Going on holiday to beautiful places may be a fantastic pastime, but should you be investing in property in those areas?
One of the places my family and I love to travel to is beautiful Pearl Beach, which is on Sydney’s central coast about an hour and a half north of Sydney.
It’s a place that my wife and I, and now my daughter and my wife and I, have been coming to for many years.
When I sit down in front of clients and we’re doing strategy sessions though, I often get asked a question, “Should we be investing in the holiday town that we go to regularly so we have a place to stay?”
Now when I’m considering an investment like to look at it purely from the numbers.
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If you were to take a dollar and invest it in Pearl Beach, for example, 10 years ago, you really would have only made, at an average, nearly just shy of 1% every year on your money
Which means over a 10-year period you’ve probably only increased your asset value by 10%, which is not a fantastic return compared to some of the other places like Sydney or Melbourne or Brisbane.
And that’s regardless of whether you’re using the holiday home for yourself and saving on accommodation fees.
If would have invested that same dollar into those capital city markets the returns would have been 5 or 6 times that figure.
What I prefer to do is invest that dollar, whatever that might be, into more prosperous areas where we can get good infrastructure, good growth and the vacancy rates are low.
As opposed to somewhere like Pearl Beach, which has a low growth rate and in the winter months the holiday letting vacancies can be as high as 60%!
That is not something that I’d like to face if I’m paying a mortgage on that property.
So if you have any questions around holiday leadings or buying into holiday towns, don’t be influenced by the great time you’re having there. At the end of the day, investments come down to the numbers and you need to make sure your money is working as hard for you as you are!