Puzzle Finance Blog

Holiday Homes - maximum pay-off for minimum outlay

David Adams offers tips on generating the highest returns from your beach house, through either rentals or a sale.

When it comes to a holiday let, the bare bones of the property — its layout and number of bedrooms — as well as its proximity to the beach and shopping strip, all play an important role in determining how much it can fetch in rental returns.

But there are also ways to spruce it up to ensure it generates the maximum rent.

If owners intend to rent out a property, experts say there's no need to spend a fortune on an expensive renovation. But presentation and comfort do matter.

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"Even some basic cute three-bedroom beach shacks can come up nicely with a white-out inside and nice beachy furniture with a splash of colour and a coastal feel," says Troy Daly, principal of J.P. Dixon in Portsea and Sorrento.

This can be as simple as applying a fresh coat of paint and cleaning or replacing carpets or, for an easily maintained option, pulling them up and polishing the floorboards.

Rather than replace a tired kitchen, it can be more cost-effective to update key features — new benchtops, new door handles and a stylish rangehood, for example. In the bathroom, re-grouting tiles or repainting the bath can give it new life.

And it's important to remember that neutral colours and themes are often more in keeping with coastal surroundings.

The number of people a property sleeps is important when it comes to income potential, Mr Daly says. Installing two queen-size beds and two sets of bunks with trundle beds in a three-bedroom house, for example, means as many as 10 people could stay there.

"Two families can then come down and share the cost of the rent," Mr Daly says.

An open fireplace — which may mean simply opening up an existing chimney or installing a free-standing model — may also be a good idea if you're wanting to rent during the off season, he adds. "A lot of people will ask, 'Do you have an open fireplace?"'

Damian Cayzer, managing director of Bellarine Peninsula-based Kerleys Coastal Real Estate, says because comfort comes first with holidaymakers, the quality of furnishings can be a significant factor in determining rental returns, as can outdoor entertainment facilities.

He suggests adding an outdoor entertainment area — either a paved space or raised deck — complete with a good-quality barbecue, outdoor setting and perhaps even some outdoor heaters, to increase returns by as much as 30 per cent.

"We find those items really do add value and make the property more appealing," he says. As a bonus, having a quality cooking set-up outside can help reduce wear and tear inside.

It's also worth considering other features, such as an outdoor shower and storage for water equipment like surfboards and wetsuits.

And, according to Sean Thomson, property adviser at WBP Property Group, space in the yard that allows people to park a boat off the street can also make a property more attractive to renters.

Sales strategies

People looking to sell a coastal property should feel free to spend a bit more in creating a "wow" factor than those preparing for holiday rent but experts warn owners to be careful about overcapitalising.

"I think the only time it's really worth making a property look 'wow' is when you're going to sell it," says Catherine Cashmore, of JPP Buyer Advocates, "because the way to achieve the maximum price with any property is to attract as much buyer interest as possible."

However, Ms Cashmore warns that major renovations, such as those that significantly alter the floor plan, will usually require owners to hold on to a property for a while to ensure they recoup the costs when they do sell.

"It could be that you're saying to yourself, 'Well, I'm thinking about selling in a couple of years, [then] it might be worth renovating and finally moving the wall and making the front living area open plan," she says.

Putting in a new kitchen or bathroom to replace a dated one may be a good idea, according to Ms Cashmore.

But if the floor plan remains old-fashioned or is not amenable to modern living, she advises not to bother changing it because the new owners will more than likely want to renovate to their own style.

"You're probably better off just making it liveable as you would [with a house] for rent," she says.

The look of a property is paramount and Blane Paton, owner of Paton Estate Agents, which operates in Balnarring and Flinders on the Mornington Peninsula, says buyers in that area are generally looking for a house that is "well dressed".

This not only means ensuring it is well maintained and cared for; it can mean applying a fresh coat of paint, decluttering both house and yard and even hiring some stylish furniture for the duration of the sale period.

In an indication of what buyers are looking for, Mr Paton says among the first things people will add to properties when they move in are bigger windows, patios and decks.

While the agents Domain spoke with generally didn't believe adding sustainable features, such as a water tank or solar hot-water system, would make any difference with rental returns, it's a different situation when selling.

Sustainable features may help improve a property's appeal to buyers (although whether that results in a higher price remains debatable).

And while swimming pools are sought in some locations, the expense of putting one in means they should primarily be installed as a lifestyle choice rather than to add value to a property.

One of the most important factors in selling a coastal property is timing. Property experts say the summer holiday period — from just before Christmas to the early weeks of February — is usually the best time to market a property.

But making sure the market is generally rising is also a good idea.

"The market is volatile in coastal areas and people don't usually go shopping for holiday homes unless they're in buoyant times," Ms Cashmore says.

Posted by David Adams - Domain - The Age on 8th January, 2011 | Comments | Trackbacks

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