Holiday homes: What to consider when buying one.
Category Buyer Advice
Having a second or holiday home appeals to many as either a secondary source of income or simply having a place of their own to escape the busy humdrum of city life.
The latest statistics show that nearly a million of the 6.8 million homeowners in South Africa own more than one property. These properties can be used for short-or long-term rentals. Affluent buyers tend to invest more in holiday homes and short-term rentals, while professionals invest in the secondary property market.
When considering purchasing a holiday home, it is important to establish what you want to do with the property upfront. If you're planning on buying to rent, for example, Airbnb, it's advisable to buy close to tourist attractions, transportation hubs, beaches, etc. If you're buying for personal use, you will need to consider things like the maintenance and upkeep of the property while you aren't using it. If you're looking at a long-term rental, you'll want to buy close to major road networks and business hubs.
Here are some tips on what to consider when investing in a holiday home:
Location, location, location.
When choosing the location of your holiday home, think about how often and for what purpose you'll be visiting. Being near beaches, rivers, shopping malls, and restaurants can enhance your experience and will also appeal to potential renters. While plans to buy a holiday home are currently driven by lower prices in many sought-after holiday destinations, it is also advisable to explore emerging areas that offer more affordable options.
"It is an excellent time for those with spare cash available to invest in property since they stand to make solid returns as inflation and rates decrease in the coming years," says Berry Everitt, CEO of the Chas Everitt International property group.
Seasonal considerations
During the holiday seasons, schools and many businesses are closed, making it difficult to get a feel of the area's typical hustle and bustle. It does, however, allow you to experience the community in its peak season. Have a look at parks, recreational areas, and nearby amenities to gauge the busyness and appeal of the area.
It is recommended that you also visit out of season in other to fully understand the dynamics of the area you are looking to invest in. Consider whether it suits your lifestyle and business needs, and if it will do to serve its intended purpose.
As South Africa is prone to flooding and extreme weather, it is vital that you assess all risks like wildfires, floods, hail, extreme heat, etc. as this not only affects interest in your rental but could also significantly increase your insurance premiums,
Safety and Security
Safety and security should always be top of mind when investing in any property. This is especially true for homes that might be unoccupied for extended periods. Properties in secure estates and developments offer the advantage of maintenance and security, but they might come with letting restrictions. It is important to get hold of your local estate agents to help you gain insight into the safety and security of the area you are considering investing in.
Long-term potential
The appeal of owning a holiday home is undeniable. With the increasing flexibility of remote working and emphasis on work-life balance, the demand for short-term rentals is higher than ever. And with South Africa's tourism industry showing a massive resurgence, investors are finding the idea of second or even third properties even more appealing.
Investing in a holiday home is an important financial consideration., It is vital to research property market trends, interest rate fluctuations, and property values of the area you are looking into to give you an insight into your future property's worth. Be sure to work costs like maintenance and repair costs, utilities, taxes, and levies into your budget planning.
If you are choosing to rent out your holiday home, it is highly recommended that you hire professional rental management agents to handle tenant and property management to reduce the risk of non-payment and ensure consistent income.
Investment consideration
When investing in a holiday home, it is important to think about the future resale value, the potential rental demand, etc. Those looking to invest from abroad must be aware of the financial nuances that apply. For example, if the property needs to be financed, banks will typically only provide a 50% bond. When selling the property, certain taxes will also be payable which will impact the sale.
Local investors need to be aware of the fact that if they are selling their second property, the sale will be subject to capital gains tax.
As for South African homeowners eyeing an additional property, securing a bond is crucial if a cash purchase isn't viable. The loan amount granted by the bank will be dependent on the buyer's credit profile. When the homeowner decides to sell the property, they should keep in mind that the sale of this property will be subject to capital gains tax.
As the demand for holiday homes continues to increase, if you're looking to invest in your own, now is the time to do so. Chas Everitt agents are ready to help you find your ideal property that will bring you not only lots of joy and relaxation but potentially a solid stream of income, too.
Author: Chas Everitt