Savvy investors know Lennox Head is poised for capital growth.
Median house prices are approximately half what you’ll pay in neighbouring Byron Bay, but that won’t be the case for much longer. If you’re keen to invest in this market before it takes off, one of the key questions to consider is: are permanent rentals or holiday homes the best bet?
Holiday accommodation: The benefits
The most obvious benefit of investing in holiday accommodation, and one of the reasons so many investors are tempted by this option, is seeing high returns over peak periods. After all, the amount you can charge for a week’s accommodation over Easter or Christmas are far more than average weekly rent.
There are also a number of extra tax benefits you can claim as the owner of a holiday property, as well as the benefits available if your property is negatively geared (which occurs when payments on your property aren’t covered by the money it brings in).
You may even want to spend some holidays in the property yourself.
The downsides of investing in holiday accommodation
While those higher returns over holiday periods are enticing, the fact is your property will spend at least some time vacant during any given year. This mean you’ll need to budget for periods when no income is coming from your property at all.
Other costs you may need to budget for include regular cleaning and maintenance, holiday property insurance, and property management fees if you don’t plan to run the holiday rental process yourself.
Permanent Rentals: The simpler solution?
By comparison, investing in a rental property in Lennox Head is a more predictable option. Average rental returns current sit at $600 for a house and $515 for a unit. Once again, if your property is negatively geared you’ll be able to claim a number of tax cuts, which means your annual costs should be balanced by rental income.
The trade-offs when investing in a rental property
What you gain in stability by investing in a rental property, you lose in flexibility. In the vast majority of cases you’ll need to offer tenants a fixed-term lease, which will limit your ability to increase rental costs within the first two years. Meanwhile, as the owner of a rental property you’ll still face the same maintenance and property management costs associated with holiday accommodation.
Choosing your best investment option
In many ways, both investment options should give you a solid return, especially as the Lennox Head market continues to grow. And there’s always the option to transition holiday accommodation into a permanent rental property, or vice versa.
Our advice will always be to seek out a professional, experienced real estate team that understands the market. By drawing on expert knowledge about the way the market is currently behaving – and how it’s projected to change over time – you’ll be in a much better position to make the best investment choice for your particular circumstances.