Searching for a holiday home differs significantly from looking for an investment property. While a holiday home can generate rental income during the months it's not in use, maximising rental income is usually not the primary focus when making this purchase.
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According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, there typically will be trade-offs if a buyer wants to find a property that can be used as both a holiday home as well as an investment property. “It will be tricky to find a property that suits your holiday lifestyle needs and has the potential for maximum returns. Understanding which of these aspects are most important to you will help prioritise your search criteria,” he explains.
To help buyers prioritise their search criteria, RE/MAX of Southern Africa explains some of the key differences between searching for a holiday home versus an investment property.
Location for max profit or max enjoyment?
When searching for a holiday home, you want to choose a location that you and your family love and will enjoy visiting regularly. Proximity to amenities and activities that match your lifestyle is key.
With an investment property, you will want to prioritise areas with high rental demand, good infrastructure, and potential for appreciation. Speak to a local real estate professional to understand the market trends and rental demand in the area.
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Broadest possible market appeal or personal connection?
When searching for a holiday home, focus on finding a property that resonates with your personal tastes and creates a sense of relaxation and comfort.
On the other hand, an investment property should appeal to a broad range of tenants. Consider factors like size, number of bedrooms, and amenities that are in demand.
Outsourced property management or within driving distance?
Something to consider with a holiday home is who will look after it during the months when it is empty. If you live close enough to it, you can pop in regularly to keep things maintained. You could also hire a cleaning and gardening service to tend to it while you are away.
With an investment property, you can outsource the management of the rentals to a real estate agent – you don’t need to live nearby. They can screen tenants, manage property inspections, and collect the rental income monthly on your behalf.
“With any property purchase, whether it’s a holiday home or purely an investment property, a good investment decision will be based on thorough research. Make sure that the investment you are making is worth the financial commitment you are locking yourself into to acquire it,” Goslett says.
READ: Becoming a property mogul in South Africa
Craig Mott, Business Development Manager for the Rawson Property Group, also shares the top 4 techniques used to build these high-performance portfolios that deliver mogul-worthy returns.
Don’t overlook an opportunity
“The best property investors keep a constant finger on the pulse of the property market,” says Mott. “They’re constantly on the lookout for optimal conditions and aren’t afraid to leap when an opportunity presents itself.”
Currently, Mott says the market is ideally positioned for portfolio expansion, with excellent lending rates and a wide variety of stock available.
“We’re seeing a lot of savvy investors using this time to fill gaps in their portfolios and implement strategic expansion strategies,” he says.
Build strategic partnerships
Becoming a property investment expert doesn’t happen overnight. That’s why most successful investors have a property professional on their team.
“Building a relationship with an experienced real estate and/or rental agent opens a lot of doors for you as an investor,” says Mott. “Not only can you get early access to prime, as-yet-unlisted properties, you also get up-to-the-minute advice on the latest investment best practices, legislative updates and property trends.”
Understand what success looks like
Bigger isn’t always better when it comes to property investment. According to Mott, the key metric to look out for is not overall portfolio value, but rather whether your total returns equal or exceed those of equivalent monetary investment funds.
“If, for argument’s sake, the same money would have performed better in a money market – before capital appreciation – you can’t regard that investment as being successful,” says Mott. “Of course, property investment is a long-term venture, so don’t be overly swayed by individual properties’ short-term performance. At the same time, don’t put all your eggs in the capital appreciation basket – investment properties shouldn’t need to be sold before they deliver profits.”
Never take performance for granted
Done right, Mott says property can dramatically outperform almost any other asset class. If it’s not living up to its full potential, it’s time to update your strategy.
“There are always going to be properties that don’t perform as expected, and these can drag the overall returns from a portfolio down,” he says. “Don’t fall into the trap of hanging on to this ‘dead wood’. The most successful investors do regular checks of each and every property’s performance. Those that consistently deliver below expectations, and cannot easily be remedied, should be sold to increase cash flow or finance more promising new investments.”
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