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Top 5 tips for investing in a holiday home

As the festive season draws near, many will be starting to make arrangements to spend some holiday time in South Africa’s most sought-after leisure destinations.

The holiday season is an ideal time for prospective holiday home investors to visit these locations and get a feel for the property market in these areas, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“As the number of holidaymakers visiting leisure destinations and coastal regions increases, so does the number of property transactions in those areas. Areas like the Atlantic Seaboard in the Cape, 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 northern regions of the country,” says Goslett.

“A holiday home investment provides an escape from the hustle and bustle of city life to enjoy the lifestyle benefits these types of properties offer. With the wide 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 locations offer buyers a range of properties in a variety of price brackets throughout South Africa.”

Apart from a getaway that 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 deciding to commit financially,” advises Goslett.

He provides the top 5 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 there are few aspects that influence a property’s investment potential like where it is situated.

    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 in the suburb.

  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 future 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 in an area, 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 rate hikes over the term of the loan, as well as maintenance, security, insurance, rates and taxes, and utility tariffs in the area,” says Goslett.

  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 a few practicality issues with managing a home in another town, so it might be worthwhile hiring a professional property management company to look after the property. They will conduct regular inspections and screen, select and place tenants if required,” advises 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 holiday seasons, which is most likely the time you would want to use it. There is little point in keeping a holiday home if you only get to use it on the rare occasion.

    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 than it is to incur debt on an additional property that will not be used very often.

“As with any property purchase, a good investment decision will be based on research. Make sure that the investment you are making is worth the financial commitment you're laying down to acquire it,” says Goslett.
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Founded by Freddie P. Steyn in 2015, FPS Properties is one of the newest estate agencies in the Northern Suburbs of Cape Town. We are professional, dynamic and fully accredited estate agency. We strive to give all our clients professional and cost effective services to ensure that your property is rented or sold within the amount of time.

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