Updated October 2026 by Albert Waldron, Awesome Lending Solutions. This article first appeared on awesomelendingsolutions.com.au.
Every holiday season, we hear from two groups of people. Some have just come back from a great break and want to buy a holiday home in the same spot. Others already own one and are wondering if it was a good idea. A holiday property can be a wonderful asset, but it can also be a costly mistake. Here's what to weigh up.
The good
- Somewhere to get away: a place your family can enjoy for years.
- Rental income: in popular spots, peak-season rent can be strong.
- A future home: some owners plan to retire there one day.
- Possible growth: well-located coastal and lifestyle areas can grow in value over time.
The bad
- Seasonal income: rent can be high in summer and very low in winter.
- Higher costs: short-stay management fees, cleaning, furnishing and insurance cost more than a standard rental.
- Tougher lending: some lenders treat short-stay income cautiously, or only count part of it.
- Local rules: many councils and states now regulate short-term rentals. In NSW, for example, short-term rentals must be registered and some areas limit how many nights a year you can rent a whole home.
The ugly
- Smaller markets: holiday towns often have fewer buyers, so prices can swing more and properties can take longer to sell.
- Personal use limits tax deductions: you can only claim costs for the times the property is rented or genuinely available for rent. The ATO looks closely at holiday homes.
- Negative gearing changes: for established homes bought after 7:30pm on 12 May 2026, rental losses can't be used to reduce tax on your wages from 1 July 2027.
- Capital gains tax: a holiday home isn't your main residence, so CGT applies when you sell. From 1 July 2027, the 50% discount is replaced by indexation and a 30% minimum tax.
Tips before you buy
- Visit out of season. A town that buzzes in January may be quiet in July.
- Check local short-stay rules with the council before you sign.
- Get real rental figures from local property managers, not just peak-week prices.
- Budget for empty weeks and higher running costs.
- Check how lenders will treat it. Some count only part of short-stay income, and some have rules on small or remote properties.
- Talk to your accountant about how personal use affects deductions.
An example
Mark and Jenny want a $750,000 beach house on the NSW South Coast. They plan to use it for four weeks a year and rent it out the rest of the time.
- Peak-season bookings look strong, but winter is quiet, so their realistic income is much lower than the summer rate suggests.
- Because they use it themselves, they can only claim some of the costs.
- Their broker uses equity in their home for the deposit and sets up a separate loan split, so the interest is easy to track.
- They keep a cash buffer for repairs and empty weeks.
Is a holiday home right for you?
It can be, if you love the area, can comfortably cover the costs, and see it as a long-term lifestyle asset rather than a quick money-maker. If your main goal is investment returns, a standard rental in a strong market may do the job with less risk.
Frequently asked questions
Can I get a home loan for a holiday home?
Yes. It's usually treated as an investment or second home loan, depending on how you use it.
Do lenders count Airbnb-style income?
Some do, often only part of it and with a history of bookings. Policies vary.
Can I claim all the costs?
Only for the times it's rented or genuinely available for rent. Personal use reduces what you can claim.
Talk to Awesome Lending Solutions
Every situation is different. At Awesome Lending Solutions, we can show you how lenders will view a holiday property and help you set up the loan the right way. Call us on 02 7904 9560 or visit awesomelendingsolutions.com.au to book a chat.
This article is general information only. It does not consider your objectives, financial situation or needs, and it is not financial, tax or legal advice. Rules, interest rates and laws were current as at October 2026 and can change. Speak with a licensed professional before making any decision. Albert Waldron is a Credit Representative (CR 407514) of AFG's Australian Credit Licence 389087.