The ultimate 5-point checklist before buying a holiday home
Ever been on holiday and decided to buy a property? Apparently it happens, more often than you might think.
“As the number of holidaymakers visiting leisure destinations and coastal regions increases so does the number of property transactions in those areas. Areas like the Atlantic Seaboard in the Cape, the Garden Route, and the KwaZulu-Natal north coast generally see an increase in demand for luxury and leisure properties over the holiday period, as do the Big-5 areas in the northern regions of the country,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
It so happens that the holiday season is an ideal time for prospective holiday-home investors to visit these locations and get a feel for the property market in these areas.
Apart from a getaway that the family can enjoy, a leisure property can also be a solid investment that generates healthy returns over the long term. However, it remains important that you consider all factors and ask all the right questions before investing.
This is Goslett’s checklist before committing financially:
The location hits all the spots
There is a reason the adage of location, location, location came about – because there are few aspects that influence a property’s investment potential like where it is situated. Before committing to any property purchase, research the area and establish the level of property appreciation it has achieved over the past year. Other factors to consider are how well maintained the area and its facilities are, as well as the general market conditions prevailing in the suburb.
The plans for the area fit my future plans like a glove
It is best to view property as a long-term investment. Don’t just consider what an area looks like now, look at possible future developments or plans for the area. Upgrades to infrastructure or the development of a new shopping mall could increase the value of property in an area; however, construction and increased traffic could affect the tranquillity of the area.
I can comfortably afford it, considering all costs
A holiday home should be a refuge and place to relax, not a source of stress and financial strain. Before heading down the holiday home route, consider your financial position, paying particular attention to the acquisition costs such as a deposit, transfer fees, and conveyancing fees.
Top tip: Don’t forget to adequately cover variables such as interest rate hikes, maintenance costs, security, insurance, rates and taxes and utility costs in the area in your planning and budgeting.
I’ve already thought about a satisfactory property management solution
Considering that most holiday homes are some distance from where the owner lives, there is the question of who will manage the home. There are a few practicality issues with managing a home in another town, so it might be worthwhile hiring a professional property management company to look after the property. They will conduct regular inspections and screen, select and place tenants if required.
My family will use, and love, it
A holiday home can generate rental income, but the most lucrative times will be during the holiday seasons, which is most likely the time you would want to use it.
There is little point in keeping a holiday home if you only get to use it on the rare occasion.
Before purchasing a holiday property establish whether the cost of owning and maintaining it is worth your while. It is far better to focus on paying off your primary residence than it is to incur debt on an additional property that will not be used very often.
And finally, as with any financial or investment decision, “I did research” should be ticked before you even think of anything else. Adequate research, making sure that the investment is worth the financial commitment, is the foundation of a successful, and happy, holiday home investment.