After jumping into the holiday rental website market, Australian Holiday Rentals has Moved on and relinguishing its site to Holidayhouses4rent.

Holidayhouses4rent acknowledges that there were some concerns from property owners to the reliability of the AHR site which saw all customers transfered to the new site www.holidayhouses4rent.com at no charge.

Owners at Holidayhouses4rent are driven for excellence at a price thats affordable to everyone and provides results.

Sea or tree: do holiday homes make good investments?

Janet de Silva
January 21, 2007

Consider these variables before buying a weekender.

Sand between the toes and solid capital growth to boot: the past decade has been a godsend for the owners of holiday homes in premium coastal or bush locations. Even with the recent price slump in some areas, residential property prices in prime sea- and tree-change locations soared between 1996 and 2006, in some cases quadrupling.

But before you hit the coast or head for the hills, here's a look at the pros and cons of investing in holiday properties - either to let out for part of the year or as a permanent rental.

Rental returns

Rental returns can and do fluctuate widely for holiday homes. In many coastal spots, the average holiday rental period is eight weeks a year with demand plummeting during winter.

Michael Troon, CEO of Lorne Real Estate, on Victoria's Great Ocean Road where prices have doubled in the past five years, says investors who buy into places such as Lorne do so for capital growth rather than rental return.

Troon estimates that permanent rentals - where the property is leased all year round - account for less than 5 per cent of Lorne properties and typically provide a net annual yield of no more than 2 to 2.5 per cent. While holiday properties in the region typically command weekly rents of $2000 or more in peak periods, most lie vacant for the rest of the year and annual yields are similar to a permanent rental.

Demand is more consistent for holiday properties in warmer locations but only for prime properties. Karen Stephens, holiday letting agent at Raine and Horne at Terrigal on NSW's Central Coast, says proximity to the beach and a sea view make all the difference when it comes to success with holiday letting. She says quality houses with these attributes can achieve an annual rental income of between $30,000 and $40,000 or even higher. However, for properties further back from the beach it's a different story; their owners are often advised to consider a permanent tenant.

Tax implications

When you buy a holiday home and rent it out for any period, you must declare the income in your tax return. If you intend to use your property for part of the year and then operate it as an investment property for the rest of the time, you will need to convince the Tax Office that the property is a genuine investment. While you are able to claim deductions (including interest expenses) for any times that you have rented out the holiday home, these must be allocated according to the time it was rented out. Unless the holiday home is your main residence, you will most likely have to pay capital gains tax when you sell it or transfer it into someone else's name.

And while travelling expenses to inspect and maintain commercially let holiday properties are allowable as income tax deductions, don't assume you can deduct the cost of your flights to and from Queensland each year to "inspect" your Noosa property. The cost of travel is not allowable as an income tax deduction if your travelling is associated with your personal use of your property or simply with the general maintenance of it.

Australian Bureau of Statistics figures indicate that there are about 700,000 holiday homes in Australia, about half of which declare an income.

Hard to sell

Even in boom times, regional properties can take longer to sell than their city counterparts. Monique Wakelin, of Wakelin Property Advisory, says properties in resort areas are more prone to volatility associated with economic ups and downs.

"When it comes to investments, it's important to select assets that hold their value through choppy economic waters," Wakelin says. "Under such conditions, holiday homes are high on the list of expendable assets, especially if owners experience personal hardship."

Even when times are rosy, regional and coastal properties generally take longer to sell than their metropolitan counterparts. Figures from Australian Property Monitors show that the average time on the market for a property in the six months to December 2006 was 239 days at Queenscliff on Victoria's popular Bellarine Peninsula and 206 days at Bowral in the NSW Southern Highlands.

Property maintenance

Multiple tenancies in peak holiday periods mean holiday homes have high maintenance and property management costs. Stephens says landlords need to be realistic about replacement costs for appliances such as fridges and washing machines which break down frequently in hot weather and peak periods.

Agents agree that the expectations of holiday guests have risen in recent times. Household items that were once considered "extras" such as air-conditioning and barbeques are now viewed as essential. "Guests are much fussier than they used to be," Stephens says. "In addition to access to beach and sea views, they are looking for special features like swimming pools, DVD players and Foxtel."

Troon estimates the annual maintenance cost (excluding body corporate fees if they apply) for holiday properties at Lorne is about 4 per cent of rental income.

The cost of property management is higher for holiday properties: at Lorne Real Estate it is 15 per cent of rental income, compared with 9. 5 per cent for permanent rentals.

Internet can help

One way to avoid the high costs of property management is to list your holiday property on an internet accommodation site and to manage the bookings yourself

The next boom areas

The price boom of the past decade means that many prime coastal spots are beyond the reach of many investors, even with the recent price dip in some areas.

"The reality is that inexpensive beach houses with a water view and within 90 minutes' drive of Sydney and Melbourne are very scarce indeed," Wakelin says.

As such, many property analysts are predicting that "spill-over" locations - those areas buyers look to as prices force them out of their first-choice areas - will experience the most capital growth in the next decade.

Robert Papaleo, a director of property consultants, Charter Keck Cramer, says sea changers are showing a willingness to trade off travel time for lower entry costs. Some of these further-out locations are waiting for transport infrastructure to improve, then they will become more accessible.

Character-rich inland areas such as towns near Victoria's Murray River, or the so-called gold rush towns of Castlemaine and Maldon, might become the next boom areas, Papaleo says.

Australian Property Monitors' Michael McNamara expects retiring baby boomers to fuel further price rises in regional areas along the coast as well as inland. "I think we've only seen the tip of the iceberg in terms of the sea- and tree-change effect," he says.

But he cautions investors to stick to those areas that are close to major cities and have strong local economies or well-organised tourism.

"It's really important to stay within three or four hours of major cities," McNamara says.

"Baby boomers may want to retire and take a sea or tree change but they don't want to move too far from access to their grandchildren."

Case study: The Smiths

Going online takes off the rental pressure

Computer software sales manager Pete Smith owns five holiday properties and plans to buy more because he believes targeting resort-style accommodation is a winner.

Smith, an experienced property investor with several other properties in Sydney, says each holiday property produces a gross yield above 10 per cent a year, and in total provide the father of four with $15,000 a year in additional income.

Smith's foray into holiday property ownership began with the purchase of a small cabin at the Kangaroo Valley Country Club (halfway between the NSW Southern Highlands and the South Coast), which the family used on occasional weekends, leasing it at other times.

He has since bought two properties at the Horizons Golf Resort at Salamander Bay near Port Stephens, another free-standing cabin at Kangaroo Valley and, just this month, a fifth property at Cypress Lakes Resort in the Hunter Valley. Initially purchasing two of the properties through failed resort lease-back schemes, Smith now prefers to purchase his properties outright and self-manage them, having achieved limited success using local real-estate agents or resort managers.

Smith says listing his properties with holiday accommodation internet site, was a turning point in his investment strategy. Prior to that, weekend bookings were infrequent, whereas nowadays he fields inquiries from all over the world, as many as four or five a day.

"Blind Freddy can get bookings at peak periods like Christmas, Easter and school holidays, but it is much more difficult to get bookings weekend after weekend if you rely on a traditional holiday real-estate agents or a resort manager," he says.

Recognising that the capital growth prospects for condo-style properties are less favourable than more traditional forms of properties, Smith says his strategy is to provide a reliable income stream in his retirement.

He uses the excess income from the properties to make extra repayments on his loans and plans to sell some of his Sydney-based properties to buy more holiday properties.

His focus will be those properties that are priced below $350,000 ("more expensive properties tend not to give such a good return") and are within a two-hour drive from a major city centre.

Aside from listing his properties on the internet, Smith says success in holiday letting is about providing good customer service. He spends about 15 to 20 minutes a day dealing with inquiries and emphasises the need to employ reliable cleaners and to make it easy for people to access the property with a key safe.

"You need to respond quickly to inquiries and to make holiday guests feel welcome," Smith says. "The extras are important, be it champagne glasses or Foxtel".

Information Excerpts Courtesy from the Age – To see the original

http://www.theage.com.au/news/property/sea-or-tree-do-holiday-homes-make-good-investments/2007/01/20/1169096018537.html?