Thinking about a Holiday Home

At this time of year, many people have either been on holiday or are about to go on holiday. Often they holiday at the beach or lake. They then start thinking. If only we could have a slice of paradise. They then start looking as they go for an evening walk, maybe search the property section of the paper. Owning a holiday house may seem like a great idea. But it is not straight forward, hassle free, and can be financially draining.

Can you make the property work, or will be simply be a financial drain? It really depends on what level of borrowing will be required for the property, the level of rates, and the cost of other property outgoings especially repairs and maintenance. These can be reasonably allowed for, for budget purposes. The real big variable is how much can the property be rented out for, and for how much time. Another complication is that you will probably want to use the property yourself over some of the peak letting time.

The past year showed how difficult it is to rent out beach properties outside of the peak six week summer holiday season. This may have been compounded by the fact that there appeared to be greater numbers of properties being available for rent from March onwards with many properties staying vacant until after mid December and the start of the current holiday season. This was a sign of the recession, as most of these properties would not have been available for rent over the winter months, with the owners being content that they remain vacant.

It is not easy to find tenants who are prepared to move out of a property from the middle of December until the end of January. Indeed, we know of people who house sit for most of the year for absentee owners who prefer the Port Douglas climate, who pay summer rental rates for their house sitters to go to Ohope for three months of the year.

One intriguing market niche for Ohope owners is the increasing number of Canadians who want to rent for a number of weeks from the end of January to April. The downside of these people is that they only want to pay off season rental rates, while they get to enjoy the more settled late summer/early autumn weather at what is often a ridiculously low price.

Most people dramatically underestimate the repair and maintenance costs associated with seaside properties. Coastal climates are really harsh on paint, joinery, ceilings, and in particular heat pumps.  These costs, along with rates need to be factored into the tariffs that are charged.

If you have made the decision to buy a coastal property and hope to rent it out to cover some or all of your costs, you need to decide how to do. You have the choice of long term tenants who bring more certainty of rent, or taking your chances to rent the property out during some or all of the prime summer period. If you decide to go for summer rentals, then you need to decide if you will manage it yourself or engage one of the increasing numbers of holiday rental agencies. If you want to do it yourself you will need to consider marketing the property to differentiate yours from the other hordes of properties that are available. You will find a plethora of prospective sites on the internet.

Regardless of adopting a long term or short term rental strategy, the chances are that the gross rental revenues will be similar. It then comes down to how much wear and tear on the property you are prepared for, and do you also want to enjoy the property in the inevitable gaps that you will get between tenants. And yes, the chances are that you will not really get a true economic cash flow return, which you would normally measure other investment returns against.