Costa del SOLD! How to scout out your very own place in the sun
If you’ve always dreamt of owning a place in the sun, you’re not alone. More and more Australians are considering this savvy purchase given the current state of the country’s property market.
Despite the fact Moody’s national index for home values has fallen for almost two years, new figures from the economic researcher predicts growth across every Australian capital city next year, except Hobart.
Therefore, now is the perfect opportunity to bite the bullet and purchase a holiday home. But how do you go about it?
Location, location, location
First and foremost, the location of your holiday home is paramount, especially if you want to rent it out when you’re not there. Chris Gray, CEO of real estate consultant Your Empire, says that buying in one-industry towns can be a dangerous strategy.
“If that industry suffers a downturn, everything in that area will be affected and it’s probably the one time that even bricks and mortar can be worth nothing.
“The more industries that support the local community, the more likely your rental income and capital growth will be consistent.”
Look for cheap holiday packages so you can spend some time in your chosen location and really get to know it. Speak to locals and scout out the best areas for yourself. Be as detailed and specific as you can.
Sometimes, a sought-after neighbourhood can withstand economic turbulence as a result of its popularity and, as a result, might be a safer investment choice.
Rental return and capital growth
Even if your place in the sun is more relaxing retreat than financial nest egg, you should still work out both your rental return as well as likely capital growth.
When it comes to rental return, calculate this for the whole year, not just peak periods. As for capital growth, don’t expect as much bang for your buck as inner-city locations.
“When the economy is up, people run out to buy holiday homes and when times are tough, it’s often the first luxury people try and sell,” Gray says. “It’s really important to consider where we are in the current property cycle; are people starting to get into the market or are they still exciting?”
Managing the property
It goes without saying that the management of a holiday home is more work than your residential property. Along with changing the bed linen, replenishing toiletries, and other domestic duties, you’ll also need to check for damage and theft.
“It will usually cost more to oversee and the performance of your holiday home as an investment is very much dependent on how good the property managers are and how they advertise and attract new potential tenants,” Gray says.
Expectations vs reality
For many holiday home owners, buying a place in the sun was the best decision they’ve ever made. However, you should still have realistic expectations in terms of financial prosperity.
“After literally hundreds of conversations with holiday home owners and those considering it, I’ve discovered that the purposes of these properties are about 75% emotional and 25% for investment…and there’s nothing wrong with buying an amazing property in a beautiful location and forgetting about whether it pays for itself or not.”
Photo by Willian Justen de Vascon