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Deciding to invest in a beach cottage is an exciting move, but make sure you have done all your homework

As the festive season draws near, many will be making arrangements for their holidays in South Africa’s most popular leisure destinations. This is an ideal time for prospective holiday home buyers to visit these places and get a feel for the property markets there, says Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa.

“As the number of holidaymakers visiting leisure destinations and coastal regions increases, so do the number of property transactions in those areas.

“Areas like the Atlantic Seaboard in Cape Town, the Garden Route and the KwaZulu-Natal north coast generally see an increase in demand for luxury and leisure properties over the holiday period, as do the Big-5 areas in the north of the country,” says Goslett.

“A holiday home investment provides an escape from city life to enjoy the lifestyle benefits these properties offer. With the variety of leisure destinations throughout the country, buyers are spoilt for choice when it comes to choosing a location in which to purchase a holiday home. Several places offer buyers a range of properties in a variety of price brackets.”

Apart from a getaway the family can enjoy, a leisure property can also be a solid investment that generates healthy returns over the long term.

“However, as with any property investment, when looking to purchase a leisure property there are several aspects that buyers should consider before committing financially,” says Goslett.

He provides five tips that holiday home buyers should consider to ensure a good return on their investment:

1 Location

There is a reason the adage of location, location, location came about – because few aspects influence a property’s investment potential more than where it is. Before committing to any property purchase, research the area and establish the level of property appreciation it has achieved over the past year. Other factors to consider are how well maintained the area and its facilities are, as well as the general market conditions prevailing.

2 Upcoming plans

It is best to view property as a long-term investment. Don’t just consider what an area looks like now. Look at possible developments or plans for the area.

Goslett says upgrades to infrastructure or the development of a new shopping mall could increase the value of property. However, construction and increased traffic could affect the tranquillity of the area.

3 Affordability

A holiday home should be a refuge and place to relax, not a source of stress and financial strain. Before heading down the holiday home route, consider your financial position, paying particular attention to the acquisition costs such as a deposit, transfer fees and conveyancing fees.

“Also consider the impact of interest rates increases over the term of the loan, as well as maintenance, security, insurance, rates and taxes and utility tariffs in the area.”

4 Property management

Considering that most holiday homes are some distance from where the owner lives, there is the question of who will manage the home.

“There are practicality issues with managing a home in another town, so it might be worthwhile to hire a professional property management company to look after the property. They will conduct regular inspections and screen, select and place tenants if required,” says Goslett.

5 Will you get good use out of it?

A holiday home can generate rental income, but the most lucrative times will be during the holidays, which is most likely the time you would want to use it. There is little point keeping a holiday home if you rarely use it.

Goslett says before purchasing a holiday property, establish whether the cost of owning and maintaining it is worth your while.

It is far better to focus on paying off your primary residence to incurring debt on an additional property that will not be used all that often.

“As always, a good investment decision will be based on research. Make sure the investment you are making is worth the financial commitment you are making to acquire it,” says Goslett.

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