Holiday rentals can be a fantastic investment as they typically come with a higher rental return. In the right area you may have fantastic occupancy rates but they won’t be occupied year round, and the fees the agent will collect on these times of occupancy will be higher.
Depending upon where you are in your investing journey, a holiday rental may compliment your portfolio beautifully, but in many circumstances it can also hold you back (financially) and if the income isn’t steady, it can’t be as well relied on. And of course in uncertain times, such as what we have been experiencing in 2020 & 2021, while we hope these are now in the past and not reoccurring, incomes have been impacted, and therefore could impact would be borrowers negatively.
If a holiday rental is to be your next investment, should you stick with a holiday area, or consider buying a holiday rental in a metro area?
Both have their benefits, Accommodation on the outskirts of city’s can be as popular if not more popular than holiday destinations, which will be popular seasonally, and can attract a higher rate. However you may find that you’ll have a more steady stream of bookings and therefore income in a metro area. Think beach side, or conveniently located to restaurants, amenities or the city without being right in the middle of it.
Rental yield may appear higher in holiday areas as they can come with a high price tag for those peak times. However it needs to be broken down over the course of a year when compared to that of what may initially appear lower in a metro area.
These areas can be popular among visitors of family and friends at seasonal and holiday times, attracting higher rates then, yet just as popular in “off-peak” times with people traveling for business and leisure, weekend weddings, or staying near the city for entertainment and making a weekend out of it!
A holiday home is no longer just a luxury, but another home that you get to enjoy at your own leisure and put it to work for you in the time that you aren’t using it yourself!
Further to location and rental income, for taxation a holiday rental will work much the same as any other investment property in your portfolio, be liable for capital gains tax, expenses claimable at tax time, etc.
If you are looking for a buyer’s agent to assist you with purchasing a home or investment property in the Sydney, Brisbane and Newcastle regions, please get in touch with Lloyd Edge and his team at Aus Property Professionals here or give us a call on 1800 146 837!
