Wanting to Buy a Holiday Home?20-01-2022 | Resource | Brent Jones
Seeking simpler holidays by the beach and discovering our favourite local destinations – without the uncertainty of border restrictions and international travel bans - has caused many of us to think about buying a holiday home over the last couple of years. The idea of having an escape from the city and your own ‘slice of paradise’ is certainly appealing, but before you head into the real estate office it is worth thinking through the practicalities of buying a holiday home, and what it might mean in the long term!
Think About the Cost
Most importantly, you need to consider all of the costs associated with buying a holiday home. In addition to meeting any monthly mortgage repayments, you will also have to cover additional costs such as:
- Monthly rates, including council, water and electricity.
- Ongoing repairs.
- Maintenance and wear and tear.
Then, if you plan on renting out your holiday home to other holiday makers when you are not using it, you will also need to cover the cost of:
- Advertising and marketing the holiday home.
- Tenant management fees if you go with a local real estate agent or online platform.
- Cleaning costs and replacement of household items.
What About the Tax Implications?
If you decide to rent out your holiday home (either through a local agent or on platforms such as Air B’n’B or Stayz), you may be entitled to claim certain tax deductions. According to the ATO, you are only entitled to claim deductions “for periods when the holiday home is rented out or is genuinely available for rent”. This means that you need to keep accurate records of when your property is rented, or listed for rent, to make an honest claim in your tax return.
When it is rented, you may be able to claim deductions for:
- Interest on the loan for your property.
- Insurance costs.
- Your real estate agent’s commission for letting the property.
- Depreciation of your assets.
- Capital works or improvements.
You also need to be aware that the property may be subject to Capital Gains Tax (CGT) when you sell it if it is not your principal place of residence. Speaking with an accountant will help to ensure that your tax obligations are covered, and that you are not hit with any nasty surprises down the track!
What Should You Do First?
Regardless of where you are thinking of buying a holiday home, the Lamrocks property team can guide you through the process.
We provide advice and assistance with the purchase transaction, including reviewing the Contract and negotiating with the vendors on your behalf. We can also conduct the necessary title searches, as well as any relevant Council searches to highlight potential issues, both now and in the future. This is particularly important when you are purchasing a property in another location where you may not be familiar with local development plans!
Speak to one of our team members to make sure your purchase runs as smoothly as possible. Call the Lamrocks property team on 02 4731 5688 for advice today.