Should you Buy or Rent your Luxury Holiday Property?

Despite the tentative growth that has distinguished the current real estate market, the luxury end has remained in rude health. More specifically, the overseas market has benefited from a considerable rise in interest during the last 12 months, with industry experts Luxuryestate.com and Engel & Volkers both reporting significant growth.

Interest in luxury properties, which are valued at $1 million or more, has risen by an estimated 2% since 2012. With a number of luxury real estate agents also recording their best ever quarterly profits at the beginning of 2013, there is a genuine sense that soaring consumer confidence is beginning to impact  on every section of the property market.

Should you Buy or Rent your Holiday Home? The Key Considerations

Another trend that distinguishes the current luxury market is diversity, as high end investors are beginning to purchase homes in developing economies such as Russia, Brazil and China. While these factors may be contributing to a prosperous marketplace, however, luxury property is an investment opportunity that requires careful consideration. This is especially true for individuals who are looking into invest in an overseas holiday home, as this is a complex arrangement that has multiple connotations. For example: –

• Your Long Term Financial and Investment Goals: The main choice that you face as aspiring overseas property owner is whether to rent or buy, and the first consideration should be your long term financial and investment goals. If you are simply looking to identify an affordable property that is available for a few months during the summer, then renting may well be the best option for you. If you have an ambition to own overseas property and wish to secure a holiday home that can deliver long term financial returns, however, you should look to make a good value purchase.

• Your Desired Destination and its Economic Standing: If you are knowledgeable about a specific region and wish to purchase a home that reflects this wisdom, your choice between renting and buying is absolutely pivotal. It should be determined by both regional property prices and the portents for long term growth, as this will help you to identify any potential returns and viability of each option. If you are targeting a property in a developing economy such as Russia, for example, buying may be a sensible option as you will be able to access luxury abodes at relatively competitive prices. This may not be the case in cities such as London, however, as the initial price point may prove to be prohibitive and ultimately counter-productive.

• The Affiliated Costs of Renting and Ownership: Apart from the purchase price and monthly rental cost, there are other expenses that require careful consideration when it comes to appraising luxury holiday homes. The majority of these are associated with ownership, however, as factors such as insurance, stamp duty and furnishings must all be factored in to the overall investment. This will have a direct impact on the profitability of your purchase, so be sure to leave no stone unturned in an attempt to get the best value for your money. If you are looking to enjoy a relatively low cost break, however, then renting represents a far more easily affordable option.

The Last Word

When considering whether to rent or buy, your first consideration should always be your long term goals and aspirations. Beyond this, it is important that you consider the additional costs and financial factors involved with each option, before ultimately determining how to achieve the very best value for money. As a starting point, you should also consider using a real estate calculator to determine your potential liability and precisely how much you can afford.