Are holiday homes a good investment?

The Real Estate Buyers Agents Association of Australia (REBAA) has warned Queenslanders of the potential pitfalls of purchasing a holiday home, particularly if you plan to rent it out as a source of income.

REBAA said several factors impact any profits earned from a holiday home, including:

• Rental yield
• Property maintenance (particularly in coastal locations)
• Body corporate or strata fees
• Property management fees
• Cleaning costs

REBAA shared its top tips to consider before buying a holiday home.

Never buy during the peak of the market

When the property market is flat, a quality property in a good location will always find a buyer.

The properties that struggle are those that have major flaws or are in more unusual locations.

A good question to ask yourself is, “Would this property generate interest in a buyer’s market?” If the answer is no, be very careful what you pay for it.

Ensure you have a buffer to cover unforeseen expenses

Even partially leasing to other holidaymakers can incur costs as these tenants can be more hard-wearing than long-term tenants.

Consider having an emergency buffer for common items that may break down quickly or require replacement due to increased wear and tear.

Be realistic about costs

Many holiday home buyers forget that a second home incurs expenses such as electricity, water and council rates, maintenance, cleaning, annual pest inspections, land tax, and insurances.

Be realistic and seek professional advice if you’re unsure of the financial ramifications.

Is it cheaper to holiday lease yourself?

Consider the long-term benefits of holidaying in the same place on a long-term basis. Is it really what you want?

Financially would you be better off holiday leasing rather than carrying the costs (and potential stress) of a holiday investment?

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.