We’ve all had that magic holiday. You know: the one that makes you wish you never had to come back home—the holiday spot that makes you want to buy a home there. Sometimes, the yearning is so bad that people make a “sea change.” That is fine if you have somewhere to work.
Sometimes, people decide to buy an investment property in their ideal vacation spot. They figure that it’s easy—all you have to do is buy it and rent it out until you retire and then you will have a nice home that someone else’s rent checks paid for.
A lot of amateur investors think like this. They buy with their hearts instead of with their heads. Making investment decisions based on emotions is the biggest mistake commonly made by amateur investors. Usually, it keeps them from ever becoming professional investors.
Unfortunately, the best vacation spots don’t always make the best investment spots. The usual scenario is that the amateur investor buys a “dream property” in their favourite vacation spot and likes it at first. They try to rent their home on their own and find that remote property management is a nightmare.
Then, market forces take over. Rental markets go through cycles; sometimes they are high and sometimes they are low. If you don’t have enough capital on hand to get through the low part of the cycle, your investment can become a large drain on your resources.
At best, the amateur investor gets through the rocky parts and eventually reaches a point where rents are high enough that they have positive cash flow and can eventually relocate as planned. At worst, all of the attraction is gone from his favourite vacation spot due to losing the home.
Invest With Your Head
Buying an investment property in your favourite vacation spot can work, but your decision must be strictly business. We recommend hiring an expert financial planner who can help you invest your money wisely. You may want to stay in Perth or you may want to eventually relocate, but you need to make sure that your investment is made solely for profit and not influenced by your love for a certain area.
Call (08) 9472 9766 to learn more.