My husband wants a beach house. For the past couple of years whenever I ask him if I can do something for him or what present he’d like for his birthday, the answer is always the same. A beach house.

Now a shack by the sea really doesn’t appeal to me but for many Australians it’s a dream goal to own a place on the coast or in the mountains. Your own weekend sea or tree change.

The problem I have with my husband’s dream beach house is the same one I have for a killer outfit or a painful but gorgeous pair of shoes that you’ll only wear occasionally – the cost per use is often simply too high. Advertisement

But, if, like my husband, you won’t be swayed from your dream, what can you do to make sure it doesn’t turn into a financial nightmare?

  • Buy where it’s cheap If your idea of a beach shack is at Palm Beach, Sorrento or other multi-million-dollar spots then it would be prudent to revise your expectations. There are still reasonable prices to be paid in coastal suburbs but you may need to look at least a couple of hours outside capital cities or perhaps a few blocks back from the beach. Once you’ve done your research and found a place you think you can afford, make use of one of the many free online loan calculators to work out what your monthly repayments would be, as well as factoring in extras such as rates, repairs and land tax to make sure you really can afford the cheaper alternative.
  • Buy with others You’ve taken a trip with some friends, you’ve all fallen in love with the area and you’ve all decided you want to buy there. Why not consider purchasing something together? In these cases I would highly recommend you engage a solicitor to draw up an agreement for how much is contributed each month, who can buy each other’s share and how often you can use the property. It’s always easier to negotiate and agree in the beginning when things are rosy than it is when someone’s Rottweiler that they insist on bringing with them each time they holiday keeps you awake again. If you work out the terms and everyone gets along, purchasing something together shares the risk and the reward as well as the financial hit.
  • Holiday rent If you suspect you’ll really only use your dream shack once a month because your jobs are busy or your kids are in weekend sport then renting it out when you’re not there would help pay some bills. This option also gives the added benefit of being able to claim a tax deduction for expenses incurred when the property is available for rent. Deciding to rent it involves more than simply telling your close friends they can rent it cheaply. It’s a good idea to list with a local real estate agent or on holiday websites and receiving a tax deduction for your income shortfall reduces the cost of owning the property, which may make the whole exercise more viable.
  • Rent it out Holiday rents can be a fickle and seasonal type of income so if you find your dream shack but can’t quite afford to own it without regular income just yet then consider renting it out for a few years until you can afford to. During this time you can pay down debt with the motivation of being able to afford to have your shack all to yourself sooner rather than later. Plus, because the property is available for rent throughout the entire year you can claim all of the allowable deductions you incur, which may reduce your tax and help you pay that debt down even faster.
  • Do it yourself If you can’t face renting out your shack but you can’t afford to purchase one outright either then think about purchasing a block of land instead. You may need to buy a block a few hours away from a major city but there are still pockets that are reasonably cheap either because of location or because facilities such as electricity or sewerage haven’t been connected yet. If you really wanted to save some money you might eventually have a reasonably priced home built to lock-up stage then gradually finish the rest yourself as you have the funds and the motivation to. However, if you’re like my husband or I and not particularly handy, the whole pursuit would end up costing you money. But for many people who are even a little bit DIY, it can be a less expensive and a rewarding way to achieve your desired outcome.

Beach shacks are a little different to shoes in that while the cost per use may be ridiculously high, there is the potential of long-term capital gain but it’s important to ensure you can afford to hold onto it for the long term without losing your sanity or your home.

That said, sometimes a beach house can simply be an expensive exercise and it is just as fun to buy it, rent it out and then holiday somewhere fabulous instead.

Posted by Melissa Browne – Money Manager (Fairfax) on 26th November, 2014