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Do your homework when buying a holiday home

As the property market continues to gain traction, it can be expected that the demand for holiday homes will gradually start to increase, which means we are likely to see slow but steady growth in the leisure property sector of the market, says Adrian Goslett, chief executive of RE/MAX of Southern Africa.

“Areas like the Atlantic seaboard, the Garden Route and the KwaZulu-Natal north coast are likely to experience an increase in demand for luxury and leisure properties, as are some areas in the northern regions of the country.

“Those who can access the necessary finance can escape to a second home that is away from the hustle and bustle of city life to enjoy the lifestyle benefits these types of properties offer,” says Goslett. “With the numerous leisure hotspots through South Africa, buyers are spoilt for choice when it comes to choosing a location in which to buy a holiday home.”

He says property is considered to be a strong asset class in which to invest, particularly over the medium to long term. A leisure property can be a home to enjoy as well as an investment that generates healthy returns, and buyers need to look at the key factors that will affect the property’s investment potential.

“The importance of location should never be underestimated. Buyers need to ensure they research the area and establish the level of property appreciation achieved over the past year. Other factors to consider are how well maintained the area and its facilities are, as well as the general market conditions prevailing in the suburb,” says Goslett.

“You also need to take into consideration the future plans and possible development in the future. Where possible buyers should find out what infrastructure or development is planned for the region, along with zoning and transport routes or nodes that may affect the tranquillity of the area.”

Before venturing into any leisure property investment buyers must consider their financial position, paying particular attention to the acquisition costs such as deposits, transfer fees and conveyancing fees. Other aspects to be considered are the impact of possible interest rate increases, ongoing monthly maintenance, security and insurance costs as well as the rates, taxes and utility tariffs in the area.

Goslett says holiday home buyers should also consider the practical implications of owning and managing a property in a different town. It might be necessary to hire a professional property management company that can conduct regular inspections and screen, select and place tenants. These fees need to be added into the overall budget.

Although it is possible to receive a rental income from a holiday home during the times when the owner is not using it, there is little point in keeping a holiday home that is seldom or never used by the owner.

Goslett says that before buying a holiday property, buyers need to establish whether the cost of owning and maintaining the property is worth their while. It is far better to focus on paying off a primary residence, than it is to incur debt on an additional property that will not be used very often.

“As with any property purchase, a good investment decision will be based on the buyer doing all the necessary homework and comparisons. Buyers must be sure that the investment they are making is worth the financial commitment they are laying down to acquire it,” Goslett says.


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