Whether it's a shack by the seaside or a hideaway in the country, an empty holiday property is money down the drain.
With the rise of holiday and short-term letting websites, it's easier than ever to make your holiday house work harder, even if it is only to cover the costs of maintaining your holiday property. Many people are managing to get the best out of their holiday properties, especially if they are prepared to manage their properties themselves.
Theresa Albioli and Tony De Marco started buying properties in Daylesford, about 100 kilometres north-west of Melbourne in 2012. What started as some extra income has grown into a full-time accommodation business. They now have six properties available for short-term rent, as well as a house they are renovating on a farm and the home they live in, all in Daylesford.
They are doing very well out of their business, with their properties able to command up to $4000 a weekend. They were using a booking agency, but were paying too much in commission. They were also not paid anything until after the the holidaymaker had stayed, which could be six months.
"The lack of cash flow was crippling us," Theresa says.
They decided to go with Stayz, which pays the deposit within days of the deposit being collected from the holidaymaker.
The remaining balance is paid to the owner within days of the traveller's stay. They also use Airbnb, but not as much, and they have their own website - thehousesdaylesford.com.
Their properties range in size from three to nine bedrooms and they are mostly let to families from Melbourne; though they also attract visitors from further afield.
A group from Mount Isa in Queensland came to one of the couple's properties for four days this week to celebrate a birthday.
More recently, they have moved into the corporate market - off-site meetings, team-building - which makes up about 20 per cent of bookings.
One of the advantages of Daylesford, instead of the coast, is they have strong demand throughout the year. All of their properties are booked for the weekends until May next year.
"To make money out of a business like this you've got to try to have the properties booked 100 per cent of the time," Theresa says.
They buy properties that need work and they organise the refurbishments themselves.
"We've both done a bit of design work and that is a passion of ours as well," Theresa says.
They also say it is very important to have a good support team. "Having good cleaners, for example, if very important," Theresa says. "If people get there and there is a dirty shower they will never come back."
They also have a maintenance person as there's always something that needs fixing and an IT person who manages their website.
DIY not for everyone
Cathy Baker, a principal of Belle Property Killcare and Wamberal, which is on the Central Coast, has sold dozens of higher-end holiday homes and says most have sold for more than $1.5 million.
Upper-end properties close to the beach can lease for more than $10,000 a week during peak periods, she says.
Baker says it is very important to see your property from the point of view of potential renters. She is always surprised at the number of owners who rent out their properties but don't update the furniture and interiors to increase their properties' appeal.
Baker has a warning for those thinking of letting out their holiday homes on short-term rental sites.
"I've seen a lot of owners try and rent the properties themselves and come unstuck with the wrong type of clients in the property, with carpets in need of replacing and sometimes the furniture as well," she says.
Owners have to be prepared to do thorough vetting it they want to manage the property themselves, Baker says.
But even then, having an agent looking after the house can be well worth the fees.
"There are quite a lot of tick boxes at the end of the rental period, for example, like checking the inventory list for damage and deciding whether the bond should be returned," she says.
Simone McDermid, the communications manager at Stayz, says while there is a reasonable number of international holidaymakers, the "sweet spot" for most holiday property owners is domestic tourism.
Short getaways are the most popular type of booking through Stayz; usually a couple of nights with long weekends particularly popular.
Holidaymakers want unique locations, space, and homely amenities that are ideal for group and family getaways, McDermid says.
"To increase bookings, owners should ensure their listing stands out with quality photographs, highlighting the unique features," she says.
Comfortable furnishings and a relaxing living room where guests can put their feet up can help increase the appeal of the property.
"A welcome pack with recommendations of local activities can help generate repeat bookings and word-of-mouth recommendations,"McDermid says.
Liz Russell, a senior tax agent at Etax, says sometimes owners do not fully understand the tax implications of short-term lettings and they need to keep good records.
All of the rental income is regarded by the Tax Office as assessable income, she says. You must declare all of your income in your tax return and you can claim deductions, such as the interest on a mortgage and other expenses.
With data matching, it's very easy for the Tax Office to see if you have been earning income through short-term rental platforms.
"One of the things that a lot of people forget is to apportion the private use out of the deductions that they are claiming," she says.
The reality is that many holiday properties will be empty for at least part of the year, Russell says.
If you occupy the holiday house for a month, you can only claim deductions for 11 months. But the property has to be genuinely available for rent to be able to claim the deductions.
Some people don't want to rent it out, or they allow friends to stay for free and try to claim deductions for the part of year that they are not staying in the property themselves.
However, the Tax Office can easily check that your holiday house is genuinely available for rent. It could ask where it has been listed and can easily check the websites you have nominated.
Simon Curtain, a director and private client adviser at Hewison Private Wealth in Melbourne, says one of the potential problems with a holiday property is that the time you want it is usually the best time to rent it out.
It can defeat the purpose of having a holiday house.
"Typically, holiday houses are on the coast and the capital gains will often not be as good as the metro areas," he says. "Most of the time I view holiday properties as lifestyle assets rather than investment and wealth creation assets. A holiday property can be a great investment but for wealth creation you'd probably want to be in the inner city where the property can easily be let out all-year round.
"If your mindset is to buy an investment, you should be looking at it from that point of view as an investor, without the emotion."
It should be in a good location with good prospects for capital growth.
The story 'It was crippling us': How to avoid the pitfalls of holiday homes first appeared on The Sydney Morning Herald.