Property Investment - Competent - 300 Words - Reading Time 2 Minutes
What are some the special considerations when buying a house or apartment that you rent out on a short-term basis through a holiday property manager or an on-site manger? Here are some of my thoughts:
- I would normally rate an investment in a holiday home as slightly more risky than a standard residential property.
- In a popular area, the cash flow can be good if the property lets out frequently. You should look for a property with a history of good returns.
- If the area remains a popular holiday destination, the increasing rental returns will impact positively on Capital growth.
- However, there is every likelihood that you will achieve a lower overall annual rent compared to a permanent rental. While holiday rental rates are higher, there is a short season – particularly in Victoria.
- Management fees and associated costs are also much higher for holiday rentals. It would need to be furnished leading to higher maintenance costs repairing, replacing furniture, cutlery, crockery etc. There are also cleaning expenses. After allowing for all these additional costs, your return may end up being only 60 to 65% of the total rent received.
- If you use a holiday home manager, they must be able to incur the above expenses on your behalf, as tenants turn around regularly.
- You are also relying on the manager to let out your property on a fair, rotational basis with other holiday homes he or she manages. You cannot guarantee this will occur.
- If you use the property for yourselves, this will reduce the tax deductions you will be entitled to claim. They will need to be apportioned for not only the time that you use it, but also any time that the property is not available for rent. This availability for rent needs to be evidenced by a real estate listing of some kind.
