Investing in a holiday property is a huge decision that shouldn’t be entered into without first considering the pros and cons. While your main reason for buying may be for personal use, it would be wise to look at the potential earnings that could also be generated from renting your holiday property to other holiday makers when you are not using it.
There are six main considerations that all potential holiday property owners should take into account before making a final decision.
Your eligibility
You may have access to funds or a mortgage agreed upon in principle, which is a great start but doesn’t necessarily mean that you are eligible to buy. Particularly where international real estate is concerned, there may be laws that regulate whether and how foreigners buy property in that country. The type of property may also be an issue, with foreigners only being allowed to buy certain property types.
Some countries, like Singapore, for example, only allow foreign property purchases if a Singaporean is partnered in the purchase. Countries such as Thailand have even tougher restrictions, where at least 51% of condos must be Tai-owned and houses and villas can only be bought by local people.
How safe is the area?
With overseas holiday property purchases, it is important to have an in-depth knowledge of the area that you intend to buy in, particularly when it comes to security issues. While you may love the area and feel completely safe and relaxed on your holiday, it is important to think about how secure the property is when it is not in the holiday season and is empty.
This problem can be avoided by buying property in a gated community or investing in security measures such as CCTV or guards. The cost of security should be taken into account when looking at your budget.
Does it match your holiday dreams?
Identifying which activities you love to do the most on holiday is imperative to finding the right property in the right location. So, if you love the beach, then a flat overlooking the sea in a busy tourist town with lots of restaurants and clubs may be perfect. But if you are looking for peace and quiet, then buying a bit further afield, perhaps in a small seaside village, may help you find the perfect spot for repeat holidays.
Finding a holiday property that suits all your holiday needs is the ideal situation, so the importance of researching the areas you like cannot be understated.
Sticking to your budget
It may seem obvious, but it is important to stick to your budget and factor in all additional and potential unforeseen costs into it.
Take into consideration the cost of living in the area you are buying, as this may restrict the things you can do while on holiday. If all the local amenities are excessively expensive, then this will negatively impact the enjoyment of your holiday, as you will find yourself watching the purse strings instead of having a relaxing break.
Can I rent out my holiday property?
If you are considering renting your holiday home to holidaymakers to generate some additional income, then it is important to consider the area you are buying in.
Limited entertainment options will also limit the number of people who will want to rent your property. The type of property should also match the target market you are aiming at, so if the area is family-oriented, then a property that can accommodate larger groups of people with facilities for children would be advisable.
Excellent transport links and accessibility will be a great asset when it comes to trying to let out your property, whereas a holiday let that is off the beaten track may only appeal to a smaller, more niche market.
It is also vital to check before purchasing whether the building or apartment block actually allows for properties to be sublet as holiday rentals, and if so, what are the restrictions on duration and times of the year?
Cost of ownership
Ownership costs are an absolute and must be considered in your budget.
Costs such as insurance, management fees, and home association fees can quickly add up, so you need to make sure you can comfortably afford them. There will be ongoing maintenance costs for fixing and replacing appliances such as air conditioning, lighting, ovens, etc., as well as general upkeep to keep the property looking in tip-top shape, such as painting and gardening.