Building a holiday home: planning the investment with foresight

Why a self-built holiday home works as an investment

Anyone who wants to build a holiday home often first has their own holiday in mind. Viewed as an investment, however, a holiday home is above all a property investment with a double return: ongoing rental income from letting to holiday guests and a possible appreciation in the property's value. The decisive advantage over buying an existing property is that, when building new, you can tailor the construction method, floor plan and energy quality precisely to a high, year-round occupancy. A modern, winterproof holiday home as a prefabricated house is also built quickly and can be let from the start.

The yield depends on realistic assumptions. In sought-after regions, reckon with 120 to 200 rentable nights per year and overnight prices between 120 and 220 euros. Consistently deduct all costs from this: cleaning, laundry, property management, commissions from booking portals, maintenance, insurance and administration quickly consume 30 to 40 percent of the gross income. What remains in good locations is a net rental yield of 2.5 to 4.5 percent. Anyone who works through the figures cleanly in advance avoids the typical disappointment of the dream house by the sea turning into a loss-making venture.

Choosing a location: where a holiday home is actually worthwhile

The location is the most important lever for yield. Established holiday regions with stable year-round demand in Germany are the Baltic Sea coast (Mecklenburg-Vorpommern, Schleswig-Holstein), the North Sea islands and coast, the Alps and the Alpine foothills in Bavaria, as well as low mountain ranges such as the Black Forest, the Harz and the Eifel. Besides the pure attractiveness, always consider the local competitive situation, accessibility, leisure amenities and the actual occupancy data of comparable properties. A holiday home in the second row from the beach with a good concept often beats the overpriced front-row property in terms of yield.

A special case is the Danish holiday home, which has long been highly popular with German guests. Anyone who wants to build or buy in Denmark themselves, however, faces an authorisation requirement for non-residents and strict letting rules. As a legally simpler option, a holiday home in a German coastal region is worthwhile – with comparable demand, but without the hurdles of a foreign property.

Building law: holiday home, weekend home and special area

The most common and most expensive misjudgement concerns building law. Holiday homes for commercial letting are as a rule only permitted in designated 'special recreation areas' under Section 10 BauNVO – i.e. holiday home, weekend home or camping areas. In purely residential areas, by contrast, hotel-like short-term letting is often restricted or entirely prohibited. Before every plot purchase, therefore, enquire with the responsible building authority, using the development plan, which use and which building limits apply. A weekend home is additionally often subject to a size limit of 40 to 60 m² of floor space and is tailored to personal use.

Building winterproof: full year-round occupancy instead of just summer

A holiday home that can only be used in the summer months leaves yield on the table. Anyone who wants to let year-round should build winterproof from the start: an insulated building envelope in line with the Buildings Energy Act (Gebäudeenergiegesetz, GEG), frost-proof water routing, an efficient heating system – often a heat pump – and controlled residential ventilation that prevents mould even during vacancy phases. A chalet in the Alps additionally benefits from the winter season, which often brings in the highest overnight prices. Timber prefabricated construction is particularly in demand here, as it combines short construction times, very good insulation values and a cosy character.

Do not lose sight of taxes, financing and operation

The short-term letting of a holiday home usually counts for tax purposes as a commercial or commercially characterised activity. This comes with obligations – but also advantages: depreciation, financing interest, operating costs and maintenance reduce the taxable profit. The reduced VAT rate usually applies to the overnight stay. For financing from equity and a property loan, the same principles apply as for your own home – a solid concept with a buffer for weaker seasons is indispensable. Discuss your figures early with a tax advisor and your bank before you buy the plot.