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How to generate income from Holiday Homes?

Updated on March 24, 2012
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Most of us may have taken holiday breaks during weekends or seasons and would have gone to upcountry villas or farm house to relax, enjoy and party. To have a serious business aspect to it, did it even occur to us, “what if we buy this property?” We all know real estate business is not for everybody. It requires surplus cash in hand, good analytic approach, and a great bargaining power.

These “weekend” properties or better known as “Holiday Homes” can be a good investment, provided you have a great plan. The investment made on Holiday Homes can be classified into two types. One is for the general appreciation of value of the property over a long period of time and the other is to use the same as “Retirement Homes” during the later part of your life.

The trends of converting “Holiday Homes” to “Retirement Homes” are not unusual. We all search for a flat, apartments strategically located near our workplace, children’s school etc. And we don’t mind paying few extra bucks for purchasing or renting the same. These criteria will be disposed once a person retires and settles down. At the later part of life, most of us love to find ourselves middle of nature and peace. Hence most of us go for a second home outside the city limits and ideally towards hill stations and beaches. If you happen to discuss the same with any real estate broker, he will inform you that a flat in the city will appreciate four to five times than a holiday home towards the outer limits of the city over a longer period. It is true.

Before discussing other aspects related to purchasing a holiday home, it is relatively easier to sell of these properties after a long period of time for the first type of investors as discussed earlier. But they are not just for a better appreciation of value. It is for those who would like to add fun with property investment.

There are certain advantages and disadvantages related to purchasing a holiday home. The main advantage would be: -

Added Value Appreciation: - Holiday Homes can be rented out as well as can be sold off after holding it for a long period of time. Hence there may be constant flow for cash if you plan wisely.

Helping Hand: Nowadays there are lots of property consultants and even builders who give you an offer to share the property for an agreed time period. During this period, the consultant or the builder will rent it out with a share in rental income.

Your Home: After all it’s your second home. This feeling will always be there when you spend the next weekend unlike some rented place.

In spite of having so many advantages, there are few disadvantages as well. But better planning can surely reduce its effect: -

Same Place vacation: Now you will be spending your vacation at the same place time and again because you don’t want to spend extra money after owing a holiday home. And this can be boring at times.

Extra Expense: - If holiday homes are your second property investment, you have to constantly shell out money on property tax, electricity bills, water bills etc for most of the times. But these can be adjusted against the rental agreement with the third party.

Seasonal Property: What if the holiday home destination attracts tourist on a seasonal basis. This means that your property remains vacant during the off season period and this will incur a huge maintenance cost. Do prepare for it as well.

But with good planning and perhaps with the help of a consultant, one can generate constant income from Holiday Homes. This can be a great source of earning if you have identified a good property at a cheap rate. The extra incomes that you can work upon are: -

1. Rental Income: Of course, you will have this from the very start of the entire purchase plan. The preference of short rental or longer rental will depend on the location and your holiday activities.

2. Wedding Parties: Lots of holiday homes are rented out for functions like Wedding Parties, Birthday celebrations etc. But do consult your tax practitioner for the legal formalities.

3. Shooting: Be it a movie or television serial, this can create great income depending on the production house and your ability to bargain.

There is a shortage of good properties towards the middle of any city around the world. Hence the second investment towards holiday homes will be a popular choice in the future.

If you have an option of selecting your Holiday Homes, where would it be?

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