Even the most savvy investors can get caught up in the holiday dream.
A comfortable little pad by the sea, ready for when they retire and need an idyllic place to live out their golden years.
My recent Easter break was sun drenched and filled with family, friends and laughter.
I soon found myself daydreaming about living coastal full time and before long (old habits die hard) I was searching local property prices.
It got me thinking that it would be very easy for an energetic real estate agent to take advantage of investors caught up in the holiday fantasy and help them to make an investment … or perhaps a very costly mistake.
Typically, when buyers are in this mode they are buying with lots of emotion.
If you are recently returned from the Easter break and are still toying with an investment in your paradise, ask yourself if you can justify the huge amounts of money required for a property that lays dormant for most of the year?
Sure, you can put it in the rental pool, but have you seen the occupancy rates and the huge management fees for this type of property?
Property purchases have large entry and exit costs associated, so do not do something you may end up regretting.
Traditionally the holiday hot spots are great in a jubilant and prosperous economy, but when the economy turns everything non-essential is put up for sale to make way for the necessities of life.
No one wants a holiday home if they have lost their job.
Job options are often a problem in popular holiday destinations.
Once the holidays are over and the crowds dissipate, so do the jobs.
People need jobs and are not willing to do a long commute each day and, for this reason alone, it may be a nice place to visit but not to live, and certainly not to invest.
The lesson here: be boring when it comes to your investing.
Aim for a strong proportion of well‑heeled owner occupiers who live nearby to their jobs in areas of good employment, like cities.
It is less sexy than a beachside hotel unit, snow covered chalet or even the hobby farm in the hinterland, but investing was never meant to be sexy.
If you are still dreaming of the ultimate property investment – great returns and a fantastic place to holiday – stop.
Chances are it will be the worst of both worlds with little gain and strangers enjoying your property in the popular holiday times.
Enticed by a future retirement locale?
Get your money working hard for you in a strong market instead so that you can afford to retire and not have to work longer to support an investment that has been on holiday ever since you purchased it.
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