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Property investors cautioned about holiday homes

By Staff Reporter
6

With summer and the festive season upon us, investors have been warned not to let their holiday dreaming get in the way of their wealth goals.

Quantity surveyors and depreciation experts Washington Brown said that during the summer months, it’s easy to get carried away “with that holiday feeling” and make poor investment decisions.

The company said despite the appeal of owning a holiday home – and being able to generate revenue from it – it can be hard to think clearly when lifestyle investments beckon.

“You may argue that the numbers stack up and it will be a cheap holiday place to visit. And at first glance, it might. Purchase price, stamp duty and mortgages offset by the rental income can make it look good in the halo of optimism that comes with the first flush of real estate lust,” they caution.

Washington Brown depreciation expert Tyron Hyde said investors who do decide to purchase lifestyle investments can make the most of their money by renting it out for most of the year to a third party and claiming depreciation benefits at tax time.

“Holiday houses can be depreciated if they are rented out to a third party,” Mr Hyde said.

“As long as it’s available for rent most of the year, you can block out a two-week period over Christmas and claim the depreciation pro rata. You are still entitled to that deduction regardless of how many weeks the property is actually rented out – as long as it was available for the full 50 weeks.”

Mr Hyde said he is increasingly seeing investors buy holiday homes at close to, or less than, the construction costs, and reminded investors that if they furnish their holiday investments, they can magnify the deductions.

 

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