One in 12 Australian households now own a holiday home, and the number is growing quickly as it becomes the preferred investment for baby boomers, sea changers and some savvy investors.

But before you hit the coast or head for the hills, this important investment decision requires a cool head.

George Kafantaris from Metropole Investment Strategists says it’s important to make sure you’re purchasing with your head and not just your heart.

“We find that the biggest pitfall in investing in a holiday unit is that it’s an emotional buy rather than a strategic investment,” George says.

“A lot of holiday-makers will go and spend their hard-earned dollars on a holiday at the end of the year. They might go spend two to three thousand dollars a week in a lovely, prime location. And they might think: ‘What a lot of money for a week – what a great investment’.

“It’s an emotional buy without much thought. The truth is, it may be a good investment for that time of the year, but those vacancy rates, which are at all-time lows through the holiday season, will not exist throughout the whole year.

“When a lot of buyers are buying holiday units, they get very excited, and they would actually like to be part of their holiday unit complex – normally during the holiday season. That’s in fact when the prime rentals are being achieved.

“So you go and buy yourself a lovely holiday unit; you think you’re going to make money all year round, which may or may not be true, but when you want to use it yourself, you in fact are trying to use it at the highest time of the return that you get for that period.”

And if you're thinking about claiming 100 per cent on the expenses associated with your so-called investment, then think again….

“The biggest tax implication or the most common tax implication with holiday units is what we call ‘personal use’,” says George.

“When an investor uses their property for themselves or their friends and it’s not actually used for normal tenancy of that complex, then different rules apply. Personal usage is not tax-allowable, whereas if it’s to the normal property pool or tenant pool, then it is [tax-allowable].”

George also cautions people who are considering managing their own properties.

“A lot of buyers think that they can save their property management fees and do it themselves. Those types of services are available on the internet. Precautions must be made though, that even though property managers do charge a fee, there’s a lot of good reasons why they do that.

“We also find that a lot of the buyers who like to property manage themselves don’t know the rules and don’t know the laws, and they quickly find themselves in trouble when things do go wrong.”