boom in regional and local travel has no doubt captured the attention of the astute investor, but if you are considering purchasing a property in a popular location, do your due diligence when deciding whether it is best as a holiday rental or a long-term investment rental.
And while the idea of owning a holiday home to only use yourself whenever the ocean calls seems desirable, is simply not practical for many Australians.
Invest with your head and not just your heart, keeping in mind a few things to make sure it is a worthwhile investment.
Location will likely be your first consideration for any purchase but consider how the location fairs all year round. In a high season, any location in a popular tourist spot will perform well; but how will your property be affected when the location is experiencing its down season?
You may enjoy healthy profits in peak season, but will this cover expenses when tourist have left?
If you’d also like to use the property in peak times, it may mean missing out on premium income from tenants/guests.
More specifically, the location of your property – in relation to beach or shops, for instance – and the type of property will play a crucial role if the property is for short term tourist visits. Buy close to infrastructure to avoid fluctuations in vacancies if you can.
If you are planning on renting the property as a ‘holiday rental’ make sure you understand how it works – what are your obligations? Do you understand the tax implications if the property is to be both your holiday home and an investment property for rental yield? And do you have enough to pay for the property when it is vacant?
Have the back-up of a good property management team and seek professional and reliable advice in all financial and legal matters.
Diversifying your portfolio can be great whether investing in a holiday home or a rental investment property in a holiday town, but ensure the purchase is right for you and your future financial goals.