There are better ways to invest in property. Richard Sheppard tells us how.
I’m sure you’ve all been there – wandering around the festively decorated shops, Christmas carols playing softly in the background, nostalgically gazing into real estate store windows and dreaming of a better life. But it’s important not to let those overwhelming emotions cloud your good investment decisions. Choosing a good investment strategy can be challenging at the best of times. A holiday-type property is quite specialised and complex in terms of property for investment purposes, so think twice.
Here are just a few of the potential complications of holiday houses as an investment:
Capital growth can be very fickle and volatile
As most holiday houses are in regional locations with high seasonality that is largely dependent on tourism, the demand and therefore growth can be very hard to predict.
Rental income is usually very inconsistent
For many of the same reasons, rental income is usually more unreliable at times when you may need it more (such as when the economy is lagging). The cost of managing these properties is also expensive and time consuming, so the rent (after management and maintenance costs) is usually much lower than it would first appear. Banks are far more conservative when using the customarily fickle income for lending purposes, so it can be much more difficult to obtain finance.
More complicated tax implications
If part of the appeal of a holiday house is the intent to partially claim your holidays on tax, you should be aware that the tax office has some quite technical tax laws in place in order to prevent this. These tax laws can be extremely hard work to navigate even with the help of a good accountant.
While there is no doubt some holiday houses out there that have performed well, they are often much harder to find. With so many possible complications to consider, the shine of owning a holiday house can soon rub off. My advice? Focus on the R & R while holidaying, and then put your best investor hat on when you return and are ready to plan your property investment goals.
Property investing can be a very rewarding experience if done well and with good advice, so if you’d like any help with planning your property investment goals, we’d be glad to show how we can assist.
Senior Property Investment Advisor Richard Sheppard is the Managing Director of inSynergy Property and Finance Solutions. inSynergy is a licenced investment property buyers’ agent that provides professional property investment advice, property market research and specialised mortgage broking services. Phone 1300 308 808 or visit www.insynergy.net.au