We have been blessed to be able to even consider all three options. Albeit a holiday house is a daunting consideration which needs careful strategy and planning.

Camping, surfing and the outdoors have been some of the best holidays we have had. Trish and I did several camping road trips pre-kids and knew we wanted to do more once we had kids. The photo below was a road trip up to SE Queensland from Melbourne around 1999. We did serval of these amazing surfing trip. 

Once kids came along a caravan made camping a lot easier and we went everywhere for over 10 years. Ours even had a bath!

Lots of free camping spots too – the one below on the ninety mile beach.

As we became financially stable (paid off house) we started to look at three options: Caravan / Upgrade, Onsite Van or Holiday house. They all have pros and cons. Some of the basic considerations we listed are below:

Costs:

We initially went the caravan option when the kids were very young. It’s easier than a tent and we loved our old Jayco triple bunk van. When we were looking at a permanent onsite van setup the running costs were not too far from a holiday home. For us (in 2014) a fixed van was about a $30k investment plus about $8k pa fees. Doing the cash flow / net-worth forecast we decided to buy a holiday home but we would need to rent it out as a short-term rental. In order to make sure it would be a successful holiday rental, we chose a house with scarcity – a fantastic location (absolute beach front) which of course cost almost twice the price of non-beach front homes – another thing for you to consider! The after tax outgoings has probably averaged out to be about $15-$20k pa which was higher than the onsite van, but the property value has done at least a double and will continue to do that over the long term. 

** HOWEVER ** It has been a side hustle with lots of property maintenance and the joys of running a small business (it’s always on).  We even started a company looking after lots of other holiday rentals, but closed it down during COVID lockdowns. We have hosted several thousand guests which feels good to know it is being used and not an idle asset. We have had a few years where the income has been up around $100k but the outgoings proportionally go up too. Hence even in the really good years it still makes a small loss after, interest, rates, land tax, cleaning, utilities, maintenance, depreciation etc.

Caution Landlords – 5 reasons!

Our decision was more lifestyle, not an investment decision but we needed to make it an investment decision to make it work. Please note Victoria Australia has been pretty stormy and the ‘greedy’ landlords have been the go-to for the current government who are in massive debt after being the most locked down city in the world during the Covid pandemic. 

1. During COVID we needed to provide free rent (which I understand as people need homes) with no compensation like other sectors. 

2. Then there has been the doubling in our land tax + a double in values so meaning a x4 increase in land tax. 

3. This year they introduced a new short-term stay tax (7.5%). 

4. But the best is to come…. if we don’t rent out the home at least 6 months a year as a short term rental we need to pay 1% on the capital value which moves to 2% next year and 3% the year after (that’s $30k pa for every $1M). Luckily we have naturally rented it out over 6 months. There are applications to submit on the VRLT (https://www.sro.vic.gov.au/vacant-residential-land-tax) which allows people to declare they have stayed at least 1 month to be exempt on this one but then you can’t claim 1/12 of any deductions. 

5. And there are lots of new minimum rental standards soon to come in which are higher than our current home we live in! No doubt every renter should be safe and a certain standard, however the growing long list of 14 categories is something to consider before becoming a landlord. To comply some properties will need to spend several thousands dollars.

Most people I know are getting out of IPs in Victoria (don’t want to play ball anymore as the rules keep changing) which doesn’t help the rental crisis. In fact, without massive increases in public housing all the above changes have and will continue to increase rents and sadly it affects the people that can least afford it the most.

In Summary

We loved our caravan and created so many great memories. We have done the same with the holiday house, but I would carefully consider the additional holding costs and time and effort to hold. The van can be a nice simple option to enjoy with your family and explore lots of new places too :). Cheers Cam