Are you ready for a holiday home?
Have you ever driven through a quaint coastal town in the ‘middle of nowhere’, and thought what it would be like to own a holiday home there? For many people, this is a thought that’s not taken seriously. For others, however, it’s an investment to aspire to.
Holiday homes are traditionally set outside of city limits. Whether it’s in a small country village, a seaside town or a mountain retreat, these properties are usually associated with holidays, surrounded by outdoor or entertainment facilities.
But what are the implications of owning these little getaways?
Know the Risks
As a current homeowner, you’re already aware of the costs involved in owning property and the process required in getting a home loan. But if you’re looking at investing in an additional house there are a few other aspects to consider:
- Repayment – You’ll need to be able to prove you can afford any new bond you require, so your primary bond needs to be almost paid up or you’ll need to have the income to cover two bonds.
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- Location – Provided you’re buying a holiday home in a sought-after area, it has the potential to increase in value over time. But do your homework and make sure you’re aware of developments in the area that may impact on future value.
- Tax – If you intend to rent out your holiday home, you’re legally required to declare those earnings as part of your income.
- Financial Concerns – Are you able to cover costs like rates and levies in addition to the bond repayments if you don’t find long- or short-term tenants?
- Rental potential – If you’re planning on letting this house as an investment, are you likely to get high occupancy rates by holidaymakers in that area? Or will it only be in demand during holiday periods – and is that going to be enough to cover your costs?
- Maintenance – Basic home upkeep might need to be outsourced to a local business nearby if your holiday home is located far from where you live.
Do your Research
It’s important not to get carried away by the idealistic notion of having a cottage in an idyllic location, or think that this could be an easy source of rental income. A second home is a huge financial responsibility, particularly if you’re already paying off an existing loan. And, just like when you bought your first home, if you’re interested in a certain area or home, it’s vital that you:
- Spend time there during high and low season to see what it’s like all year round.
- Speak to real estate agents about rental popularity.
- Ascertain the security of the area and what measures may be required to secure the property while empty.
- Determine the proximity of important amenities such as hospitals and police stations.
By having all the facts by the time you chat to real estate and finance providers, you’ll be able to make an informed decision on whether or not you’re ready to buy a holiday home.BACK TO BLOG HOME>