Consumer Watch: Buy a bach and bank on rent

By Susan Edmunds

It's peak bach-buying season. Could the perfect holiday house you've spotted over summer prove a wise investment?

Over summer, the most popular baches to rent are in Northland, such as on the coastline at Matapouri Bay. Photo / Destination Northland
Over summer, the most popular baches to rent are in Northland, such as on the coastline at Matapouri Bay. Photo / Destination Northland

Baches in some parts of the country can command enough rent in one month over summer to cover half the year's mortgage repayments.

Sales of holiday homes pick up at this time of the year, says Real Estate Institute chief executive Helen O'Sullivan, as people go on holiday and fall in love with properties, then come home to do their research and seal the deal.

Many have found that if they rent the properties when they'r not using them, they will cost very little to own.

Over summer, the most popular baches to rent are in Northland, according to Bookabach. But purchase prices in many bach hotspots are still well down on their peak.

In Mangonui, the median sales price is $320,000. Coopers Beach properties pull in a median $358,750 and Paihia $351,000.

A property bought for $350,000 would cost $2500 a month in mortgage payments on current interest rates with a 100 per cent loan, or $30,000 a year.

Bookabach said the average per-night rental for Northland baches between December 20 and January 5 this year was $244.

That means that if a median-priced Northland holiday home was rented for the average Bookabach rate, a third of that mortgage cost would be recovered in one month.

Accountant Mark Withers said a lot of people did better than that. It was not uncommon for properties to pull in $300 or $350 a night over the peak period and earn their owners $12,000 a month.

"I've seen incomes as high as $70,000 a year from a single rented bach, and many earning $25,000 to $40,000."

Other popular places to rent baches were Auckland, with 13.1 per cent of peak summer bookings, and the Coromandel, at just under 12 per cent, Bookabach said.

Baches in the Auckland region could command an average $252 a night and in the Coromandel $228.

Holiday Houses said its busiest locations were Queenstown, Mt Maunganui and Waiheke.

Queenstown baches pulled in an average $400 a night, Waiheke $350 and Mt Maunganui $230.

"You can easily make good money renting out your house if you're prepared to keep it attractive for renters," manager Andrew McKaskell said.

Commentator Alistair Helm said there could be opportunities to buy coastal properties as improving economic conditions made people more prepared to move on.

Websites such as Bookabach and Holiday Houses make it easier to rent out a holiday home, but charge a fee.

Bachcare, which manages everything, including cleaning up after the tenants, charges 20 per cent commission. Spokeswoman Leslie Preston said there was often more involved in renting out a holiday home than people realised and Bachcare listings had grown 50 per cent in the past year. She said a nice home in a good location should rent up to 60 nights a year.

Withers said baches were a good investment in lifestyle for people who could afford them. "You will need to be lucky with your timing to achieve capital gains, particularly if your tenure is short-term.

"Perhaps as the ageing population retires and moves to the beach, demand will increase for coastal property. This will probably be progressively boosted over time by international buyers as they continue to discover the unbelievable lifestyles Kiwis enjoy."

New tax rules meant people were less likely to rent houses half-heartedly, Withers said. Costs can now only be claimed relative to the amount of time a bach is rented.

If a bach is rented for 50 nights and used privately for 50 nights, half the costs are tax-deductible. And if the bach costs more to run than it earns, this can only be offset against a taxpayer's other income if the gross rent exceeds 2 per cent of the government valuation of the property.

Summer rent covers costs

Gebbett's Mangonui bach.
Gebbett's Mangonui bach.

Diana Gebbett was visiting New Zealand from Britain for the first time in 2002 when she and her partner bought their holiday home in Mangonui.

"All our friends said we were mad."

For many years, she returned each summer to work on the house and gardens.

This year, it was renting for $350 a night over January. She said if there hadn't been work to do on the property, what it earned in rent would probably have covered the costs of owning it. She is now trying to sell the house.

- Herald on Sunday

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