Your hol­i­day home in­vest­ment

Finweek English Edition - - LIFESTYLE - BY KRISTIA VAN HEER­DEN

Many of us dream of our own lit­tle piece of par­adise – a place where we can go when we feel like leav­ing the world be­hind. While hol­i­day homes are of­ten seen as an ex­trav­a­gance, lux­ury and in­vest­ments aren’t al­ways mu­tu­ally ex­clu­sive.

“A well-cho­sen hol­i­day home can be the source of great fun for the fam­ily for many years, as well as a gen­er­a­tor of reg­u­lar in­come, with po­ten­tially good cap­i­tal growth com­plet­ing the pic­ture,” says El­wyn Schenk, Pam Gold­ing Prop­er­ties (PGP) area prin­ci­pal in Umh­langa and Umd­loti.

Adrian Goslett, CEO of RE/MAX of South­ern Africa, agrees, but warns that putting in the time and do­ing the re­search to find the best prop­erty in­vest­ment is a piv­otal part of find­ing a hol­i­day home that can be sold at a profit at a later stage.

“It is vi­tal for any in­vestor to study the mar­ket and know how and where to invest in or­der to make the most of the cur­rent con­di­tions. Ir­re­spec­tive of the mar­ket phase, one still needs to take into con­sid­er­a­tion all re­lat­ing fac­tors be­fore mak­ing a decision.”

He adds that prop­erty price growth is fairly con­sis­tent over time, mak­ing it eas­ier to more ac­cu­rately pre­dict the po­ten­tial re­turn on i nvest­ment with a prop­erty pur­chase. “Un­like other in­vest­ment op­tions, there is no need for a prop­erty in­vestor to con­stantly watch the mar­ket to make a profit,” he says.

Fin­week com­piled the ul­ti­mate have-your-cake-and- eat-it buyer’s guide to buy­ing a hol­i­day home as an in­vest­ment.

1 The home

“Buy as though you are buy­ing for your­self,” says PGP’s Basil Mo­raitis. “If you wouldn’t like to live there, nei­ther would your prospec­tive fu­ture buy­ers. Also, don’t over­cap­i­talise if it’s your in­ten­tion to sell in the medium term. Good, well-ex­e­cuted fin­ishes are bet­ter than poorly ex­e­cuted over-the-top fin­ishes.”

Schenk adds that an easy walk to the beach or shops, fin­ishes that are easy to main­tain and clean with con­stant pas­sage of sandy feet, and a lay­out that caters for di­ver­gent fam­ily needs, are some of the at­tributes of an at­trac­tive hol­i­day home. ■

2 Lo­ca­tion

We hate flog­ging a dead horse, but lo­ca­tion re­mains a key con­sid­er­a­tion when buy­ing in­vest­ment prop­erty. “Buy­ers need to en­sure that they re­search the area and es­tab­lish the level of prop­erty ap­pre­ci­a­tion it has achieved over the past year. Other fac­tors to con­sider are how well main­tained the area and its fa­cil­i­ties are, as well as the gen­eral mar­ket con­di­tions pre­vail­ing in the sub­urb,” says Goslett.

Mo­raitis says that se­cu­rity and good mu­nic­i­pal ser­vices can make or break a sub­urb. “A well-man­aged sub­urb with good in­fra­struc­ture and an ef­fi­cient City Im­prove­ment Dis­trict will en­sure the value of your in­vest­ment.”

Coastal prop­er­ties might be eas­ier to sell when the time comes to cash in on your in­vest­ment. Carol Reynolds, from PGP, says in ad­di­tion to the life­style el­e­ment of a coastal in­vest­ment, prop­er­ties on the coast with sea views gen­er­ally hold their value and make good in­vest­ments. ■

3 Safety

Hol­i­day­mak­ers are in­creas­ingly look­ing for safe prop­er­ties, says Reynolds, not­ing a ris­ing de­mand for homes in gated es­tates and apart­ments in se­cure com­plexes. “Hol­i­day home pur­chasers gen­er­ally re­quire low-main­te­nance, se­cure liv­ing, and tend to pre­fer prop­er­ties within com­plexes or es­tates that of­fer a lock-up-and-go life­style,” she says. You are more likely to find a will­ing buyer for a prop­erty in a gated es­tate. ■

4 Rental po­ten­tial

Un­less you are plan­ning an early re­tire­ment, odds are you won’t use your hol­i­day home as of­ten as you’d like. Rent­ing out your prop­erty to other hol­i­day­mak­ers when you are back in the real world is a great way to get the prop­erty to pay for it­self. Schenk warns that not all com­plexes al­low hol­i­day let­ting, so be­fore buy­ing a prop­erty, en­sure that this op­tion is in fact al­lowed. Let­ting your hol­i­day home will also af­fect the type of prop­erty you should invest in.

“You are bet­ter off buy­ing smaller apart­ments if yield is your pri­mary ob­jec­tive, plus you’ll have the added bonus of cap­i­tal growth,” says Mo­raitis.

If you pre­fer a more ac­tive role in let­ting your slice of heaven, the Airbnb data­base will put you in touch with trav­ellers from around the globe.

The ser­vice han­dles the book­ing side of things, al­lows you to screen po­ten­tial guests and en­gage with them be­fore they ar­rive, han­dles de­posits and of­fers in­surance should the screen­ing process fail you. ■

5 Take care of the le­gal­i­ties

“As hol­i­day homes are of­ten handed down from gen­er­a­tion to gen­er­a­tion, it may be wise to vest the prop­erty in a trust,” ad­vises Schenk. He ad­vises ap­proach­ing an ex­pert for the best so­lu­tion to your cir­cum­stances.

Just be­cause it’s a hol­i­day home, doesn’t mean you can take a tax break, says Schenk. “While the yields on par­tially let hol­i­day homes can be high, bear in mind that in­come de­rived less costs in­curred is tax­able in most cases. This needs to be fac­tored into the equa­tion.”

If death and taxes are the only two cer­tain­ties in life, best be pre­pared for both. To that end, Schenk ad­vises you have suit­able and ad­e­quate pub­lic li­a­bil­ity in place. “A fall by a ten­ant on a loose floor­board could prove an ex­pen­sive event for the owner. Dis­cuss suit­able cover with your in­surer be­fore­hand,” he says. ■

R7.25m, St Fran­cis Canals

Prop­erty on the V&A Water­front in Cape Town, priced at R28m through Pam Gold­ing Prop­er­ties.

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