Johnson Property Group

Why leasing your weekender makes more than just financial sense

So you’re using your Perth weekender or your Albany holiday house for less than a couple of weeks a year and it’s looking neglected. 

This is an increasingly common story as more and more primary producers realise they have a dead asset on their hands.

The property was probably bought years ago because a base was required for kids’ city schooling and university. But now it doesn’t carry a debt, the family has grown up, it’s almost never used and it isn’t achieving highest and best use.

In many cases there has been a loss of yield because the improvements are in dire need of attention. Costly items such as hot water systems and dishwashers are breaking down because of a lack of use, and it is so rarely inhabited that the threat of break-ins and squatters is significant. These issues combined hinder your ability to further invest.

It’s time to inject some money into improvements and make a call on selling or renting.

If you have a landed property in the city it makes good sense to put it up for rent. This will provide you with a good yield on your asset, but you must think of this as a long-term opportunity. The yields and maintenance costs just don’t stack up with short leases or an Airbnb-style arrangement. You need to look at renting your lifestyle asset for a minimum of 2-3 years.

Having the convenience of a house in the city is a hard habit to break, but the reality is that if you’re only using it for a couple of weeks a year then you’re much better off staying in a hotel.

I’m helping a rural client weigh up the options of a scenario such as this right now. The family has a property in Fremantle that they have owned for 18 years. In the last 12 months they have only stayed there for 10 days. 

This piece of real estate is not currently providing any cash flow and is in urgent need of refurbishment. It’s worth about $850,000 to sell but could achieve a rental of about $650 a week with an annual growth that would significantly contribute to a sound wealth creation pathway.

However before you make any decisions in this space it’s important to have a conversation with your accountant. Once you’re equipped with the financial tools, talk to a real estate agent with experience in sales, property management and developments. This will give you the knowhow to make an educated decision on the way forward with your lifestyle property. You’ll know if renting is the best way to add value to your asset or if it has already reached its “best use” potential and is ready to be moved on to make way for something that will provide you with better value in the future.