Noel Whittaker says don't get beached by dream purchase
AS THE holiday season ends, your thoughts may be turning to the notion of buying a place at the beach.
Before you get too carried away ask yourself the tough questions.
First, "do we keep it for our own use or rent it out?”
If you don't rent it out, you'll be tying up a large amount of capital that could almost certainly be used better elsewhere and, if you have children, you'll find out that you won't be able to go there as often as you'd planned.
Then you will have to decide between leasing it
out permanently and making it available for holiday letting.
If you go for a permanent tenant you will achieve a regular income but the trade-off is that you cannot go away and use it for the odd weekend.
If you opt for casual letting you will need to provide everything from plates to a washing machine and will have greatly increased wear and tear because of the constant turnover of tenants, few of whom will treat the property kindly.
If you borrow for it, you'll only be able to claim a tax deduction for the rates, maintenance, interest and other expenses if the property is income- producing.
This means you will have to rent it out.
If you decide to keep
the peak periods such as school holidays for yourself, you'll be substantially reducing the income because the highest rents are charged in the holiday season.
And if you do use the property yourself, you'll only be able to claim a percentage of the costs.
For example, if you occupy the property for 13 weeks, leaving it available for the other 39 weeks, you could claim only 39/52 of all expenses.
Then comes the choice between a house and a unit. A house will be great if you want to take the pets away on weekends with you, and as long as you don't mind maintaining two gardens.
Unfortunately the cost of a well-located beach house, as well as the accompanying rates and maintenance, is way out of the reach of most of us. To make matters worse the land tax on the property will put you into a higher land tax bracket which could affect your other rental properties.