More people in the UK own a second home than ever before. In most cases, the second property is an investment opportunity — rented out for an additional income. But some are inherited, and some are bought as a holiday home away from urban sprawl.
If you’re thinking about buying a second home, there are a few issues you should consider before taking the plunge.
Why do I want to buy a second property?
Most people buy a second home as a buy-to-let opportunity. The property earns the owner a steady second income — while appreciating. You may want to buy a small holiday cottage for weekends, or somewhere you and your family can holiday. Some people buy a property with a view to cashing in on it in the future.
Think about your reasons for buying a second home. This should help you decide on the type of property you want.
How much will buying a second home cost?
Most second homes are smaller and cheaper than the owner’s principal property. While the cost of buying it might be lower, there are tax implications you need to know about before proceeding.
A second home is referred to as a ‘secondary residence’ by HMRC. Any income you make will be assessed for Income Tax. And if you sell your home for a profit, you’ll be liable for Capital Gains Tax.
There’s also Stamp Duty to consider. Unlike buying your first home, there is no tax-free value on a secondary residence. You not only pay Stamp Duty on the full sale price, but you also pay it at a higher rate.
Can I let my second property?
Not everyone intends to let out their second home at first. Some people inherit property, while others decide running two homes at the same time is unaffordable. This is why you need to know where you stand in terms of the rental market.
The first thing you should do is check with your lender. A lot of mortgages don’t allow letting. You might need to remortgage in order to let out your second home. Even if you decide to move into the second home and let out your primary residence, you’d need to inform the mortgage provider and switch to a buy-to-let loan.
Do I have time for property management?
As the owner of a rental property, you have some serious responsibilities. You have to make sure your home is safe and habitable. You also have to abide by all the various letting laws in the UK. This all requires managing — as well as time and money. You can leave the day to day management of your rental property to a property company, but this will eat into your income.
Can I develop my second property?
If you have spare cash, you might want to improve and renovate your second property. If you know what you’re doing, you can increase the market value of your home by far more than the cost of renovation.
If the local property market is buoyant, and you’re OK with a little DIY, this might be a good idea. But when demand is even slightly depressed, the risks of property development increase markedly.
Can I use it as a holiday home?
You can use your second property as a holiday home. However, you’ll need to pay Council Tax. You’ll also need to consider the costs of running and maintaining the property. A lot of owners rent out their holiday home for a few weeks each year. This is allowed by most standard mortgages.
If you need to sell a second home fast or raise the money for purchasing one, Sell Property Fast Cash can help. We work with various partners to buy properties quickly and without fuss. In the right circumstances, we can buy a home in just seven days.