VIC Holiday house dream

Hello everyone

It is a dream of ours to have a small holiday house to leave for our kids, but its always been just that "a dream" .

Now someone mentioned that by buying a house with potential to subdivide in Dromana/Safety beach we can make that a reality. Rent the existing house and build our little holiday place at the back...then sell the front house and reduce our debt to managable level.

Do you think spending $500k + in those areas to buy something is a good move to follow the above strategy?
Has anyone found a good way to be able to afford a holiday home when unable to pay off two mortgages (we still haven't paid off our home).
Thanks very much...really appreciate everyone's advice on this forum.

 

I've been in the rosebud area over the last few w/es viewing properties and auctions for subdividable blocks, the market seems to be red hot at the moment!

The price for blocks with subdivision potential seems to be too high to make it feasible at the moment. meaning you would have to hold the property for a while to make the numbers work, the problem being (in my opinion) that rental yields can be quite low.

As an example a property on the w/e (2bed 1bath about 700sqm) sold for $455k but was only collecting $260pw rent so holding costs are high.

This was rosebud so could be different to dormant/safety beach and I'm not an experienced developer but from what I witnessed margins would be very tight.

Have you considered different ares or are keen on the peninsula?

I have a couple of places on Phillip island and while the CG hasn't been great as yet the yields can be ok and I'm planning on holding long term (for personal family use down the track)

 

I think that entry price is too high for my liking, Melbourne is generally in a sellers market. I think you have a downside or flat market risk buying in Melbourne's beach holiday areas right now. I think the market has to cool, and when that happens, that will be the time to buy. However, I could be completely wrong.

Anyway, if you are to do it, can you short term let it while you aren't using it yourself?

 

I see holiday homes as pointless unless you have plenty of cash.

Buy a decent IP somewhere, and book a place or go on holidays when/where you wish, it will be cheaper

Holiday homes need maintenance, none is deductible, they are like having a boat IMO, pour money into it & usually under used.

 

You can buy houses at phillip island for high 2s low 3s. Much easier than paying 550k then sibdividing and being left with a battleaxe block and then still having to build!
Can get 4.5% yield pretty easy and it hasnt had the growth of other places. Its just starting to tick over now

 

If buying in Rosebud only do so within the Ave’s. I personally purchased a 2/1 in October 2016 for 361k and getting $305 a week rent.

The market is hot but you can still buy well

 

Stupidest thing I ever did was buy a holiday house. Other properties I've bought have more than made up for the capital loss, still hurts though as do the high ongoing costs.

 

This is my mantra Im forever telling everyone I know who ever drops the holiday house scenario...Imagine how many 5 star hotels and flights you could buy for e.g. 500k? Thats a $hitload of holidays imo

 

I understand the thought that they are wastes of money, but I disagree to an extent.
It's not a decision you'd make purely from a financial point of view but a lifestyle one.

For example I would rather live in a $600k PPOR and have a $300k holiday house than have a $900k PPOR

I bought my first house as a holiday house (long story) kept it for for myself, family and friends for 18 months (2 summers) then rented it out. I was 23 when I bought it and had an absolute blast being able to go away whenever I wanted. Being able to have large groups of friends and or family down at any time was brilliant!
I wouldn't trade those 2 summers for anything.

From a financial point of view it was probably costing me about $10k per year in interest but the way I looked at it I had to work 2 Saturdays a month to cover it (still finish early enough to get down there by 4pm)
It was a rough 2 bed house but I was in no hurry to renovate so I slowly did it up at very little expense due to mates helping because they loved having a place to stay.

I'm now renting it out, about neutrally geared and has had solid CG. When I'm a bit more set up financially (and probably have a family of my own) I look forward to having it as a weekender again.

 

Do you think you could have had the same enjoyment from it if you were to rent a holiday home on an annual basis? I do see where your coming from, my husband always says “let’s buy a holiday house for the next IP, but I have to be keep bringing him back down to earth and reminding him that our money will work a lot better for us elsewhere. If you can afford a holiday house I say go for it, but for me I can’t justify one

 

It is hard to justify, if I knew then what I know now I don't know if I'd do it, but I'm stoked I did.

I honestly don't think so, I think it's different when it's yours, you can leave everything there so you just need to jump in the car and go, even if it is just for a quick trip you'll still do it.
But the main thing is, I wouldn't have booked places to stay, I wouldn't have justified the money or found the right house or may have been busy, I think if I didn't have the house I wouldn't have had anywhere near as many w/es away.

 

Yeah I get that. Would definitely be great to have somewhere to go whenever you wanted, without having to spend money or plan, since you
Don’t notice the money going towards it when it’s part of your regular expenses.

 

Just a suggestion...if you are really wed to a holiday abode have you considered an on-site van. No capital growth (guaranteed!), but holding costs are small and someone else mows the lawns. Where we are they generally cost $20K for a decent setup (and seem to have cost that for last 10 years...no growth, but no depreciation) and holding costs are $3.5K per annum. Yep, a lot for a holiday, but I have 4 adult kids that use it with their families as well as the Mrs & I.

To me its the best of both worlds

 

Having a 600k home and a 300k holiday home is not the same as a 900k home, nowhere near it, you can justify it however you want, but the calcs will not even be anywhere near close to assume same, so no point trying that angle.

I maintain holiday homes are a waste of time and money, while I know some have them and even capital has increased, would have been much better to be a rented IP, and holiday when you want where you want and in a better place.

But hey, we can all spend our money as we wish

 

I dont think there would be a better time to buy a holiday home in Victoria or Queensland
Both holiday markets are poised

You can always rent the thing when your not there anyway

Asking prices are low excluding mornington peninsula so a good yield is still achievable

 

Is it silly to want to buy a holiday house when you already live at the beach? I'm planning for this to be my next move. Surfing can really be a costly hobby. But if every second weekend I drive down the coast for a wave or when I consider that I get all of the school holidays off it seems to make sense to me. I also justify it as me preferring to have two smaller houses than a larger, nicer PPOR.

 

My former neighbour at North Epping has a townhouse at Umina Beach and he has owned it for years. Generally speaking, he used to always keep it vacant. But then I spoke to him about my airbnbing and said it would be a suitable property for it (though, he also said he never wanted to do another tax return ever!) Anyway, his daughter in law now manages it as an airbnb rental. Very good reviews. And they can all still use it if they like.

 

Do you mind if I ask where it is (rough area)?
You've done well with $3.5k per year and unlimited people, I know a few people who have been screwed over recently by new owners of parks upping the fees to around $5k PA and can only have 4 people as listed users, anyone unlisted has to pay about $18 per night which isn't much but adds up and is a bit of a deterant to using it.

 

I don't know about Qld but in vic I think there's definitely some value, the Mornington peninsula has really moved over the last 18 months (I think) but there are other areas that haven't really moved in 6 years that have room to move. I know Phillip Island is moving now with a real lack of stock over the last 12 months.
I think asset selection is very important though.

 

Yes phillip island has moved a bit. Over 10% in the last 6-12 months i reckon.
We sub divided a block there and have just about sold the block with house on it.
We will build on the other block and by the time its ready to sell i would be surprised if the market.doesnt do another 15%
The land in the estates is starting to run out which is a sign prices will rise
Also the 600 blocks that were 150 are now around 195-200k