Be wary of investing in holiday properties

Before the GFC hit and destroyed many Australians’ retirement funds, we were beginning to see a demographic shift as some segments of Australia’s population, particularly the retiring baby boomers, were selling up their large suburban homes and moving to the coast to retire, undertaking a transformation known as a  “sea-change”.

While this trend seems to have been halted as many boomers reassess their retirement plans in light of the current economic conditions, the trend will re-emerge, and in time, many coastal towns will have to reinvent themselves to cope with the influx of people.

When looking for a high-growth properties in coastal locations, the question to ask yourself is, “Will this be the type of property that will be attractive to a sea- changer?” Sea-changers will be looking for spacious, modern, low-maintenance properties that offer security and privacy. They will not be looking for “holiday” accommodation.

Another important factor is driving time to major cities, because even though sea-changers are shifting out of a big city environment, they still want a relatively easy drive to a major regional centre or the city. They want to be near hospitals and airports.

Beware the “holiday home” syndrome

Many people like the idea of buying a holiday home and think they can get the dual benefit of a rental income and a free holiday.

I would be cautious, because many people fall into the trap of buying with their hearts overruling their minds in this area. Many investors kid themselves and tell their friends and family that they bought a holiday property for financial reasons when, in reality, they fell in love with the idea of owning a holiday home and often paid scant attention to the investment fundamentals.

I’d rather own my investment properties in prime (non-vacation) locations and then stay at the latest and best accommodation in the spots where I want to holiday.

So which location?

For years, the agents have been telling us the answer is “location, location, location!” And in recent years they have been telling us the right location is near (not in) the CBD or near the water. But this doesn’t help us decide which location to choose and which property within that location to choose.

Location is important, but as you now realise, not always as important as some other factors. You will need to do the legwork and research you do to familiarise yourself with your chosen areas and markets so you can identify bargains and keep your finger on the pulse.

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is best-selling author, one of Australia's leading experts in wealth creation through property and writes the Property Investment Update blog. Subscribe today and you'll receive a free video, The Golden Rules of Property Investment.

This is an excerpt from the fully revised new edition of Michael Yardney’s best seller How to Grow a Multi Million Dollar Property Portfolio – in your spare time. Get your own copy plus four free bonuses by here http://thebookonpropertyinvestment.com/