KEY POINTS:
Summers at the bach are as embedded in our culture as jellytips and jandals. Every January, like clockwork, we head, en masse, for the beach and the nearest real estate agents' office, where we dream of owning our own bach (or crib).
Yet for most people, renting a bach for $1000 a week or more makes better economic sense than buying one.
Back in the old days a few families, or members of an extended family, would club together and throw up a shack with second-hand building materials.
In the 21st century a Keith Hay home plonked on bare grass isn't enough. Buyers want architectural this and that along with "European" appliances and a Mediterranean-style landscaped garden.
That comes at a price. Even basic baches start at $400,000 in many coastal resorts.
Mortgage broker Sue Tierney, who runs Ponsonby-based Mortgages By Design, sees a lot of clients who would like to buy baches. Some can afford it. But even they sometimes think twice when they see the figures laid bare.
Bryan Thomson, chief executive of real estate agent Harcourts, agrees. "No matter how much money you're earning, you cannot economically justify buying a bach."
The lifestyle benefits for you and your extended family, are, however, another question.
Assuming buyers mortgage their own homes for a deposit, the mortgage on a $400,000 bach would cost $31,000 a year to service, at fixed interest rate of 7.75 per cent, says Tierney. That's not including maintenance and insurance costs, both of which can be high thanks to the steady stream of tenants - not to mention hordes of children - traipsing sand through the place.
Many bach owners, including Tierney herself, let their properties on a nightly or weekly basis when they're not using them. But if, for example, you bag the best weeks yourself and rent out to family and friends at mates' rates, you're not going to make much of a dent in that $31,000.
If you do let your property, then choosing peak holiday periods for yourself carries an "opportunity cost", says Peter Miles director of online booking service Bookabach.co.nz.
One of the big problems with renting out a bach is that most have a very limited season - often just three months of the year. To get a decent rental yield, you need it to be let for a far bigger chunk of the year.
"The people who do make the numbers work spend quite a bit of time managing it to get the occupancy," says Lisa Dudson, financial planner and co-author of Success with Property in New Zealand.
That could mean setting up your own website for bookings as well as listing in bach rental guides and on websites such as bookabach.co.nz and holidayhouses.co.nz.
Between each let you'll need to arrange for the place to be cleaned, mowed and maintained.
You can get it managed, but will often have to pay 15 per cent or more of the rent to an agency.
If you're serious about letting your property in the high season and get an average of $500 a week averaged over the year, then even after depreciation costs, a taxpayer on the 39 per cent rate would still be $1402 a month out of pocket, says Tierney.
That's $16,824 a year.
It's a great deal of money to chew up for the pleasure of being able to lock your boat and kayak up at the beach and eat off granny's best Crown Lynn oddments.
It is, of course, possible to claim your losses against your other income. But it can be a bit of an accounting nightmare because owners can only claim the mortgage and expenses for the days that the bach was available to be rented.
What's more, claiming every last cent involves tedious jobs such as recording mileage every time you drive to and from the bach to do some DIY or clean up after tenants.
Then there's the cost and hassle of setting up family trusts or loss attributing qualifying companies (LAQCs) to shelter the property from acquisitive partners and the tax man.
Another downside, says Miles, is that you have to go to the same place each year - although some owners who use his site do bach swaps.
Property accountant Mark Withers, of Withers Tsang, says although the cash-flow equation is tipped against buying, most bach owners make their decisions on lifestyle considerations.
There are many advantages to renting rather than buying a bach, says Miles. "You get go wherever you want whenever you want, to beaches, mountains, farms, lakes etc."
The disadvantages of rentals, he says, include not feeling at home because it's not your place and not getting what you thought you booked, although rental websites include a feedback system to keep owners' honest.
In recent years bach owners have made huge capital gains, which, says Withers, has "validated people's decisions to buy, putting a strong case for ownership for those who are lucky enough to be able to afford the holding costs".
However the person who spends $900,000 on a bach now is not going to get the same returns.
"You might even get negative growth," says Dudson. Financially propping up a property for an extended period of time can hurt.
Many potential bach buyers get confused about their motivation, she says. "They try to justify what is essentially a lifestyle decision on financial grounds. It like mixing oil and water."
So next time you're browsing a real estate agency in Whangamata, Raglan or Taupo, make a bee-line for the rentals desk.
