A holiday home; maybe a house, an apartment, a cabin or even a houseboat! We’ve come across them all. A holiday home is a property you buy where you can go to escape your day-to-day life and have a real break away. It may be a place you want to retire to one day or somewhere you can share with family and friends for holidays and special occasions. Buying a property other than your main home is often an emotional decision. Still, as it is a considerable investment, those heart-strings need to be reined in a little with some good doses of common sense and financial savvy.
Here at Holiday Rentals Australia, we’re giving you the benefit of our years of experience managing holiday and short-term rental properties to make sure you think about all aspects when looking at holiday homes to buy.
- Using the property
- Financing
- Financial return
- Think beyond your own needs
- Location
- Area appeal
- Property appeal
- Furnishing
- Maintenance
- Security
- Servicing
- Talk to agents
Using the property
By its nature, a holiday home isn’t going to be your primary place of residence; it’s always going to be somewhere you go when you have spare time. We highly recommend sitting down and looking at your past calendars and schedules to see when you would have had time to have weekends or trips away to your holiday home in the last year. Obviously, you may have “made” more time available if you had somewhere to go, but many of the owners we have worked with find they actually end up being able to go away less than they initially expected. Life things and plans often come up which take up your time and can start to eat into those spaces you allowed for breaks and holiday weekends.
This isn’t to say buying a holiday apartment or house is a bad idea; we’re just encouraging you to be realistic given this is a big financial investment. The good news is that owning property typically makes you money in the long run with rising property values so it can be a sound financial investment. However, you also need to think about covering its ongoing costs unless you’re lucky enough to be able to buy it outright from day one. If you have a chunk of money for the deposit and are willing to think about holiday rentals to generate income for you, it’s a tried and tested formula for successfully owning a holiday home.
Financing
If you’re able to buy in cash that’s wonderful because it helps take away some of the hurdles and financial pressure from making your purchase. For those not in such a fortunate position, financing for your property is one of the key considerations. How much can you borrow? How much deposit do you have? How will you make the repayments?
You may well have sufficient income already to cover any additional mortgage repayments which puts you in a great position but sometimes that isn’t the case. It’s important then that a property can generate an additional income stream for you when you’re not using it. If you’re buying on that basis, it will be essential to tell the mortgage company of your plans to ensure you get a mortgage that allows the property to be rented out.
Another vital consideration if you’re getting a mortgage is the projected income from the property and this is the time to involve holiday rental management agents. They will have the experience and expertise to estimate the rental income for you. Using a quality agency will ensure they are licenced agents working to industry best practices that will offer accurate and realistic information which is accepted by the mortgage company.
Financial return
As briefly mentioned above, the importance of your property generating a good return for you should not be underestimated. It’s very rare for us to come across owners who don’t really care about the property being an excellent financial investment. To most people, the critical aspects of this are that it appreciates in value and generates a good income. Yes, the property is there so you can benefit from using it whenever you wish but it should work positively financially for you too.
If your financing means you need the purchase to become a successful income-generating holiday rental home, then you’ll want to make sure it has the broadest appeal. The more popular and appealing your property is, the more guests will be willing to pay for their stay. Most places will find some appeal in the short-term rental market, but we’re talking about maximising your holiday rental income potential.
If there are two properties of similar value that you like equally and one would earn you $2000 per month in holiday rental income while the other would earn you $4000 per month, that should be an easy choice for you to make. Setting emotional appeal aside for a moment, try to objectively look at the income potential to make sure it gives you the easiest path to owning a holiday home.
Think beyond your own needs
One key aspect of successful holiday rental homes is their versatility to provide great accommodation for a wide variety of people. Holidaymakers come in all shapes and sizes and can range from single occupants to large groups. Two to three bedroom houses and apartments, in our experience, strike the best balance for excellent occupancy and strong appeal to the most popular group size. Yes, homes larger and smaller are still popular too but we’re just trying to help you hit the sweet spot for demand.
Think also about what space different groups may need? If it is a family-sized home, does it have enough room for a family to enjoy the property? Are the communal spaces large enough to match the number of people per bedroom? Is there a garden for children to play in? Is there enough parking?
Take some time to consider what appeal the property has to the wider audience for a holiday stay. This can be a good time to run places you’re considering buying past a wide variety of family, friends and work colleagues. This may sound like a strange recommendation, but if there are people in your world that often disagree with you, make sure you ask their opinion! It may be hard to hear them be pessimistic about the place you’ve fallen in love with, but they can help give you a reality check and an objective opinion about what may appeal to people who aren’t just like you (chances are your friends are likely to share your views more so may not be as objective enough to be really helpful here).
Location
We recommend looking at wider areas rather than specific locations to help find your ideal holiday home because this can often bring up some unexpected gems that meet your ideal criteria. In doing this, it’s important to consider access to and from an area because if a location is hard to reach, it may reduce the rental appeal for anyone other than those intrepid explorers who really want to be “off the grid”. Sometimes you may also get more for your money in an area you hadn’t perhaps considered but has promising local appeal, facilities and transport links. Local real estate agents will help you here if you explain what you’re looking for; they will have specialist local knowledge that is unbeatable in a property search.
Area appeal
Unless you’re buying a remote rural cabin and going for an off-the-grid experience, the appeal and amenities of the area you’re choosing should be a consideration. If you’re buying a family-sized holiday home what is there for families to do in the area to add to the rental appeal? You may find a beautiful property, but if there’s nothing to do nearby, your guests may get bored quickly and not have a great time. The last thing you want is for reviews to be left by guests saying their experience was fine but they had nothing to do! Are there famous attractions nearby, good beaches, swimming pools, golf courses, shopping centres, sports facilities, scenic places, hiking trails etc.? These will all add value and appeal to your property for holiday rentals.
Property appeal
Whether you want to buy a property that needs no work or buy one where you can make your mark on it, you must consider how well it may appeal visually to guests. Holiday rentals need to be advertised and promoted, so looking good in pictures is a real help. Modern home trends such as open-plan layouts are positive features for holiday homes so be on the lookout for homes that have them. Property amenities that help attract guests are:
Property amenities that help attract guests are:
- Views – a good view of a city skyline, a bay, a river, a beach, a famous attraction are always real winners for holiday rentals and massively improve marketing appeal
- Outdoor space – whether it’s just a balcony, a large deck or a big garden, external space adds value and appeal to guests
- Pool/jacuzzi/spa bath – coming in at numbers 1 and 8 on the Airbnb most wanted amenities list, being able to spend some time in the water at a property is highly sought after. Whether it’s a jacuzzi outside or a spa bath inside, these are sure to make your property stand out
- Heating/air conditioning – being too hot or too cold can quickly ruin a trip so it is worth ensuring your property has quality heating and/or air conditioning depending on the climate. Whilst locals in some warmer climates may be used to coping without air conditioning for example, guests from colder countries may struggle so once more, we recommend thinking beyond your own needs to increase appeal
Furnishing
How will you furnish the property and in what style? This isn’t necessarily a major consideration at the time of purchase but it’s a good thing to have in the back of your mind when browsing properties. There is a cost to consider and logistics of getting items delivered and set up. Sometimes it’s possible to buy existing furniture you like that is in the property as part of the sale to save you time and hassle later, don’t be afraid to ask. Also, don’t forget to try to come up with versatile furniture solutions to keep the property adaptable to different types of groups. We recommend having a sofabed in the living room to increase occasional capacity and second bedrooms benefit from having a bed that can split into two singles from a larger bed to increase flexibility for different groups.
Maintenance
If you’re not going to be there all the time, the maintenance needs of a property and how you’re going to manage them is important thing to think about. If you aren’t living nearby, you may need to consider getting someone else to do maintenance checks. Buying in a managed development like an apartment block can significantly help reduce this type of work for you, but there are extra considerations if you’re buying a house. How will the garden be looked after? Will you need to get someone to clean the pool regularly? What is your plan to keep everything in working order? What’s the plan if a pipe bursts in winter? Having a holiday rental management agent on your team to take care of all the guest needs and those of the property is an ideal solution.
Security
Similar to maintenance, due consideration needs to be given to the security of your holiday home. Once more, apartments are generally less of a worry from a security standpoint because they typically have on-site security features such as CCTV, building managers and closer neighbours who are likely to report any obvious security issues. For houses, security is a more necessary thought if they are to be left unoccupied more.
Alarm systems are recommended and there are many good CCTV systems with remote access available. This means you can check on the house’s condition both inside and out from wherever you are in the world. If you don’t live close enough to check on your holiday home regularly then it’s good to have a local contact who can do it for you to make sure everything is safe and sound. Once again, having a management agent can pay dividends here because they’re likely to keep the property regularly occupied with guests when you’re not using it which significantly helps reduce security worries.
Servicing
If you want your vacation home to generate an income for you to help cover costs or meet other financial goals, then you’re going to have to make it available for holiday rentals when you’re not using it. There is almost no other way to generate the income needed whilst still allowing the use of the home by you. Therefore, this does mean that you need a process and services to manage your holiday rental guests, assuming you don’t live close enough to do it yourself. Even then, preparing and taking care of guests can be a time-consuming and intensive experience that requires much more work than owners initially realise. Having a management agent for short-term holiday rentals can ease the pressure and take away all the worries and stresses, leaving you free to enjoy your visits for what you hoped they would be, a relaxing break away.
Talk to agents
Agents have a substantial role to play in any second home purchase that you hope to use for short-term holiday rentals. First of all, the real estate agents selling the properties you’re considering will know the local area well and be a wealth of information. They’ll be able to tell you things like the type of people who live in and use the area, the local facilities available and the likelihood properties in the area will increase in value.
Holiday rental management agents will have a different but valuable insight too. They’ll be able to research the local market for competing properties, provide tips on styling that will appeal to holiday guests, give you some indication of how in-demand the location will be for holiday rentals, and advise how to make holiday rentals work for you with the minimum amount of hassle. They’ll also give you the best advice on the value of rental income you will be able to generate from holiday rentals.
We hope this article has given you some extra things to think about when holiday home shopping. If nothing else, please take a moment to step back emotionally and consider the finer details of your plans before taking the leap. If you want more advice without any obligation or would like us to prepare a proposal detailing how a particular property might work for you as a holiday rental, please feel free to get in touch.
For further information on this topic, download our free eBook on this subject on our website homepage.
Start your holiday home search now at www.domain.com.au and www.realestate.com.au!