Is a Weekender / Holiday Let really such a bad idea?

The general consensus would seem a weekender/holiday let isn't a great investment choice. I'm inclined to agree if we're talking about a pure investment when compared to looking more openly/objectively at the wider market to maximize what else you can do with the same borrowing.

We're at a bit of a cross roads at the moment, we've spent the last 4 years trying to make some in-roads into our investment journey after procrastinating for a long time and suddenly realizing we were starting to get older, quickly.

We've been in our current house for 6 years, and whilst we love it and the area, I am getting itchy feet now and then. We'd ideally like to end up on some acreage at some point.

Now, with our sensible hats on, acreage just isn't possible for us at the moment. To buy a property where we want to live we'd be looking at $1.5-$2m. Whilst we could conceivably borrow this amount, it would mean a mortgage 7 times bigger than our current one and likely an end to any further investing.

Whilst we'd love to live on the dream property, I can't convince myself that the urge is strong enough to have such an enormous anchor of a mortgage, effectively condemning us to "work" for way longer than I ever hope to have to and basically just renting it off the bank.

We've accumulated 4 properties in 2 states since 2013 and are well on the way to the next deposit which should see us in a purchasing position around June this year to go again. This time though, I have no idea where to start looking.

So, this brings me back to the main topic, we thought about a weekender a few years ago and the subject has come up again now. The pro's are, we can stay when we currently live and love yet have something different as a bolt hole when needed. We would have a budget of around $400k which could get us something quite nice in the area I've been looking at and when we are not using it it can be left with a local holiday let agency.

Another "pro" being that all the time it is "available" for rent we can pro-rata deductions for interest etc I believe?

The cons are - as we're already down the Mornington Peninsula, we're an hours+ drive from the city before we even begin to get "out of town", for a weekender we'd want to be a maximum 2 hours drive from home, which limits our options in that price range unless we go east, which then limits the holiday let market.

We really like Daylseford, we go there often, it's about the right distance, has a good sized town and still plenty of good stock at that budget. I think this is where we'd concentrate.

The other con is that it will no doubt hurt our serviceability moving forward for a subsequent purchase. Having said that though, even if it never got a tenant, at a $400k budget plus keeping out current home it would still be a good deal less than half the total borrowing of us moving to a $1.5m place instead.

Anyway, sorry for the ramble, just good to get tings in black and white in front of you sometimes.

I'd really love to hear from anyone that has a weekender or holiday home, how much you use it, how big a pain it is and why, what pitfalls to look out for etc and any thought's on Daylesford as an investment area in general would be most appreciated.

Any suggestions for places to check out within 2-2.5 hours of the Peninsula would also be welcome.

Cheers.

 

People have made a lot of money out of hotels.

However weekenders are not investments, they are businesses if you want to make money. Even if you have staff doing all the jobs they're a hell of a lot of work.

There will be a large line of family and friends wanting cheap/free accommodation.

You will likely want to use it during peak periods. Off peak periods still have the same running costs. After the agency takes their cut, cleaning and laundering costs there will be very little left, during off peak. Power bills will be sky high - guests will run the ac/heating non stop.

Are you able/prepared to drive 2 hours and do a turn over at the drop of a hat because your cleaner hasn't turned up?

How often is often? Usually it's not often enough to justify a holiday house.

If you want a holiday home (of your description) and can afford it, go ahead. But if you expect to make money out of it you will be disappointed.

 

I'm wanting to build a weekender. No intentions of letting it out, just lets me have a larger house with a yard somewhere, and I can rent a smaller cheaper one in civilisation.

 

Weekenders sound good in theory but are inevitablydrains on resources.

How many weeks accommodation could be had in a similar property in the same town (& without all of the upkeep) for your same $400k? (Whether or not you factor in any tax benefit).

It must be a considered a lifestyle choice not in the same category as your investments.

 

Do you have kids? I know personally that a weekender wouldn't work as weekends often get taken up by sport and homework. Cheaper to book a place online for a weekend away.
Maybe when the kids leave home..

 

I thought about this a while back.
I came to the conclusion that it would be cheaper to rent the weekender.
But there are bragging rights that come with it though

 

We purchased a beach house/weekender some years ago now, it was great while our children were young, however as they got older with sports commitments etc we went from going there every w/end to perhaps every 2 months.

My husband had to mow lawns, and basically ended up more work than it was worth. We decided to just rent it out and we now never use it. As its rented I don't have any emotional attachment to it anymore.

I know people who rent their w/enders at peak holiday seasons, but these properties need to be in good condition, fully contained, clean linen etc and even though they achieve a premium rent at peak its only around 6-8 weeks pa.

Just my thoughts, my personal experience.

MTR

 

Thanks for all the comments, all goof food for thought. We don't have kids, and to be honest would likely use it ourselves more off-peak than peak. We tend to stay local in peak season anyway but enjoy going away when it's cold and quiet.

I realize it's not a great investment in pure terms, the priary reason for buying one would be for our use, the icing on the cake would be that it's essentially a subsidized second home as long as it's legitimacy listed as available for rent.

It would have to be fully managed by an agent that does holiday lets, so no doubt that would eat into any "profit". I've no doubt it would cost a fair chunk in terms of upkeep, but then on the flip-side would still be cheaper than us upgrading the PPOR.

To upgrade the PPOR to anything remotely like what we'd want we'd have to be adding around $1m to our total mortgage, there's just no way I'm prepared to do that at this stage. I'd rather stay in our current house, (love where we are, just hankering for a change I guess). The thought of owing the bank that much money though when it is for a non-investment just feels like too big an anchor and cements me into my job for the rest of my days.

We could borrow say $400k instead and have a weekender, that's also then subsidized to a small extent. Probably a romanticized idea, but I think overall a better option than a massive PPOR mortgage increase.

Would be better if we lived further out to begin with so that we could geta cheaper bolt-hole without too much of a drive. There's a few place in the High Country we'd buy into for a weekender in a heartbeat, but realistically a 4 hour drive each way means we'd just never use it.

I need to sleep on it some more.

Cheers.

 

If you go ahead with it, throw it on Airbnb... as long as its appealing, you really might surprise yourself in regards to demand.
You'd need a good local cleaner/manager for it but its doable...

 

From an investment point of view, looked at a holiday rental and compared to a normal rental property in the same area. The holiday rental probably had approximately $7-8,000 more rent per year (mostly over the peak periods), but factoring in cleaning, wear and tear etc... it didn't seem worth it.

 

In which case I'd treat it as a consumer item. Any income you earn is a bonus, but don't rely on it. I guess you can rely on the tax deductions and hope they don't happen, in which case you will be further ahead.

If you rent it out then it will never really be a home to you. You wont be able to arrive to a stocked pantry and fridge. You will have to properly clean it even if you've only stayed 2 nights. etc.

I know a few people with holiday homes. Here's two examples:

1. Retired. Spend half their time at the holiday home. Actually, I'd call it a second home. I'm a friend of their son and friends are always welcome and they never rent it out. They can leave the boat in the shed, the fine scotch in the cupboard etc. It's a home and a very nice place to visit.

2. Retired, relatively young. They run it as a business and earn decent money from it. Rent it as much as they can, mostly do everything themselves. If they can rent it at more than the turn over cost they will. They get to use it the odd day or two inbetween bookings. They'll use it for a night or two inbetween bookings and then turn it over. But sometimes they're there every few days as just cleaners. Lot of work doing the bookings, cleaning and laundering. It's not homely, it feels like a hotel. As retirees it does keep them occupied, but creates headaches when they want to travel.

 

What about air bnb your current house and use the cash to stay on a hotel or go somewhere?

Friends just spent a month in Indonesia/bali and the Airbnb of their house covered a good chunk of the holiday.

But if you want it fit off peak and it's a second ppor (love purchase) , given what your after it could work ok. Just need to do some numbers and find the right mix

 

Where abouts on The Peninsula are you Prop?

 

Wouldn't really fancy AirBNB'ing our PPOR @bob shovel too much stuff in there. A second home would be minimal in terms of stock and furniture etc.

We're in Somerville @Bayview

 

We seriously looked into it a few years ago and purchased a sturdy 2 b+ 1 + unit so not have the garden and maintenance issue.

Turned out that by leasing the property as a full term rental it clears annually $2.2K so we have left it as a rental.

It is paying itself off and allowing us enough money to holiday somewhere similar for at least 10 days.

 

Husband and I always go to the same place(s) to holiday and it's tempting to buy there instead of renting. But renting works out cheaper.

However, if it's a consumable, and you'd rather have a home of your own that you lease out to strangers every now and then, then the extra cost is just the cost of a consumable.

Have you considered buying a larger property, renting that out with the provision that you'll have a small granny-flat/RV on the property to use yourself? I knew someone who did this - rented out the larger property long-term, and essentially got a free weekender for his own use.

 

Great idea, that's thinking outside the box for sure....

 

One of the worst investment in my opinion.

My dad bought a place on the Yourke Peninsula. It is a 3 bedroom house and a shed lined like a house, kitchen bathroom etc.

His plan was to fence off the shed and use that whilst renting the house to someone else.

Long story never ended up happening. As it was to hard to find permanent rental for the house. So now the whole thing is rented for only $320. And he can't use any of it until the tenants move out

 

I have thought of that. Buy a property on a large land and build a GF or buy one that comes with a sleep out...rent the larger house and go into the sleep out every now and then. I am still keeping the dream alive.