How to invest in a holiday home on the Great Ocean Road

Posted on 14/10/2021 by Andrew Morris in Mortgage Broking
Andrew Morris
Andrew joined Sinclair Wilson in May 2017 as Mortgage Broker, having spent the past 10 years in the banking industry. With a small business background - in hospitality, no less...

With international travel off the cards, many people are opting for a getaway that’s closer to home – staying along the Great Ocean Road or somewhere else domestically, to take a break when restrictions allow.

If 18 months without the usual travel has seen your savings rise, you may be in the position to achieve this domestic getaway dream via your own holiday home.

The benefit of owning a holiday home is that you’ll have a vacation retreat for a little R and R throughout the year, while also potentially gaining additional income if you rent it out.

So, what should you be aware of before investing in a holiday home? Here are some tips.

Be clear about the purpose

One thing to keep in mind is that the times you are likely to want to make the most of your getaway could also be the times that you’re likely to make the highest rental returns.

For example, a beachside property is likely to be in demand during summer – which might mean it’s off your destination list when the weather is warm.

Is this likely to be an issue? Are you purchasing this property for its rental potential, or purely for you to have a getaway?

Before buying, consider what’s more important to you. That way you can budget and plan your cash flow accordingly.

Remember the golden rule – location, location, location

The golden rule of property doesn’t just apply to where you live every other day; you need to consider it when it comes to your holiday home, too.

It’s wise to be looking for a property that offers you solid capital growth potential.

When searching for a property, make sure you take into account the supply of holiday homes in the area you are considering, and the demand in that market.

Ideally, you’ll be looking for a location that only gets people during a short term season. Also consider whether there are other industries in the local area beyond tourism. That way, you are increasing the likelihood the property remains tenanted regardless of the time of year (or if there’s a global pandemic!)

Access to amenities and major infrastructure also means that you’re increasing the appeal of the property to more potential tenants. For example, a nearby supermarket means that you’ll be appealing to a wide base of potential tenants, compared to an isolated shack atop a hard-to-reach mountain.

Check the zoning in the area the property is located

Its important to know what local zoning laws might be in the area where you are looking to purchase.

That’s because local laws could place restrictions on short-term accommodation use. For example, does the local shire or council have any kind of local laws that dictate the number of days you can rent out a holiday home?

Perhaps the Local Government authority needs you to apply to be a short-term accommodation provider?

Make sure you do your homework, so you know the rules before you fall in love with that picture-perfect getaway!

Understand the tax implications

It’s always a good idea to speak to your financial planner or accountant about the tax implications of making a big purchase like a holiday home.

Some things that should be on your radar:

Something else to keep in mind is that you’ll need to be meticulous about record keeping.

What about finance?

If you’re considering a holiday home purchase, chat to us about your finance options.

We can explain your borrowing power, including whether you can use any existing equity to help you achieve your goals.

Reach out today!