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Let’s face it… unless you own a holiday home you’ve probably forked out a bucket load to rent a holiday house or you’ve crammed yourself and your loved ones into the spare bedroom of a friend or family member who happens to own their own holiday home.
While you’re there the blue sky dreaming sets in. You find yourself staring at the windows of realtors and the discussions of whether you should purchase your own holiday home begin to feel more and more real.
But how far do you let the dream go?
If you’re serious about purchasing a holiday house of your own you might want to consider the below:
It is extremely important to understand the objective of the property from the outset as this can dictate the type of property that you purchase.
The property would not be generating any rental income so there would be a financial cost or an opportunity cost for owning this property.
Like any investment decision, analysis should be undertaken to determine whether the investment metrics stack up. Understand the likely rental return and associated costs. The last thing you want is for the property to turn into a money pit. If your mindset is to buy as an investment, you should be looking at it from the point of view as an investor, without the emotion. To maximise rental income the property should be purchased in a popular holiday location with capital growth prospects.
Clear parameters should be set, which can be tricky. Have a clear understanding of how much of the year would it be rented and over what periods. For example, if it is a beach house, would you rent it over the peak holiday season period in summer when it would achieve the highest level of rent or would you want to make personal use of the property over this period? These decisions can significantly affect the income return you generate.
If the property is used as a hybrid, with part personal use and part rental, the ideal situation is to have it generating enough rental income to cover outgoings (loan interest, bills etc.). This way it isn’t costing you anything and any capital growth on top is a bonus.
The purchase of a holiday house can be very rewarding, with many years of enjoyment that you can share with loved ones. Define your objectives, do your research and if it all stacks up then chase your holiday home dream.
If this article has set your blue sky dreaming soaring you might want to tune into the Money Mentors Podcast (with Nathan Lear & Glenn Fairbairn) Epsisode #10 as they discuss the topic of purchasing a holiday home.
If you’d like assistance in the decision of whether to take the plunge and purchase a holiday home, a financial adviser at Hewison Private Wealth can help.
Hewison Private Wealth is a Melbourne based independent financial advice firm. Our financial advisers are highly qualified wealth managers and financial planners. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.au
Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.