Leisure properties still hold value

Globally real estate agents in several resort areas suggest that the time is right to purchase a holiday home because of a larger inventory and favourable prices.

The United States’ National Association of Realtors’ (NAR) undertook an annual Investment and Vacation Home Buyers Survey in March 2008, which found that eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59% percent of primary-residence buyers. A startling 44% percent of vacation home buyers said they were likely to purchase another property within two years.

While these statistics may well have changed since the credit crunch, Peter Gilmour, Chairman of RE/MAX of Southern Africa, points out that since owning property can be one of the most profitable investments you will make if managed properly, investing in an additional residence is an appealing option for many individuals.

However, as with any investment, there are pros and cons to consider when buying a second home or leisure property. Gilmour says that reasons why people would hesitate to buy a leisure property include not being able to make use of it enough to warrant the expense, along with the upkeep and maintenance involved with owning a property. Then there is capital gains tax to consider should the property ever be sold.

“These issues can easily be overcome,” says Gilmour. “For example, buying a property that is close enough to home to easily be used as a weekend getaway would be a good first step. South Africa is crammed with a host of idyllic locations for holiday homes – from bush retreats to ocean villas; our country really has it all.”

Secondly, Gilmour says that a property management agent, for example, will be able to assist with the management of the upkeep and maintenance of the property and will more often than not also assist in renting the property out when you are not using it. Remember however, that rental income will be subject to tax.

“While a management agent will charge an administration fee for services rendered, and while enlisting their services does not take the responsibility of owning a property from you, they can take the hassle out of owning a second home,” says Gilmour.

Fractional ownership, he says, is another option for those wanting a property investment without the hassle. Fractional ownership, explains Gilmour, is typically associated with luxury holiday homes, and vacation real estate, and is a shared ownership of a professionally managed leisure asset. This investment option is commonly promoted as a hassle free alternative between whole ownership and timeshare.

Whether you invest a fractional scheme or wholly own a leisure property, capital appreciation will always be the biggest advantage. The investment just needs to be an astute one, says Gilmour, who points out that buyers could even use their weekend as a retirement property. “If bought early on in your life, it could be a fully paid off asset that attracts capital appreciation and generates an additional income way before you actually retire and would want to move into the property yourself,” he says.

Gilmour concludes by saying that in today’s stressful, and often financially driven world, the benefit of owning a leisure property is twofold: it provides a safe haven that will allow you to escape the rat race every now and again along with a solid return on investment, if you have purchased wisely and undertaken all the relevant due diligence.

Article from: www.remax.co.za