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Is owning a holiday home a good idea?
holiday home

You know the story. You go on holiday, you have a wonderful time, you love the relaxed lifestyle, and wow you could really live in this place. You walk down the High Street, you spot the Real Estate agency, you stop and peruse the window display, you decide that property is really cheap in this area or certainly very affordable. And before you know it you’ve walking in through the front door, you’ve picked up some brochures, and you’re well on your way to spending several hundred thousand dollars on what could really only be a pipe dream. Gone is all common sense, all thoughts of due diligence, research, and all the things that you have been reading in the Adviseable blog over the last two years. 

Now don’t get me wrong, a holiday home is a real dream for many people who love to travel and who want to have a place to escape to during vacations. However, before investing in a property, it is essential to consider both the benefits and drawbacks of owning a second property for this purpose. 

Advantages of owning a holiday home:

  1. A home away from home: Owning a holiday home gives you a place to escape to during holidays. You can decorate the home according to your preferences and make it a comfortable space that reflects your taste and personality.
  2. Cost-effective: In the long run, owning a holiday property can be cost-effective compared to renting a vacation rental every time you want to go on a vacation. The cost of renting a property can be higher than the cost of owning a holiday home. It all depends on the price of the home and then maintenance costs of course.  
  3. A source of income: You can also rent out your holiday property when you are not using it, which can be a source of passive income. You can use the rental income to cover the cost of the mortgage, maintenance, and other expenses.
  4. Potential for appreciation: Depending on the location and the local real estate market, a holiday home can appreciate in value over time. If you decide to sell your holiday home, you may be able to make a profit.

Disadvantages of owning a holiday home:

  1. High upfront costs: Purchasing a holiday property requires a significant upfront cost. You need to have a substantial amount of money to put down as a deposit, and the monthly mortgage payments can also be substantial.
  2. Maintenance and upkeep: Owning a holiday home also comes with additional maintenance and upkeep costs. You need to keep the property in good condition, which can be time-consuming and costly.
  3. Limited usage: Depending on your work schedule and other obligations, you may not be able to use your holiday home as much as you would like. The property may sit empty for extended periods, which can be a waste of money.
  4. Market fluctuations: The real estate market can be unpredictable, and the value of your holiday home may decrease, which can be a financial setback if you plan to sell the property.
  5. Depreciation in value: your holiday may not appreciate in value as much as you want it to. Typically, holiday destinations don’t make great growth areas. They have a certain limited demographic, sometimes a lacklustre economy, little infrastructure investment or varied industries, and next to no population growth. All of these drivers are required for a location and the properties there to grow in value.

Owning a holiday home can be an excellent investment for some people, but it may not be suitable for everyone. Before deciding to purchase a holiday home, it is important to weigh up the benefits and drawbacks carefully. You need to consider your financial situation, lifestyle, and long-term goals. If you have the financial resources and time to manage a second property, a holiday home can be a valuable asset that provides you with a place to escape to and potential rental income. However, if you do not have the financial means, are not prepared to take the risk of no value growth, or do not want to deal with the additional responsibilities, it may be better to continue renting vacation homes or staying in hotels during your holidays and investing your money in a better, less volatile location.

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