Investment - Individual

How should I choose a real estate agent to lease my holid... An experienced, professional management team makes all the difference between an empty or occupied holiday home.
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Investment - Individual

The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.

I’m looking to buy an investment property. Is a holiday home a good choice?

Choosing between a conventional investment property and a holiday home investment can be tough. You really need to decide whether you’re making the purchase as an investment or lifestyle choice.
 
Here are some useful questions and tips to help weigh your options;
  • Will the investment property be used as a rental property or holiday home?
  • Are you prepared to cover a large portion of the running costs out of your own funds?
  • What is your long or short-term financial goal for the property?
  • Will the investment property offer you any tax benefits?
  • Are you confident of your financial position if there is a downturn in the holiday rental or sales market?

Tips:
  • Try and take the emotions out of your decision making
  • Remember, investment property (other than your main residence) attracts capital gains tax when selling or transferring the title to someone else
If you are a first time property investor who requires consistent rental income to cover mortgage repayments, it may be safer considering a long-term residential property in a capital city or a highly populated area, rather than a holiday home investment property.

What should I look for when buying a holiday home for investment?

The most important rule when buying any property is location, location, location.  

This means the property and local area must offer appeal in order to provide good rental returns and potential capital growth in the future. Things to consider include:  
  • Infrastructure and amenities
  • Future plans of local municipalities for the area
  • Local appeal to tourists - all year round or seasonal
  • Accessibility from major towns to the property, proximity to capital cities and/or airports
  • Street appeal and attractiveness of the property
  • Natural light, quiet enjoyment and a good amount of accommodation space
  • Appeal to a broad range of tenants i.e. couples, singles and families
 
Should the sales market soften, freestanding property tends to drop less in price than units and even less than privately owned hotel rooms.

Are there any hidden costs associated with buying a holiday home?

People often underestimate their expenses and outgoings when buying an investment property.  These costs can include:
  • Owners Corporation/Strata levy costs
  • Letting and management fees
  • Property and landlord insurance
  • Caretaker and cleaning costs
  • Electricity, land tax, water and council rates
  • Potential property investors need to consider that their holiday homes could sit vacant for weeks on end and therefore should have funds in reserve to maintain their mortgage repayments.   
Consistent advertising, regular property maintenance, furniture replacement and linen hire are other expenses to consider.

Owners also have to balance the high-cost demands of guests who seek the luxury of finer furnishings, pay TV, modern kitchens, air conditioning, multiple bathrooms, barbeques, DVD players and games facilities.

Is buying into a timeshare property a good investment?

Timeshare schemes are a type of investment known as ‘managed funds’. Generally this means that the scheme operator must hold an Australian Financial Services Licence and must give you a product disclosure statement.

To find out if the company managing the investment holds a AFS licence before buying into a timeshare scheme, check the ASIC professional register.

There are several financial obligations for your consideration:
  • There can be extra costs, hidden fees and taxes in some schemes
  • Very rarely do timeshare owners make money on the resale of their property shares
  • Some timeshare purchasers end up worse off because the value of the property depreciates drastically over time
  • In slow economic times timeshare purchases are almost impossible to give away  
  • Unless you join an active network that has dozens of interested swappers every day, you might find this swapping process difficult and inconvenient, as other locations could be undesirable, poorly maintained and have fewer amenities.
If you are looking for an investment that will give you a return, you may wish to consider other options.

Can I rent out my holiday home myself or should I use an agent?

When deciding on whether to manage your holiday rental property yourself, your decision should be based on your knowledge of the industry and your available free time, the ability to handle maintenance issues at the property, your customers’ expectations, possible complaints and your willingness to be directly involved.

If you wish to manage the letting of your property yourself be aware that that there is a good level of involvement required to complete an inventory and condition report at the beginning and end of the rental period, cleaning of the property after the tenants have left, laundering of all linen, immediately replacing any broken appliances and dropping off the keys to the new tenants.

Self managing owners need to be highly organised to handle all of the tasks required and have all advertising and booking mechanisms streamlined to maximise their effectiveness.

How should I choose a real estate agent to lease my holiday home?

An experienced, professional management team makes all the difference between an empty or occupied holiday home.  

When choosing a real estate agent or property manager, look for a strong track record of experience in holiday letting as well as extensive knowledge of the competitive holiday letting market.  
 
If you choose to deal through a real estate agent you must complete a written agency agreement that sets out what the agent will do for you, and agree to instructions on matters such as:
  • Asking rent and security deposits
  • Cancellation and return of deposits
  • How to handle minor repairs or damage to the premises
  • Real estate agent fee’s and commissions
  • Other services such as cleaning and laundering of furniture and linen
  • Instructions on how to handle disputes
  • Conduct of holiday makers and respectful treatment of permanent neighbours

As a landlord of a holiday home, what services should I be supplying?

When supplying accommodation, landlords should specify (in writing) to the occupants the services and facilities that are included in the rental price. For example:
  • All utility costs
  • Cleaning services
  • Gardening
  • Pay TV
  • Laundry services

Landlords also need to understand that, depending on the price range, guests may be seeking  high-end, luxury standards of both property and interiors. This could include:  
  • Modern kitchens and bathrooms
  • Quality furniture and soft furnishings
  • Luxury Manchester
  • Contemporary appliances (including modern pay TV’s, DVD players, and computer games)
  • Adequate air conditioning and heating
  • Barbeques

What is the best way to ensure a tenant does not damage your investment property?

You (or your agent) and the occupant should inspect of the property before the occupant moves in, to check the state of the property. 
 
It is suggested that a Condition Report and Inventory Report be completed at the beginning and end of each tenancy.
 
The Condition Report should report on the property itself (inside and out) including any existing damage, marks, wear and tear. The inventory Report should note all furniture, soft furnishing, cutlery, crockery, Manchester and appliances provided, noting the state of their condition. 
 
The more time taken to carefully complete these reports the better the outcome for both parties at the end of the tenancy (you may even wish to take photographs to prove the condition of certain items).
 
Both the occupant and landlord should then sign both reports stating their agreement to condition. This is the best way of avoiding disputes when the occupant moves out.
 
Should the occupant damage any part of the property including inventory items, the occupant will be responsible for such damage with the exception of fair wear and tear of items or property.

Are there any safety requirements to consider when leasing out a holiday property?

Landlords and their agents have a duty of care to tenants and their occupants who lease any property.

They must ensure that the property meets safety standards before occupation. It is recommended that landlords and agents conduct regular checks of electrical and gas appliances to ensure they are in safe working order.  

If the property has a pool, the landlord must ensure it complies with safety standards required by law in Australia including secure fencing.  Smoke detectors must be checked and batteries replaced regularly as required by law.  All blinds and curtain cords should meet state safety legislative requirements and all furnishing should meet with fire resistive ratings.  

For more information check with a First National Real Estate Property Manager or contact your state’s fair trading or consumer body.

Should I lease out my holiday home on a short term or long-term lease?

Any property leased for holiday letting, or rented for a period of less than three (3) months is not governed under the general tenancy laws of most states.
 
In most cases rental returns on short term fully furnished holiday properties is much greater than long term leasing.
 
Investors need to consider their investment strategy and investigate all associated costs before making the decision to lease a property for short or long term tenancy.  
 
The best time for leasing out your holiday home is in high season (and most school holidays) when asking rents are at their highest.