Your guide to investing in a holiday home
Imagine waking up in a cosy mountain retreat or a beach shack overlooking the ocean, all in your own holiday home. It’s a lifestyle upgrade many Australians dream about, and for good reason. A holiday home can diversify your property portfolio and give you a private escape whenever you need it.
But before you buy that coastal hideaway or bushland cabin, it’s worth stepping back and running the numbers. Here’s what to consider to make sure your holiday home works for both your lifestyle and your long-term financial goals.
Plan how you’ll use the property
Start by thinking about how often you’ll use the home and when. Your personal use versus rental strategy will influence:
Your borrowing options
Your rental income
Your overall return
Peak tourism periods often deliver the strongest yields, which may mean giving up your own stays over summer or long weekends.
Look into whether the area attracts consistent year-round visitors or if it’s season-dependent. This will help you predict occupancy and plan for periods of lower rental income.
Research the local market thoroughly
Holiday home hot spots vary widely in performance, so doing your homework is essential.
Look into:
Demand vs supply for holiday rentals
Peak and off-peak visitor trends
Proximity to amenities like shops, cafes, beaches, transport
Local employment and population trends
Any upcoming infrastructure that may support long-term growth
This kind of research will help you pick a location with strong rental appeal and solid capital growth potential.
Check local laws and regulations
Short-term rentals come with rules, and these differ significantly between states and councils.
Some areas require:
Registration for holiday letting
Limits on the number of days the property can be rented
Compliance with fire safety, noise and parking rules
Additional levies (like Victoria’s 7.5% short-stay levy)
Make sure you understand everything that applies to your chosen area before you commit.
Understand the financial implications
Owning a holiday home comes with ongoing costs beyond the mortgage. You’ll need to budget for:
Mortgage repayments
Council rates
Home and public liability insurance
Cleaning and changeover fees
Maintenance and repairs
Land tax (depending on the state)
It’s also important to understand the tax implications:
Tax deductions
You may claim deductions for expenses associated with generating rental income, but only for the portion of time the property is genuinely available to rent (ATO rules apply).
Negative gearing
If the property costs more than it earns, you may be able to deduct the loss from your taxable income.
Capital gains tax
If you later sell the property, any gain may be subject to CGT. Holding the property for more than 12 months may qualify you for the 50% CGT discount.
Your accountant or financial planner can walk you through the specifics.
Ready to make it happen?
A holiday home can be a rewarding investment when the numbers stack up. If you’re ready to explore your borrowing options, want to compare lenders or need guidance on using equity, we’re here to help.
Get in touch today and let’s bring your holiday home dream to life.