SILVER LININGS PROPERTY PLAYBOOK Part 4
“The tourism industry has been one of, if not the hardest hit sectors due to the COVID-19 lockdown. When it does start to recover, it will do so from “inside to out” meaning that the clients frequenting attractions, hotels and holiday homes will first be regional-based tourists living within a car drive away from the destination, followed by tourists within a short flight away, either within the country or from neighbouring countries, and finally international long haul flight tourists.
IT WOULD BE REASONABLE to predict that attractive, reasonably priced holiday accommodation will be in high demand as soon as leisure travel is allowed again. Holiday letting the correct properties prior to the lockdown provided excellent returns, and with the advent of AirBnB and the hosting / management companies that assist in facilitating bookings, it has never been easier.
One of the additional advantages to buying an investment property for holiday letting purposes is that, unlike a permanent rental, you as the owner can still make use of the property.
As mentioned above, the lockdown has created a zero-income environment for the owners of “holiday-let” properties. This, added to the fact that holiday homes are generally a luxury as opposed to a necessity, means that there are a significant number of holiday homeowners that would consider an offer in this post-lockdown market.
BELOW IS A QUICK GUIDE TO HOW TO IDENTIFY THE CORRECT HOLIDAY HOME INVESTMENT PROPERTY AND HOW TO TAKE ADVANTAGE OF THE CURRENT ECONOMIC SITUATION TO GET IT AT THE BEST POSSIBLE PRICE:
- Firstly, consider an area that you have frequently enjoyed going to on holiday yourself. If you have enjoyed it, it is likely that others will too.
- Choose a home that has a unique location that would be extremely difficult to replicate. The obvious example would be a home situated on the beachfront. Inland options would be properties situated on a recreational dam or bordering one of the country’s iconic game reserves. The reason for this is two-fold a) it will be easier to holiday let b) it will hold its value for longer.
- The home must be in walking distance of attractions and amenities, such as a popular beach, sports facilities, restaurants, convenience stores, etc. The more attractions close to your property, the higher the rental income you may achieve.
- The location of the property needs to be in close proximity by flight or road to a major economic hub. This will not only allow a considerable amount of clientele for your holiday-letting business, but will also mean that your home would have capital appreciation as it could potentially appeal to a wider market than just holiday home buyers in the future.
- Make sure that the home could be lived in permanently. Consider things like a covered parking (carport/garage) adjoining the home or, at the very least, ample secure parking within a short walk away, the number of steps going up to the home (not too many), and the spaciousness of the rooms.
- Remember you are either buying a business, or starting a business, depending on whether the home is currently being holiday let or not, so do your homework. Either ask for the existing night and occupancy rates or ask a holiday management company to do a forecast.
- Identify the “listing date” of the property. If the listing date is post the severe lockdown i.e. post 31 April 2020, then there is a relatively good chance that the seller is offloading it due to the economic strains of the COVID-19 Lockdown.
- Find out what the fair value of the property would be and put a clean unconditional offer that is below this value but is reasonable i.e. 5% - 15%, with a short timeline for acceptance such as 24 hours. As the property is either a luxury and/or a business venture for the seller they are inclined to be far less sentimental in considering an offer. If you follow these steps you could find yourself the proud owner of a holiday home which can be used both to make cherished family memories and as a means to create wealth.
For our four-part Silver Linings Property Playbook series. www.huntproperties.co.za firstname.lastname@example.org
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