Renting out your holiday home
Buying an investment home by the seaside or tucked away in a country hamlet, with plans for retirement, is a very common portfolio strategy. Additionally, the purchase of a home or apartment at your favourite holiday spot can make you feel almost like a local. But, what happens with the home for most of the year, does it become a vortex of expenses?
If you are thinking about renting your holiday home out to short-term tenants, there are a few tips to consider.
Repairs and maintenance
Importantly, you can only claim tax deductions for repairs conducted on your holiday home for non-pre-existing instances. For example, if your home needs a new roof before it becomes fit for tenants, this cannot be claimed. However, if a window breaks during a tenancy, the replacement costs may be claimable. Also, you can only claim repairs for work required during the time the property is available for rent, i.e. the more time you take it off the market for your own uses, the less you can claim.
The best advice is to get onto an accountant who has experience dealing with record keeping and claiming for investment properties to ensure you don’t get caught out. It is recommended from the moment you commit to purchasing an investment property, whether it is for short or long term renting, you maintain comprehensive records on all incomings and outgoings, as well as rental periods, regardless of how small. This will make it simple for your accountant to lodge details for tax purposes.
It has become easier to manage the tenancy calendar yourself with multiple websites to choose from, each with different pay out terms and commissions. However, this DIY approach may also mean you need a good team of local contacts to arrange cleaning, property inspections, emergency repairs and in the worst-case scenario eviction of a tenant. Depending on how far away you are from your holiday home, it may make sense to engage a local property manager who will take on the full responsibility of coordinating each tenant. But, this does of course come with an expense, and may come down to a balance of income versus costs versus peace of mind,
They key to successful holiday home rentals is taking the time to prepare your property. It needs to not only cater for a diverse range of tenant types, i.e. families, couples, groups, and also make people feel like a home away from home, but without too many of your personal décor items (such as family photos etc.). Getting the right property photos is important to get the right tenants in the first place, and then capturing the positive recommendations after each stay will replace the need for extra advertising.
All rental income from a holiday home is regarded by the Tax Office as assessable income. This means 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 like repairs, maintenance and advertising costs.