Investing in a holiday home
AFTER much longed-for school holidays are done, many people across the State often return home with something much more positive than a case of back-to-work blues.
According to the Real Estate Institute of Queensland (REIQ), a treasured holiday can often lead to families buying a holiday home in that location.
As well as retiring baby boomers, many younger people buy homes in their favourite holiday locations in preparation for when they finish work.
These buyers prefer to buy now and rent the property out so it will be available for them in 10 or 20 years.
The Sunshine State has long been a favourite holiday destination with people from across the country with many long-time annual visitors often deciding to buy a holiday home.
Areas around the Gold and Sunshine Coasts are often targeted by baby boomers retiring to seaside locations from places as far afield as Melbourne and Sydney.
Less well-known locations such as Brisbane’s islands, parts of the Gold and Sunshine Coasts’ hinterland and smaller coastal locations between Noosa and Bundaberg usually attract a higher proportion of Brisbanites.
Locations south-west of Brisbane, such as Stanthorpe and Boonah, continue to be popular places for holiday homes.
These areas offer an escape from the city yet are only a few hours’ drive away.
But similar to other property investment decisions, rental returns and capital growth should be considered when buying a holiday home.
Most families dream of owning a holiday unit on the beach and letting it to tourists when they don't need it, however few have much idea of what income it is likely to generate.
Unlike standard residential investment properties that are rented out on a long-term basis, income from holiday-let properties relies not just on the rental rate but on the occupancy level.
Even if you get a good room rate on your unit, the return from your investment will depend on how often it’s occupied.
Potential buyers also need to take into account the operating costs of the complex, which include management fees, maintaining the room through cleaning, repairs and replacements, marketing and advertising.
On average, these costs can eat up 40 percent to 50 percent of the gross income from the unit. And, if you want to maximise your income, you won’t be able to use the property in peak periods such as school holidays