When you live in a place like the Coast, it's tempting to cash in with an investment property well-suited to holidaymakers. But it pays to do your homework before buying a holiday home.

Buy with your head

Buy with your head and not your heart. Many people think that buying a holiday home will bring dual benefits - rental income and
free holiday accommodation. While there are perks associated with holiday rentals, this should not be your primary motivator for purchasing.

Location scout

During peak season, most holiday homes and apartments perform well, but in the not-so-busy times some properties don’t. Therefore, when scouting for a location it’s best to aim for the top and buy in the most desirable positions. Proximity to the beach, cafes, tourist hotspots, restaurants and shopping centres is a key selling point, no matter what the season.

Peaks and troughs

Do your homework before investing - it’s important you understand how rental properties work and what the market conditions are in your area. In coastal areas such as the Sunshine Coast, your property will experience peaks and troughs throughout the year, with summer obviously your busiest time. Are you prepared for the slow times?

Size matters

While smaller rooms potentially yield a higher rental return on the purchase price, self-contained apartments with larger rooms and a separate kitchen, laundry and bathroom are generally more desirable short-term rentals as they are more attractive to holidaymakers by offering greater flexibility. Buy self-contained if you can.

Magnificent management

If you’re considering buying an apartment, make sure the managers have a strong track record in apartment complex management as well as a comprehensive understanding of the highly competitive holiday accommodation market. An experienced management team could mean the difference between an empty and occupied apartment.

Do your sums Short-term holiday rental rates are always higher than long-term rates, increasing significantly in the peak tourist season. Therefore the initial sums for holiday properties look great. But you’ll need to allow for longer vacancy periods and fluctuating occupancy levels along with higher body corporate and management fees.

Stay, play and pay

While it’s tempting to use your holiday home as often as you can, every week you stay in your property is a week’s rental income you miss out on. And the times you would usually like to stay in your property will be the times that other tourists will want to stay there too.

Replace and repair

In peak periods your property is likely to host many tenants over a short period of time. So you need to budget for replacement costs for major appliances, running repairs and maintenance fees. The annual maintenance cost (excluding body corporate fees) for holiday properties is often about four to five per of the income, but could be up to 15 per cent.

A taxing time

When you buy a holiday home and rent it out, you must declare the income on your tax return. If you use the property yourself for part of the year and then operate it as an investment property for the rest of the time, the Tax Office will want to see evidence that it is a genuine investment. Speak to your accountant about the tax implications relevant to your circumstances as capital gains tax, expenses and depreciation will affect you.

Marketing magic

Your holiday home will need to be well marketed if you are to attract short-term tenants, so make sure your management team has an effective promotional program in place. Alternatively, you could manage it yourself using a number of marketing tools and websites, though it is best to leave it to the professionals.