CityLiving: Do your sums if you want your holiday home to pay its way says Edel Morgan

Before buying a holiday home as an investment, make sure you are armed with all of the facts. The bumper rents a short term let can potentially command during high season may seem attractive but the reality is that buying a holiday home in Ireland is often only a good idea if your motivation is to cover costs rather than make a a substantial profit.

Since 1996 thousands of Section 23 holiday homes have been built around the country as the Government attempted to attract investment into certain rural and seaside locations. The draw for many investors is the valuable allowances, but some have made the mistake of choosing on the basis of tax benefits alone and have suffered high vacancy rates as a result.

The Section 48 seaside resorts scheme, which is no longer in operation, was heavily criticised when a surplus of properties was developed without significantly boosting tourism revenues in some locations. Many investors who hoped for significant capital appreciation in these schemes have been disappointed.

Location and local supply and demand are important considerations when buying a holiday home. A recent ESRI report found that owning a holiday home in Ireland is still top of many Irish people's wish list, but can it sometimes be more trouble than it's worth?

While even the smallest cottage in a good location can achieve rents of €350 upwards per week during the summer, it may be a struggle to find tenants during quieter periods.

The advantage of managing the property yourself is that you can be flexible with letting periods and pricing, offer last minute deals and spend as much time at the property as you can afford. An agent - whose job it is to provide a steady stream of bookings - might not want you visiting the property during the peak letting season and may restrict use at other times.

Managing a property can be a hassle, particularly if you have a full-time job. It is often a good idea to pay a trustworthy local to keep an eye on the property as well as clean it, change the bed linen and respond to any maintenance issues that arise, particularly if you are not living within easy commuting distance.

If you decide to use an agent - who will charge a fee of anywhere between 12 and 20 per cent of the rental income - finding a good one is crucial. Liam O'Neill, who has a cottage in Co Kerry, initially considered seeking Bord Fáilte approval but discovered that the owners of several neighbouring properties were registered with a UK agent who found them an almost steady supply of clients during the summer months. While they experienced the occasional fallow period in May and September, the rest of the season was busy.

O'Neill found that English tourists often like to bring their dogs on holiday so banning pets from your property will immediately reduce your target market. Some holiday home owners stipulate that only one or two pets are allowed, while others charge a subsidy for each pet.

In established holiday destinations, there is often fierce competition to get tenants. In some areas it is established practice for the locals to move into a smaller property and let their house during the summer months. The better equipped and more reasonably priced your property, the more chance it has of getting regular tenants.

Liam O'Neill's agent assessed and graded his property taking into account its facilities and size and then set a weekly rate accordingly. The most basic, no frills model has a rate of around £240 (€360) per week during peak season and £119 (€178) during the quietest periods. This rises to around £779 (€1,169) in high season and £449 (€674) during low season for the largest top-of-the-range holiday home.

A relatively low rating should not necessarily be taken as an insult - it means the property has a more reasonable rate and may appeal to a wider market. Christmas and Easter can be busy periods in some areas, as can annual events, like the race weeks or arts and comedy festivals.

The agent performs annual checks on the property and gives owners client reviews and advises on anything the property needs to maximise its chances. The west of Ireland gets 6.5 million visitors a year, which means rents tend to be high. However, holiday homes account for around 20 per cent of dwellings in Mayo, Clare and Kerry, so competition is keen in some locations. While bookings have been steady throughout the high season for O'Neill, he says that profits often have to be ploughed back into the property. "Particularly with an older property, where there is continually something that has to be repaired or damp proofed or updated. One year when we had no major costs, we made a few thousand euro in profit which paid our son's college fees."