Holiday Let Investment Properties

I haven’t invested in holiday letting, so feel free to discount my advice (only cons, I’m afraid).

It’s not a simple matter of splitting half the year into high rental return and half into low return. You can expect to have the place sitting empty half the time between lettings – with none of the stability of a 12 month rental contract to know when your payments are coming in.

There will be higher than average letting costs – first to continually promote your unit, as well as to clean and maintain it regularly.

You’ll need to furnish it (including crockery etc), and expect bits and peices to go missing as well as increased wear and tear to a regular rental. This won’t be anyone’s home. No background checks are conducted on holiday tenants, so you’ve no control of who blows in.

I’m not sure what the pro’s are – but I’m sure someone with experience in this area will step up to the debate.

Mitm,

We have owned a beach shack for the past 4 years. Having a young family we bought the place as a ‘fun place’, with the intention of getting away from the city mainly on weekends and the like.

Finances and investing came a very poor second or third in the heirachy that went into the selection criteria before the decision to buy was made.

The beach shack has fulfilled it’s primary function of having fun.

We have been pleasantly surprised by it’s financial performance…coming from our low expectations, we are reasonably happy with how it has performed.

The rental income covers 86% of the mortgage payments (started out as 100% loan) – we chip in the other 14% plus all outgoings.

Over the 4 years we’ve had to chip in a total of $ 19 K, but the up side is we’ve had free accomodation for holidays for the past 4 years and enjoyed cap growth of $ 185K so far. We consider it paid fun !!

What are the downsides ??

1. PM (only IP we employ one for) charges 20% plus all the usual add ons.
2. Some minor kitchen utensils and crockery always go walkabout – frustrating mainly – $ cost about $ 120 over the 4 years. Don’t let that put you off though.
3. We usually go in the off season, as it’s always booked out over Easter / school hols / Xmas and New Year
4. Even though the casual tenants bring their own linen, the thought of many couples going through your bed is a tad off putting. This in fact is the main reason why other people in the town don’t rent theirs out. When we get a bit more flush with cash, we’ll pay the loan off and do the same probably.
5. That’s about it really.

We have a big land component to the shack (2 storey fibro right up on the top of the hill with 180° ocean views), so the block is growing nicely.

If you are asking about some villa or high rise deal…I’d probably give that a miss.

Cheers,

Dazzling

“No point having a cake if you can’t eat it.”

A big factor I have found to consider is who is the onsite management team. A good onsite manager/team will know how to effectively advertise, keep the place well maintained and know how to get visitors returning every year. Good managers will have a history, and I would recommend doing a bit of back ground homework on the management team, as part of your overall research on buying a specific IP in a holiday letting location.