With restrictions in place throughout much of 2020 and possibly into the future, many people have opted to purchase a holiday home rather than spend money on interstate or overseas travel. As many workers now have the flexibility to work remotely post-pandemic, this has added to the desire to purchase a holiday home. Demand for popular holiday locations such as Bryon Bay and Portsea has skyrocketed since the pandemic. 

If you are seriously considering taking the plunge, here are a few things to consider. 

Have clear objectives as to how you will use the property 

Will the property be exclusively for personal use, a rental property, or a combination of both. Whatever the intended purpose, have a clear understanding of how you plan to use the property. For example, if you plan to rent out the property, will you rent it out during the peak periods and make use of the property yourself during the quieter periods such as winter for coastal locations.  

Understand the costs 

Have a good understanding of all the running costs. If using a bank loan to help fund the property, the loan interest is potentially the biggest expense. There are many other costs to consider such as insurance, utilities, rates, cleaning, and general maintenance. Often people overlook the expenses of running two households.  

Tax Implications 

Rental income generated would be taxable at marginal rates. If the property is to be rented out or made available for rent, the outgoings would be tax-deductible. If the property is negatively geared (expenses greater than rental income) it would provide a tax benefit. It’s important to seek professional tax advice from your accountant before proceeding with such a venture.  

Contingency Plan 

Consider worst-case scenarios such as the loss of income or rising interest rates if funded with a bank loan. 

Do your research 

Like any major investment decision, do your homework. Understand the market you are buying into. If possible, spend time at the location you are planning to buy into, preferably at different periods such as summer and winter. Speak to local real estate agents and residents to gain a deeper understanding of the area.  

The purchase of a property can be an emotional decision. With many people rushing to purchase a property at the moment, take care to not make a rash decision that might not suit your long term objectives.  

The purchase of a holiday home can be extremely rewarding with many years of enjoyment with loved ones and long-lasting memories created. Define your objectives and do your research and if it all stacks up then there is no reason why you cannot chase your dream.