Holiday rental investment. Any advice?

[leicachamp]

Hi everybody. I have been looking into the idea of building a couple of Holiday rentals in the town of Daylesford. Has anyone had experience (Good or Bad) with any holiday rental properties. Note: I have no more negative gearing benefits for this property. I have heard that a lot of high income earners invest in Holiday rentals for neg gearing and perks of free accomodation.

From my limited research. On the positive side is the high rentals, can use the property myself when vacant.


On the negative the high build cost($250,000 for a 10 square unit!!!!). High expenses!!!!


Any advice would be greatly appreciated.

 

[R377]

please avoid or be very very cautious with holiday rentals.

im sure alot of other members will agree....

 

[Propertunity]

I have heard that a lot of high income earners invest in Holiday rentals for neg gearing and perks of free accomodation.

Tax benefits are the icing on the cake. They are not THE CAKE!

Any advice would be greatly appreciated.

Yes - don't!

 

[craigb]

IMOP it seems like a nice fary tale way to invest , and some fall for this when they are on hollidays, very romantic, the strata in some areas tell you that if you buy one there is only a #@&^ % vacancy rate and they are agood investment, if this is true, why are there so many for sale????

usually your trying to have somone renting (paying for it) 24/7 holiday units do not, you might find that the excessive costs would usually allow/be equal to. allowing your familly to travel and holliday any place they wish in the future,
most only get anual leave for 4 weeks a year, so would it be worth loosing $$ for 4 weeks free? accomadation.

 

[Monopoly]

Hi everybody. I have been looking into the idea of building a couple of Holiday rentals in the town of Daylesford. Has anyone had experience (Good or Bad) with any holiday rental properties. Note: I have no more negative gearing benefits for this property. I have heard that a lot of high income earners invest in Holiday rentals for neg gearing and perks of free accomodation.

From my limited research. On the positive side is the high rentals, can use the property myself when vacant.


On the negative the high build cost($250,000 for a 10 square unit!!!!). High expenses!!!!


Any advice would be greatly appreciated.

Speaking as someone who runs holiday rentals, they are great if:

1. you live close enough to service the property yourself
2. you don't mind spending a lot of your free time mowing lawns, changing and washing linens, (if you have one) pool cleaning, and general maintenance but most importantly (and this is the REAL clincher)
3. you're not negatively geared to the max on this type of investment!

Pluses:
They (like any property) DO experience CG
They ARE great money makers especially in the warmer months
They ARE a great (off season) getaway for you and your friends/family
They DO provide great tax benefits (Note: when rented)
*A common misconception is that you can claim all year round on holiday rentals, but that is definitely NOT the case at all. You can only make claims on expenses even small ones like toilet roll purchases etc whilst it is listed as "available" but you need to make sure that you have evidence of this (ie. listing/advertisement and not just heresay!

Minuses:
They ARE a lot of hard work
They ARE subject to a lot more wear and tear with the constant people traffic

The notion of "holiday rentals" is a very romantic one for most novice investors who often go into such deals all goo-goo eyed firmly wired shut!!! Don't delude yourself, they are hard work but if you're prepare to put in the hard yards, and don't mind the low-season lulls that occur from time to time (and I say, "time to time" because SOME do make money even in winter months as "weekend getaways"). If ideally located (as mine are) with such things as bayviews, tennis courts, open fireplaces etc, people will use them as an escape retreat even when it is cold outside!

Just to repeat, there is CG in these places, regardless of their nature, they are still property and at the end of the day, will grow in value especially if positioned in holiday hotspot areas (ie. bays, mountains) but if you're relying on them to make huge $$$ ALL year round, DON'T!!

 

[units4me]

Yep, they can be very volatile, with lots of potential negatives, but if you develop a good hloiday clientele, they can be excellent.
Be aware that you can have limited options if you have a falling out with onsite/offsite managers. Don't believe everything the seller or the prospective manager tells you either.

Lots of wear and tear issues, high cleaning/linen etc costs too.

Another problem can be managers letting out your unit (for cash on the side) and not telling you. I think this is more common than people think.

So in a nutshell, you need a CLOSE eye on your manager and DEEP pockets to hold on until if/when you start seeing decent returns.

BTW, expenses are deductable for the entire time it is AVAILABLE for rent, not only the time actually rented. So, for example, if you have personal use of it 3 weeks/year, then you can only claim 49/52ths of all expenses.

 

[leicachamp]

Thanks for all the advice guys. I will do more homework before i take the matter any further.

 

[Monopoly]

BTW, expenses are deductable for the entire time it is AVAILABLE for rent, not only the time actually rented. So, for example, if you have personal use of it 3 weeks/year, then you can only claim 49/52ths of all expenses.

Thanks for that units4me, you're quite right (hence I edited my earlier post) yes you can deduct costs as long as the property is "available" and the best way to do that is to either:

a) have it occupied, showing that an income has been generated at this time

b) have it listed, eg. online "stayz.com.au"

Aathough (b) is perfectly acceptable/legitmate, the taxman will come down on you if you keeping making claims without ever really showing (enough) revenue being generated, so DO be careful on with this practice.