Tips for investing in a holiday home

Tips for investing in a holiday home

With property in coastal towns continually increasing in value, this remains a lucrative investment whether a client intends to live there now or later when retired. Here are good advice to offer when someone is considering whether or not to buy a home by the seaside.

According to FNB, house prices in towns typically considered holiday towns continue to accelerate quite strongly – possibly because a growing number of young people are turning to these smaller towns for their permanent homes as they offer more affordable accommodation, less congestion and increasingly, educational facilities such as private Curro schools, says Sandra Gordon, Pam Golding Properties (PGP) senior research analyst.

“So, we are seeing the transformation of holiday towns and hamlets as people increasingly opt for coastal living, which means that if you are buying a home in these towns for use as a holiday home, you have the potential to benefit from the increase in prices as people opt to move there permanently. Worldwide, well located coastal property is limited in availability, which increases its desirability and potentially its value,” ends Gordon.

Here is a list of useful aspects for your clients to consider when making their decision.

Location, location – Make sure it is within easy reach and that it is a destination they would want to visit regularly. Is the cost of the transport to and from within their budget? Do they want a weekend getaway or a more distant holiday home?

Being within walking distance of the beach, river or lagoon, with shops and restaurants nearby, will add to the value of the property.

Consider the weather and in which direction the home should face. “Location and position of the property within the area of your choice is particularly important if the home needs renovation, which requires additional capital investment,” says Erika van der Westhuizen, PGP area principal in Hartbeespoort Dam.

Stef Nel, PGP principal in Scottburgh on the KwaZulu-Natal south coast says this location is increasingly sought after among families wanting to be near parents residing in the retirement facilities on this coastline.

Investment potential – Check the popularity and price growth in the area you are looking at buying into, says Mohammed Amra, PGP principal in Port Shepstone. “Not all areas are on the up and up, so ensure you do your homework as you don’t want to invest in an area where house prices may not be appreciating in value. Also look further than the cost of the property itself – don’t forget to consider costs like furniture, should it be acquired unfurnished, as well as electricity, water, rates, taxes and levies,” Amra adds.

For resale purposes, ensure it is a home that suits most families, and rather spend a little more on a fantastic view as it adds value. Nicola Lloyd, PGP area manager in Hermanus and Onrus in the Western Cape recommends prospective beach home buyers look for an area with strong investment potential. Ideally the area would be attractive to different market segments. Important information would be to know about plans for future expansion in the area and how that would impact the property investment. As agent you should also have information on the property growth trends over the last 10 years.

Security – Security is important, especially if the home will remain vacant for lengthy periods. For some clients it will be advisable to look for a lock-up-and-go property within a sectional title complex or, if they are looking for a more spacious property, within a lifestyle estate which usually also include a number of leisure activities such as golf, swimming and walking.

Another plus is a home that does not require a huge amount of upkeep, especially if the property may stand empty for a large portion of the year.

Planning ahead – Clients in their 40’s may be looking ahead to buying a property to retire to. Then by the time they retire, they will have home on the coast that is fully paid for. Amra advises that clients keep in mind that their holiday home needs to fit in with their current and future lifestyles. Look at aspects such as flooring (easy to clean) and large open-plan areas for entertainment of family and friends.

Activities for whole family – It is a good idea for clients to make a list of their family’s requirements and to ensure there are activities the whole family can enjoy. Take note whether there are restaurants, animal parks, beaches, hiking routes, fishing spots, adventure sports and other fun holiday activities, as well as shopping malls.

Letting income – Carol Reynolds, area principal for PGP for Durban Coastal says she would advise her clients to invest in holiday homes where short-term letting is allowed, or even Airbnb letting. This would mean that their properties can generate returns when they are not using them. To this end, a managed apartment block that offers a key and laundry service would be ideal, as the property would be hassle-free and the owners could book several weeks per annum for personal use and leave the management agents to manage their short-term lets in between.

Reynolds’ five tips are:

  1. Invest in a property or complex that allows short-term holiday letting
  2. Find a way to reduce the hassle of property management – either via a trusted agency or by investing in a complex that is self-managed
  3. Furnish the unit nicely without over-capitalising – this is a holiday home, not a primary residence
  4. Invest in a great location close to the beach or local amenities, this will make the property more desirable from a letting perspective
  5. Always ensure when investing in a complex that the body corporate is well run and the complex is well-maintained. A holiday home investment should be as low maintenance and hassle-free as possible, no-one wants to become embroiled in a poorly managed apartment block with weak financials and insufficient funds for ongoing maintenance.

Adapted from press release provided by Pam Golding Properties group.

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