Q & A


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.

I’m looking to rent a holiday home over the Internet. Is there anything I should look out for?

Prospective holidaymakers must be extremely careful when renting holiday homes and cottages as rental listings promoted on the Internet are a popular target for scammers.  

Unfortunately some scammers go to extraordinary lengths to demonstrate their genuine interest in the property, posing as owners or real estate agents. Many scam property addresses and photographs are actually genuine and have been copied from legitimate agents’ websites, then offered at unrealistically low prices.
 
Here’s some tips to help you avoid being scammed:       
  • Tell-tale signs of a scam advertisement include incorrect spelling, grammatical errors or pixilated photographs
  • Insist on inspecting inside the holiday home, not just on the outside
  • If you live overseas, ask someone you trust to make local enquiries
  • Don’t rely on referrals provided from anyone recommending the holiday home unless you know the person personally
  • Avoid paying any funds via a money transfer transaction
  • If the holiday home owner or agent lives overseas or interstate from the property this is a warning sign that it is a scam, ask for local telephone numbers and addresses and have these verified
  • Conduct an internet search and reviews on the name of the owner or agent offering the holiday home
  • Keep all written correspondence about the holiday home including banking details and a copy of the listing itself
  • Watch out for conspicuously less expensive holiday home rentals. They are probably a scam.
  • Never send money in order to be posted keys to a property

I plan to rent a holiday home over the school holidays. Should I rent through a real estate agent?

Owners are at liberty to rent out their holiday homes themselves. However, if they use an agent or broker to carry out this task, then those operating for the landlord must be licensed real estate agent by law. By renting a holiday home through a genuine licensed agent, your interests and personal details are protected. 
 
Whether renting holiday homes or cottages directly from the property owner or through a licensed agent, it is advisable to investigate websites offering reviews on the property, the owner or the agent to ensure the transaction is legitimate and the property is to an acceptable standard. 
 
Make sure to inspect the property beforehand and ask as many questions as possible before signing any holiday home rental agreement.  Ask for everything important including receipts to be put in writing and don’t pay any deposit via a money order transaction as holiday letting is a popular target of scammers.  

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.

What services can I expect when renting a holiday home?

Every property and the services provided will differ from property to property.  It is therefore important, before signing any written agreement, to contact the holiday home owner or agent in writing about anything you are unsure of, for example:
  • Does the owner have the right to enter the property while you are living there? If so under what circumstances?
  • Is the holiday home accommodation rated in accordance with any accommodation classification system?
  • Is the holiday home accommodation serviced and if so, how often and when?
  • Will the electricity be on when you arrive at the property? Is it included in the rental price?
  • Is there anything in the property that cannot be used or are there any facilities that are shared?
  • Is the holiday home accommodation fully furnished including cutlery, bedding and all Manchester?
  • How close is the premise to points of interest and transport?
  • If there are any disputes, how will these be settled?  Does any formal dispute resolution system exist?
  • Will there be manuals and instructions for using appliances available in the property when I arrive?
  • Will there be ingoing Condition and Inventory reports be available to cross-reference before I move into the property?
  •  Who do you call in the event of a problem or an emergency relating to the property?

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.