The pros and cons of owning a holiday home
Category Home owners tips
The idea of buying a second property as a holiday home or for investment may be an exciting prospect or motivation to earn extra income, but it might not always be as glamorous as it seems.
Maintaining and looking after another property far away can be difficult, both in terms of time and finances. Always evaluate the pros and cons carefully before making such a big financial commitment.
The benefit of a second home is that you could rent it out to other holidaymakers for extra income, but then risk additional wear and tear on the property. You could simply keep it for your own holiday exclusively, but then it sits for most of the year unused. However you choose to use the holiday home, there are pros and cons to owning one.
Pros and cons of owning a holiday home
The obvious advantage is that you can visit it at any time, even just for a weekend getaway. You do not need to book in advance, nor do you need to pay high season rates over the holiday. You could also rent it out to friends and family, and earn some income or offset the maintenance costs. Later, the home can become your retirement property.
A key drawback, however, is that there will be a cost attached to owning the property. Aside from the general property taxes and utilities, there will be security and maintenance costs. If you rent the property out, usage and potential damage or breakages could add to the maintenance costs.
Research before purchasing a holiday home
Once you commit to purchasing the property and signing the offer to purchase, you cannot simply back out. Investing in a second home therefore requires the same research that you would do when buying a home to live in. Check the average prices in the area so that you do not overpay.
If the aim is to rent the property out, check that there is demand in the area and what rental income you can expect. If you need to earn enough rental income to cover expenses, ensure that you budget for those including aspects such as agency commission, cleaning and garden services, and utilities. You will also need to budget for maintenance, especially in coastal areas which may require additional costs to maintain.
Holiday versus residential home
There are key differences between the property that you would buy for your own use, and a property that holidaymakers will want to rent. A property which is secluded may not have the same appeal as a property which is close to the beach or offers stunning views. It should be a strategic purchase rather than an impulse purchase while you are on holiday.
That said, it is recommended that if you see something online that you are interested in purchasing, that you actually take the time to go and enjoy a holiday in the area to ensure you make a good investment. Managing a holiday home from afar is time consuming, and you will likely either need someone in the area who can keep an eye and manage the property for you, or appoint a rental agent.
If something goes wrong at the property, you will need someone who can act quickly and provide you with the right information and advice. If maintenance is needed, the person or agent should provide verified local contacts to get the job done correctly and within budget. An agent is usually recommended if you want to rent the property out as they can assist with finding tenants, and managing the cleaning and maintenance needs.
Whether the holiday home is mostly for own-use, or you are renting it out (even in part), then it is advisable to visit it at least a few times a year. Aside from ensuring it is a worthwhile investment, this will provide an opportunity to inspect the property, and take care of any cleaning or maintenance requirements.
Regardless of how you use the property, you will need to set aside a budget so that you can meet the maintenance needs. Holiday rentals are seasonal, and it is advisable that you budget and plan correctly to ensure you are able to meet the bond payments as well as associated property costs.
Here are a few tips to help make holiday house hunting a little less stressful:
- Schedule viewings well in advance to avoid last-minute disappointments. As much as you can try to plan ahead, holiday plans and house hunting can often clash. Be prepared to adapt your schedule to fit in viewings.
- While festive decorations can add charm, ensure you focus on the property's actual features - size, layout, and condition - not just the holiday ambiance.
- During school holidays, homes with children may not be as tidy as usual. Focus on the property's potential rather than being distracted by toys or holiday mess. It's the space and structure that matter most.
- Use the holidays to explore various neighbourhoods. Festive activities, like local holiday craft markets, can give you an insight into the community vibe.
- Don't try to tackle this on your own - a trusted agent can streamline your search by narrowing down options to fit your needs, saving you time and reducing stress during the busy holiday season.
Author: Team Seven