What to consider before buying a holiday home

By Carolyn Parrella | Published 22 November 2024 | Last Updated 19 October 2026

For some Australians, buying a holiday home can offer a place to escape on weekends and, in some circumstances, a way to earn rental income through short-term accommodation. However, income is not guaranteed and the costs, risks and responsibilities can differ from a traditional residential rental property.

Before purchasing a holiday home, consider your objectives, financial situation and needs, and seek professional advice if required. The information in this article is general in nature and should not be taken as a recommendation to buy, rent out or insure a holiday home.

Potential benefits and trade-offs of owning a holiday home

A holiday home may offer lifestyle benefits, such as personal use of the property, and may generate rental income. These potential benefits should be weighed against costs, vacancy periods, maintenance requirements, tax considerations and the risk that income may be lower than expected.

The growth of online booking platforms, such as Airbnb and Stayz, has made it easier for property owners to market accommodation to travellers in Australia and overseas.

However, potential returns depend on more than location alone. Occupancy rates, operating costs, seasonal demand and financing expenses can all affect profitability.

Holiday rental vs traditional rental property

Holiday home costs

Before buying, it’s important to understand both upfront and ongoing costs, and to test whether you could manage repayments and expenses if bookings, nightly rates or occupancy levels fall.

Purchase and financing costs

• Property purchase price
• Stamp duty and legal fees
• Loan establishment costs
• Interest repayments
• Building and pest inspections.

Ongoing costs

• Council rates
• Utilities such as electricity, water and internet
• Property maintenance and repairs
• Furniture and appliance replacement
• Cleaning and linen services
• Online booking platform fees
• Property management fees
• Insurance premiums.

Terri Scheer tip

A detailed budget can help you compare possible income scenarios with ongoing expenses before deciding whether the property may be manageable for your circumstances. Consider allowing for vacancies, seasonal demand, interest rate changes, repairs and other unexpected costs.

Rental income, occupancy rates and cash flow considerations

Rental income from holiday accommodation can be variable, and gross revenue does not show the full picture. Net outcomes may be affected by vacancies, seasonal demand, financing costs, management fees, cleaning, repairs, taxes and other expenses.

Avoid assuming a holiday property will remain fully booked throughout the year. Demand can fluctuate due to factors such as:

• Seasonality
• School holiday periods
• Local events and attractions
• Economic conditions
• Competition from nearby properties.

When considering whether a holiday home is manageable for your situation, you may want to review:

• Expected occupancy rates
• Average nightly rates
• Indicative rental yield, noting it may vary and should not be relied on alone
• Mortgage repayments
• Management costs
• Vacancy periods.

A property generating strong income during peak periods may still experience cash flow pressure during quieter months, particularly if interest rates or operating costs increase.

Choosing a location for a holiday home

Location can influence occupancy rates, costs and long-term property performance, but it does not guarantee rental demand, capital growth or financial outcomes.

Before purchasing, consider if:

• the area attracts visitors year-round
• the area has access to local attractions and amenities
• there’s competition from other holiday rentals
• there are local council regulations affecting short-term accommodation, and
• there are plans for future tourism and infrastructure developments.

Researching local demand, occupancy trends and regulatory requirements may help you form more realistic expectations. You should consider whether the property and any related financial commitments are appropriate for your circumstances.

Managing a holiday rental

Holiday rentals typically require more hands-on management than traditional residential investment properties. Owners can choose to self-manage or engage a professional property manager.

Self-management may reduce costs but can involve guest communication, cleaning coordination, maintenance management and booking administration.

Professional managers can reduce day-to-day involvement, although management fees will affect overall returns.

Many owners also use booking platforms, like Airbnb and Stayz, and dynamic pricing tools to manage reservations and adjust rates based on demand throughout the year.

What are the risks of owning a holiday home?

Holiday homes can carry financial, operational and property-related risks. Understanding these risks before purchasing may help you make a more informed decision, but this article does not take into account your personal objectives, financial situation or needs.

Risk summary

Holiday rental insurance for your holiday home

Holiday rental properties often face different risks from owner-occupied homes and traditional long-term rental properties. Because guests stay for shorter periods and turnover is more frequent, owners may face increased exposure to:

• Accidental guest damage.
• Theft or vandalism.
• Liability claims.
• Loss of rental income following an insured event.
• Severe weather events such as storms, bushfires and floods.

If a property becomes uninhabitable following damage, owners may also experience cancelled bookings and reduced rental income while repairs are carried out.

Depending on the circumstances, policy terms, limits and exclusions, Terri Scheer Holiday Rental Insurance may help cover certain risks associated with operating a short-term rental property. Consider the relevant Product Disclosure Statement and Target Market Determination before deciding whether a product is appropriate for you.

Property owners may wish to review their insurance arrangements based on how the property is used, the risks they want cover for, and the terms, limits and exclusions of any policy. Holiday rental insurance and landlord insurance may respond differently to short-term rental arrangements, so compare the policy documents and consider whether the cover is appropriate for your circumstances before deciding.

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Holiday home checklist

Before buying a holiday rental property, consider asking yourself:

• Can I comfortably manage mortgage repayments if bookings decline?
• Have I budgeted for maintenance, cleaning and insurance costs?
• Do I understand local regulations affecting short-term rentals?
• Am I comfortable with fluctuating rental income?
• Do I have sufficient funds to cover unexpected expenses?
• Have I considered whether buying and operating the property is appropriate for my objectives, financial situation and needs?

Is a holiday home right for you?

A holiday home may offer lifestyle benefits and possible rental income, but it also involves costs, uncertainty and risk. Outcomes can depend on factors such as location, demand, interest rates, operating expenses, management requirements and local regulations. By assessing cash flow, occupancy rates, management requirements, risks and insurance needs before purchasing, you may be better placed to decide what questions to ask and whether to seek professional advice before acting.

It helps to review Terri Scheer Holiday Rental Insurance, read the Product Disclosure Statement to understand the cover, limits and exclusions, and consider the Target Market Determination before deciding whether the product is appropriate for you.

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