Investing in a holiday home: the full guide

A holiday home blends two different decisions — a lifestyle one and an investment one. Most buyers focus on the first and underweight the second. The buyers who do well do both at once.

The lifestyle side

Be honest about how many weeks a year you'll actually use it. The answer is almost always lower than you think when you're standing in the property on a sunny Saturday. For most owners, real use is 4–6 weeks a year. The other 46 are when the investment side has to carry it.

The investment side

Holiday lets work on a different rhythm to standard residential rentals. Peak season can pull in 3–5× the weekly rate of a normal lease, but you have:

• Vacant weeks in shoulder and off-seasons.
• Management overhead — cleaning, key handovers, guest issues. Most owners use a manager, which costs 15–25% of the gross rent.
• Higher wear than a typical lease, meaning faster refurb cycles.

A reasonable rule: net yield on a holiday property, after management and vacancy, is usually 30–40% lower than the gross figure. Model on the net.

Lender treatment

Holiday lets are treated differently by every lender. The variables:

• Some lenders cap the LVR on holiday or short-stay properties at 80%.
• Some won't include short-stay income in your servicing calculation, requiring you to prove the loan on long-term rental potential.
• Some require a minimum 12 months of consistent income history before counting holiday rent.

This is where lender selection matters most. A standard residential mortgage broker may not know the holiday-let-friendly lenders by heart. Ask specifically.

Tax structure

Holiday properties available for short-stay rental can claim deductions only for the periods they're available to let. Personal use weeks are non-deductible. Keep a clean calendar — the ATO has been targeting this in audits.

Depreciation deductions can be substantial on new or recently-refurbished holiday properties. Get a quantity surveyor's depreciation schedule before lodging the first return — usually pays for itself many times over.

Location matters more than the property

The best holiday investment properties sit in markets where:

• Tourism numbers are stable or growing.
• Short-stay regulation is permissive (some councils are tightening fast — check before you buy).
• Transport access from a major capital is straightforward — the easier the drive or flight, the higher the occupancy.
• There's enough mid-week and shoulder-season demand to fill the calendar.

A property in a "weekenders only" market will sit empty 60% of the year no matter how nice it is.

The deal flow is real, but holiday property is an active investment, not a passive one. Treat it that way and the numbers can stack up well.