We're coming up to a year of lockdown measures and mnay people are looking forward to taking holidays. Thinking about buying a holiday home? Here are some things to keep in mind.
Do you really want to buy a property?
Firstly, it’s important to get your priorities straight: do I really want to buy a holiday home or would I be happy just renting? Before you make the decision, look at the cost of renting a similar property and compare it with the costs of buying, taxes, insurance and other outgoings that come with a purchase.
Many people much prefer the idea of ownership and the freedom that comes with it; you can visit a property you own on a whim but can’t do the same with a rental. There are also the perks of being able to keep belongings in an owned property and decorate it according to your taste so there are definite boons involved.
That being said, there is a lot of freedom that comes with renting as well. In an age of cheap flights and affordable foreign holidays you need to decide whether you would visit the property enough to make it financially worthwhile, potentially missing out on other attractive destinations around the world.
It’s worth figuring out why you want a particular property in a particular location and deciding whether it is worth purchasing or not. For some people the reasons for buying are immediate and obvious but others should do their research, get to know the locations and get a feel for the local community.
Renting it out
Many people with holiday homes rent the property out in order to cover some of the maintenance fees. This might seem like an attractive prospect but there is no guarantee that you would turn a profit on this investment or even break even.
It’s worth deciding at the outset what this purchase is: is it going to be an investment or is it just a luxury? If it is an investment your access to the property might be restricted if you have a long-term tenant or, if it is let out on a short-term basis, income may differ across the seasons or dip in some years. If the property is a long drive (or flight) away then it is likely that you will need to hire someone for maintenance and this can be a thorny prospect. There is no guarantee that work would be carried out to an acceptable standard and, if you live far away enough to need this service, it may be tricky to monitor what is being done.
Things become much more difficult if the property is in a foreign country as, for instance, you would be required to pay tax to a foreign government which requires a working knowledge of the language plus a foreign bank account from which to pay the bills from. It may also be difficult finding maintenance at a reasonable price as providers may assume that a UK investor with a foreign property portfolio has a lot of money to throw around. Ultimately, looking after such a property may prove to be very expensive.