There are a range of factors that motivate people to buy a holiday home, investment being one of them. We caught up with Jordan Property Group’s Sue Jordan to find out how you can make the most of your investment property.
Q: Does the location of your holiday home impact the return on your investment?
A: Definitely, you have to do your research. In South East Queensland, there can be oversupply in coastal areas, so if you are looking to buy here you have to make sure the property is unique in some way. Don’t just do what everyone else is doing, because you won’t stand out. You have to always think to yourself, “why would someone choose to stay here over anywhere else?”. Ultimately, your holiday home is a business, and for businesses to make money they have to out-do the competition.
Q: What should readers bear in mind when choosing a location?
A: Make sure people have a reason to go to that area, whether that is being next to a beach or tourist attraction; or being close to a sports stadium, conference centre or big hospital. Transport and parking are also major considerations depending on your target market.
Q: When it comes to choosing the actual property, what are the things to look out for?
A: It is important to remember there is a big difference between an investment property you rent long term and a holiday home that you also rent for short stays. If you don’t intend to use it yourself, the property you choose could be entirely different. When you’re researching make sure you work out your Rate vs Occupancy. Your short-term rental doesn’t have to be full all the time to make money, and conversely, it doesn’t have to have a high price per night to bring in a big profit — as long as you get the bookings.
Q: What advice would you give readers when it comes to managing the property themselves vs using a management company?
A: Managing a holiday let is a 24/7 job 365 days a year. People often burn out managing it themselves long term, but it is a great idea to do it yourself for the first few months so you can get an idea of how the business is going to work. Then you can put a team in place to manage it for you. Part of my job is training people on how to manage their rentals to get good returns.
Q: What are the setup costs that people don’t think about?
A: When you have to furnish an entire property from scratch you are normally looking at about $10,000 – 15,000 for a one-bedroom apartment, with an extra $3,000 per bedroom on top of that. Furniture, linen, TVs, washing machines, dishwashers, a fridge — even if you buy second hand, it all adds up. Depending on the area you buy in, different local councils will have different application fees when setting up a short-term rental, and different costs for your quarterly rates, this can make a huge difference in both your initial setup costs and ongoing costs. Other ongoing costs to think about include short-term rental insurance, wifi, higher than usual water and electricity bills, cleaning and laundry costs; even small things add up, like refilling tea and coffee or buying toilet rolls.
Q: If you could give PropertyMash readers one tip for maximising the return on their investment, what would it be?
A: To be competitive in today’s online world you need good reviews, a good description and good photos. First impressions count (both online and when they arrive), so if you can present your property well on whichever portal you choose to advertise on, give good customer service, and get great reviews, you will already be ahead of the game.
Q: If you had $500,000 available for a holiday home right now, what/where would you buy to maximise returns?
A: Look for somewhere with poor supply and high demand. Where have you stayed recently that you struggled to find a decent apartment to rent? I think South Brisbane is one of those areas at the minute, and it is close to The Gabba, the Brisbane Convention & Exhibition Centre, etc so there will always be people passing through.
Q: If you had $1 million available for a holiday home right now, what/where would you buy to maximise returns?
A: If you have a large budget consider buying multiple properties. Remember not to put all your eggs in one suburb, so to speak. Buying smart is all about having a backup plan. Plan A would be short-term rentals, but if you buy somewhere where long-term rentals are also in high demand it gives you a Plan B, which is important in today’s volatile market.
Sue is the author of upcoming book Ready, Set, Host: The Ultimate Guide To Setting Up A Short Term Rental, due to be released in 2019.