Dif­fer­ence be­tween where you live and go to get away

Weekend Argus (Saturday Edition) - - PROPERTY -

BUY­ING a hol­i­day home is a big ex­pense and com­mit­ment, and the sort of thing one should con­sider is dif­fer­ent to buy­ing a pri­mary home, says An­drea Atkin­son, Ooba’s Eastern Cape sales man­ager.

Buy­ers need to en­sure they know a great deal about the prop­erty and the lo­cal mar­ket be­fore tak­ing this big step.

Why are you buy­ing the prop­erty? If you are look­ing to buy a hol­i­day home as an in­vest­ment, Atkin­son says you should en­sure you can let it, and that there is good price growth in the area.

“It is im­por­tant to sep­a­rate your per­sonal tastes from those that will make the prop­erty at­trac­tive to renters or fu­ture buy­ers.”

You should be sure it has the right ameni­ties and that your chil­dren are likely to con­tinue hol­i­day­ing with you for the fore­see­able fu­ture.

Can you af­ford it? Atkin­son says a buyer’s abil­ity to pay for a sec­ond prop­erty is cal­cu­lated in much the same way as it is for the first, but the banks are likely to be more strin­gent.

“They will re­quire a sig­nif­i­cant de­posit and will scru­ti­nise your in­come and ex­penses closely to be sure you can af­ford the monthly bond re­pay­ments… Most banks are un­likely to take po­ten­tial rental in­come into ac­count when con­sid­er­ing your bond ap­pli­ca­tion, be­cause they need to be con­fi­dent you can af­ford the prop­erty.”

What are the ad­di­tional costs? As hol­i­day homes are usu­ally lo­cated far away from where buy­ers live, they will prob­a­bly have to pay let­ting agents to man­age them.

Buy­ers will also need to con­sider the costs of re­fur­bish­ment, maintenance, rates, taxes, elec­tric­ity and wa­ter, as well as any levies. They will need to re­search costs of in­surance and security.

“Another im­por­tant con­sid­er­a­tion is fur­ni­ture. Some hol­i­day homes are sold fur­nished, and you should as­sess the con­di­tion of the equip­ment and fur­nish­ings so you know ex­actly what you’ll need to re­place and how soon.

“If the fur­ni­ture is be­ing itemised and sold separately, banks do not pro­vide bonds on this, so you will have to pay cash.”

Buy­ers also need to re­mem­ber trans­fer du­ties and le­gal fees and in­clude this in their over­all re­turn on in­vest­ment es­ti­mate, Atkin­son says.

What are the tax im­pli­ca­tions of a sec­ond prop­erty? “Re­mem­ber that in­come from prop­erty rental is tax­able, so if you are plan­ning to let your hol­i­day home, you will have to de­clare it as part of your earn­ings.”

And she says when you sell, be­cause this is not your pri­mary res­i­dence, your hol­i­day home will be sub­ject to Cap­i­tal Gains Tax.

PIC­TURE: LEW GEF­FEN SOTHEBY’S IN­TER­NA­TIONAL RE­ALTY

This home in a gated es­tate in Hout Bay was re­cently bought as a hol­i­day home.

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