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Holiday home investment tips

12 Dec 2013

With many South Africans about to migrate to different holiday destinations throughout the country, those who are looking for a way to make the most of the money they may have saved up might be considering buying a second property or holiday home as a solid long-term investment.

When it comes to investment and long-term appreciation, well located holiday properties, whether at the coast, in the mountains or in the bush, will always offer the best return on investment.

This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who says while being a full-time landlord may not be for everyone, there are other options for buyers who would like to invest in a second property. He says based on the fundamental economic principle of supply and demand, a well-chosen holiday home for example, is a great way to own property and make money by renting it out to holidaymakers during peak seasons.

Goslett says many holiday homes offer excellent potential income during holiday seasons, and this way, investors have the opportunity to reap the benefit of owning an immovable asset that helps pay for itself.

“While property prices have started increasing, there are still value-for-money opportunities in the current market, with conditions still in the buyer’s favour. Another plus point for those considering buying a holiday home is they will have a place that they can escape to as their private getaway.”

Goslett says whether it’s a coastal property, in the mountains or the bushveld, a holiday home offers the owner a chance to take some time out.

He notes that considering the cost of holiday accommodation, particularly during peak holiday periods, a holiday home investment could make sound financial sense over the long term, especially if the buyer regularly spends money on holiday accommodation.

He says why not use the money spent on holiday rentals to buy an appreciating asset and have other holidaymakers help pay off the bond? Twenty years or less from the date of purchase, the owner could have a fully paid off holiday home that could become a retirement residence or be left to their children as a legacy of free holiday accommodation, he says.

As with all property investment ventures, it is always important to consider the holiday home’s location, says Goslett. “When it comes to investment and long-term appreciation, well located holiday properties, whether at the coast, in the mountains or in the bush, will always offer the best return on investment. This is due to the fact that these kinds of properties are generally always in demand because of limited geography and supply.”

Goslett notes that the natural splendour and the relaxed lifestyle offering of these kinds of properties appeal to a wide spectrum of buyers who are looking for a holiday getaway, retirement residence or just a lifestyle that is far removed from their daily city life.

Properties with ocean views are highly sought after, along with properties that are within walking distance of the beach and close to amenities such as shopping and entertainment facilities, he says.

Goslett says properties in the mountains as well as those situated in the bush will need to have good views and relatively easy access to amenities like shops. He notes that these elements will not only have an impact on the property’s appreciation, but also its possible rental income value and how many holidaymakers it attracts.

Before any buyer takes the plunge and buys their holiday home, it is vital that they carefully consider their financial standing and take into consideration aspects such as transfer costs, possible interest rate increases, ongoing monthly maintenance and security, he advises.

Another important consideration is the practical implications of managing another property, especially if it is situated in another town. In these cases, the owner may need to think about hiring a professional management agent to look after the property and place tenants.

“With the relevant research and professional real estate advice, investing in a holiday home can be a viable long-term option that the owner can enjoy both now and during the holidays,” says Goslett. 

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