Should you buy a holiday home?

Platforms like Airbnb and Stayz have transformed holiday homes from occasional getaway spots into year-round income generators. What used to sit empty for most of the year, only used for Christmas or family holidays, can now bring in cash flow with flexibility. But is it enough to make a holiday home a good investment property?

Is a holiday home a good investment?

Deciding on if a holiday home also works out to be a good investment is contingent on a few key factors, such as your goals, the property type, how much rent to charge when you’re not using it, and so on.

Goal setting

With any big purchase in life, it’s important to work backward from what your goals are. When buying a holiday home, you need to decide your main motivation.

A good way to break this down is by deciding what are your personal goals and financial goals.

• Your personal goal might be to spend Christmas in your holiday home every year.

• Your financial goal might be to break even year on year with your loan repayments and passive income from the house.

Having clear goals will help you decide where to purchase, and what sort of property you are looking for. However your personal goals and financial goals won’t always align, and you might need to decide which one takes precedent over the other.

See also: How to start investing in property

Where to buy and how much to spend

Your end goals also influence where you buy, what kind of property and how much you spend. For example, buying a holiday home purely for your own use means you can buy in the location most desirable for you. It may be a region with sentimental value, or close to relatives or friends.

However, just because you find that area attractive doesn’t mean potential tenants might. That might mean you lose money on it throughout the year, in loan repayments and maintenance, which outweigh any rental income or capital gains.

It might sit empty for many months, and that’s okay, but it’s important to decide if that’s something you can afford in the long run.

1. If it sits empty for months, you need to also consider insurance implications - many insurers won’t insure vacant property for more than a few months.

For example, buying a beach house as an investment property might mean it's only able to generate income on a rental platform like Airbnb in the summer time. This might also coincide when you want to be able to use it.

You may be happy to accept that a holiday home won’t generate income all year round, but you will be able to use it whenever you like. However, if you are looking for passive income, you may need to buy in a region that is attractive to holiday goers or more permanent tenants all year round.

If you want a more permanent tenant, it could be a good idea to lock off a spare or master bedroom for yourself for when you’re there on holidays.

Another reason you might be buying a holiday house is for capital gain. Usually, this means holding onto a property in a high-demand area, which will grow in value over time.

Read more: Costs of property investment

Property type

Once you have decided on your financial and personal goals, you can narrow down the property type. You may be looking for a low-maintenance unit with a couple of bedrooms. Or you might need a big house with plenty of space to host family on holidays.

These decisions will impact both your earning potential as an investment and influence how much you can charge from guests throughout the year.

It’s also important to factor in additional costs associated with different properties such as:

• Body corporate fees for units and townhouses

• Pool/garden maintenance

• Property management fees

• Cleaning fees

• Registration fees for STRA - short term rental accommodation

What to charge

If you are looking to turn a profit and rent out your holiday home during the year, you need to research other rentals in the area.

Go to short-term rental websites like Airbnb and Stayz, to see what similar homes are being rented for. Most online platforms will also have helpful tools to estimate what to charge.

Finding an affordable price setting is important as by making it too cheap, you may only break even after cleaning fees, and fees to use the platform. However, overpricing your place might mean not getting much business.

If you are looking to run a short-term accommodation rental, you need to calculate if you can afford the loan repayments without any guests, as there is no guarantee you will be able to rent it out all year round. Your goal might be to use it as an Airbnb to cover your repayments, and use it yourself sporadically when it isn’t booked out. If that’s the case, you need to decide what property can realistically generate enough income to cover your repayments.

How to finance a holiday home

A common misunderstanding about buying a holiday home is the belief that you need to save an entirely new deposit. In reality, if you already own a property, the equity you’ve built could do much of the heavy lifting. In fact, it can even get you into a second home far sooner than starting from scratch.

Using your redraw facility

If you’ve consistently paid ahead on your mortgage, your redraw facility may give you quick access to the extra repayments you’ve already made. It’s a straightforward way to free up funds for a deposit or renovations without changing your loan structure or your lender.

This option tends to suit homeowners with a strong repayment history who want a simple, flexible path into a second property.

Using a top-up

A top-up uses the equity in your current home to increase your existing loan amount. If your property has grown in value, and you still hold at least 20% equity, your lender may allow you to borrow more against it. 

The appeal is simplicity: one loan, one lender, one repayment to manage. It’s a tidy solution for owners with solid equity who prefer not to juggle multiple mortgages. Just keep in mind that topping up increases your overall debt and may affect interest costs, repayments or the length of your loan.

See also: How to use equity to buy a second property

Using a second mortgage

If you’d rather keep the new purchase financially distinct, a second mortgage creates a completely separate loan for the holiday home.

You’ll be assessed as a new borrower, and because holiday homes can be seen as higher risk, particularly if they’re remote or intended for short-stay rental, lending criteria can be tighter. Still, this route works well for buyers who want different loan features or clear asset separation for tax or accounting reasons.

State-by-state fees associated with short-term rentals

Regulations and fees differ from state to state for short-term rentals. They will also depend on which platform you list your property on.

Here are some general differences between each state in terms of rental accommodation. Be sure to check out each region's specific rental laws before you purchase, especially if you are investing in a holiday house interstate.

NSW

NSW's regulations for Airbnb and Stayz rentals state that they need to be registered as STRA properties.

Some regions in NSW now have limits on how long guests can stay, depending on whether the host lives at the property or not.

These restrictions need to be factored in when buying your investment property, as you may not be able to rent it out all year round and when you are able to rent it out, may be the same time of year you were hoping to use it yourself.

Queensland

In Brisbane City, there are provisions for all types of short-term rentals and the assessment of a proposal considers the potential impacts on the immediate neighbourhood. Check out Queensland laws here.

Victoria

Victoria introduced a 7.5% levy on short-stay bookings from 1 January 2025 and gave owners corporations the power to ban short-term rentals in certain buildings. Both hosts and guests became responsible for any damage, and local councils were allowed to set additional rules. Short-term stays were generally defined as bookings of fewer than 28 consecutive days.

Northern Territory

The Northern Territory Government has not announced any reforms or legislation for the short-stay accommodation sector.

Tasmania

According to the Short Stay Accommodation Act 2019, booking platform providers are required to collect and display certain information regarding short stay premises listed on their booking platforms, and must also report this information to the Director of Building Control on a quarterly basis, within 30 days of the end of the quarter. Read The Short Stay Accommodation Act 2019 for a full outline of Tasmanian laws.

Western Australia

In the Perth metro area, you can rent a property for up to 90 nights a year without development approval. Exceed that limit, and you’ll need approval from your local council.

In regional WA, the rules differ by area, so it’s best to confirm locally. Across the entire state, all short-term rentals must be registered on the WA Government’s STRA Register.

ACT

Since July 2025, ACT has introduced a 5% levy on short-term rental stays. The charge is applied to the total booking cost, including taxes and platform fees, but it doesn’t cover credit-card surcharges or any refunded amounts.

1. Savings.com.au’s two cents

When considering your plan for buying a holiday house, you really need to decide if it’s for you and your family, or if it’s a way to make money. If it’s just for you and your family, you need to consider whether you can afford the loan repayments.

Managing a holiday rental is not easy, and requires more upkeep and organisation than you might think. If you are looking to turn a profit, make sure you do your research into the costs of running a short-term rental accommodation.

If you are in a position to buy a holiday home, you need to decide the value you place on it, and if that value for you and your friends and family using it whenever you like outweighs the financial value of renting it out to strangers.