Are you daydreaming about what it might be like to own a vacation home – a spot to pop back to whenever you feel like a weekend away?
Many of us can relate to this, especially when summer rolls around. But if it’s not managed well, a holiday house can become a problem as well as an asset.
Here are some things to think about if you’re considering purchasing.
It’s natural to want to buy somewhere in a spot where you’ve had an amazing holiday. But how practical is it to buy in that particular area? Is it close enough that you could get there regularly? And would it be too close to the sea – close enough to possibly be uninsurable?
What are the prospects for the region? If jobs are booming and tourism is taking off, it could be a great investment – but if things are looking bleak, you might be better to take your time.
Plus, what’s the weather like? What else is there to do there? A holiday house will be much more useful if you’re able to use it in the winter, as well.
So don’t forget to check the local amenities – it’ll be easier to drop everything and go to a holiday home if it’s in an area with a good supermarket than one in a remote part of the country where you need to come equipped with everything you need.
If the house is in a very different part of the country to which you normally live, you may need to have a strategy in place to allow a local to help you with maintenance.
Even if the house is only used by your family, it’s helpful to have someone nearby keeping an eye out and taking care of things like mowing the lawns. This way, you won’t spend most of your precious holiday hours doing chores.
And on this note, before proceeding with the purchase, make sure you consider the level of maintenance your property will likely require. Generally speaking, a new home or an apartment in a complex managed by a body corporate may need less work than an older property.
The most expensive properties tend to be those on the water or near the beach. How much of a premium you pay varies around the country; according to Homes.co.nz, for example, in Gisborne you’d pay almost three times as much for a beachfront property.
If you like an area and aren’t bothered by a short walk to the beach, you may find cheaper properties just a few streets back.
The way you use a holiday home is likely to be different to how you live normally. You might place more value on an outdoor shower or a big living area, and be willing to sacrifice bedroom or storage space to get what you want.
Do some research into the local market. In some areas, buyers have snapped up holiday homes planning to rent them on things such as Airbnb. But because there are so many listed on the site, it’s often quite inexpensive to book one for a short-term stay. If this is the case in your favourite area, you may be better off investing somewhere else and simply using someone else’s holiday home for your next getaway.
The cost of the mortgage isn’t the only important thing to consider. There’ll also be rates, insurance and maintenance costs – and rates in small beach towns can be surprisingly high.
If you plan to use short-term bookings to help defray the costs and think that will be more than six weeks a year, or you need that money to meet bank servicing requirements, you’ll be treated as an investor loan in most cases – which comes with more lending restrictions.
If you are not planning to gain an income from your vacation property, most lenders may not consider it as an investment property, so the normal owner-occupier LVR rules apply. Please get in touch – we can help you find the right mortgage for your property purchase, so you can enjoy summer as you’ve never had before.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.