The Pros And Cons Of Buying A Holiday Home

Travel is one of the greatest leisure pursuits to which we can dedicate our free time. Sure, there are cheaper hobbies, but the merits and benefits of international travel really do speak for themselves. It can give us a greater perspective on the World and our place within it. It exposes us to new cultures, climates and cuisines. We meet fascinating new people and gain valuable insights into the lives of others. Away from the familiar and the comfortable we really come alive, breaking from routine and getting a better understanding of who we are outside of our role as a parent, or outside of our professional persona. It can even help us live longer and happier lives. Travel is a great adventure that keeps on educating and edifying.

 

When we have kids, travel becomes even more important. It helps them to grow up with a greater understanding of the world and the importance of international understanding, respect and cooperation. There’s even evidence to suggest that it can help to improve their performance in school. There’s so much World, we owe it to our families to see as much of it as we can as often as we can.

That said, when we find a holiday destination that we fall head over heels in love with, we can start to wonder at the prospect of putting down roots there. We can find ourselves fantasising about investing in overseas property, and making a home away from home. While this is a romantic notion, it’s not an arrangement that should be entered into lightly. Here we’ll look at the benefits of a holiday home as well as the pros and the cons, and how to find a balance between them.

 

All the comfort and familiarity of home. All the fun of a holiday

It’s easy to see why the notion of a holiday home is appealing to so many. It offers us all of the comfort and familiarity of home, combined with an exotic, overseas setting. You may think that such a purchase is an unattainable pipe dream that’s beyond your financial capabilities but there are many everyday people just like you who have invested in holiday homes and found them to not only be a very prudent investment but a lucrative money spinner.

You’ll likely need a hefty deposit. Many mortgage lenders will expect at least a 25% deposit on a second home which may seem prohibitive. If, however you can secure the funding by remortgaging your existing property, you may be able to make it work for you. Don’t forget that property in many territories is far more affordable than here in blighty. Just take a look at the NDB BTO 2018 listings in Singapore to see what you can get for your money. What’s more, a holiday home can be a much higher yield investment than a normal buy to let property.

A holiday home can offer you the best of both worlds while you’re enjoying your holidays and a real money maker when it’s not in use. But while many have turned their holiday home into both a luxury and a lucrative revenue stream, it’s not for everybody. If it were a guaranteed money spinner, everybody would have one. It’s simply a matter of taking into account the pros and cons of such a purchase and weighing them to make an informed decision as to whether or not such an investment is the right idea for you.  

 

So, let’s talk pros

We all think that checking into a new hotel is part of the fun of going on holiday, but when you look past all the bells and whistles, when you’ve seen one hotel room, you really have seen them all. Even when you do your homework, read all the guest reviews and peruse the website of your chosen hotel, you are still playing something of a lottery when you stay in a hotel for the first time. For many, there’s also something fundamentally depressing about a hotel room, especially when you’ve stayed in a few in a short space of time. Even when they have luxurious amenities and tasteful decor it’s not uncommon to yearn for something that’s a little more yours.

Having your own holiday home liberates you from many of the anxieties of staying in a hotel. You don’t need to worry about being kept up all night by the amorous newlyweds next door who veer wildly from loud exclamations of passion to raging arguments. You don’t have to worry about just how clean the duvet really is and you never again need worry about how much it’s appropriate to tip.

You can decorate your holiday home however the heck you want (although it’s probably best not to be too idiosyncratic in your decor if you’ll be renting it out while you’re at home). You can invite as many guests as you like over without drawing disapproving looks. Those who struggle to nod off in hotel rooms can get some well deserved kip and you can have a lie-in if you want without worrying about being rudely awakened by the maid. You can cook whatever you like, however you like and prepare your food to your own tastes without worrying about being misunderstood by the kitchen staff.

What’s more, if you choose to rent out your holiday home, you can expect much higher weekly returns on your investment than you might get from a buy-to-let property. You may also be eligible for certain tax breaks if your property is available for rent 210 says out of the year and occupied by tenants for 105 days of the year. This will qualify your property as an FHL or Furnished Holiday Let giving you potential capital allowances on a huge range of costs associated with maintaining your holiday home.   

 

And now the cons

It’s not all sunshine and swimming pools, though. As with any investment, a holiday home can come with its fair share of risk. What if you are unable to occupy the property for at least 105 days out of the year? Will you still be able to keep the lights on?

Sure, you’ll be able to treat the place as your own while you’re on holiday, but don’t forget that you’ll have to deep clean the place to be ready for tenants before you leave. Not the most pleasant way to spend the last few days of your holiday. You will be responsible for managing any wear and tear to the property and while a property management company or letting agent can help a lot with the day-to-day operational costs this will represent a substantial cut in your rental income. If the economy should nosedive, tourism is one of the first industries to take a hit. This could seriously impact how viable the property is to maintain, while also making it harder to sell should you decide to cut your losses.

 

Finding the balance

Having looked at the prospective rewards and risks, it’s clear that there’s a balance to be struck. Fortunately, you are not powerless in mitigating the risks. Everything from mortgaging your overseas property (which can be done either at home or in your chosen destination) to using energy saving bulbs to keep electricity costs down can help you to leverage the inherent risks of managing a holiday home. If you do your homework on the area in which you wish to buy, you can get a great understanding of the local market, how much you can expect to make in rental income and how long you can expect the property to be occupied from the comfort of your laptop. You can also insulate yourself from the risk of damage caused by tenants by having a comprehensive insurance policy.

 

Ultimately the decision of whether or not a holiday home is viable lies with you. But with the right knowledge and planning you don’t need to be a property magnate to be able to make it work!

 

*Collaborative post

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