Whether you’re looking for a weekend hideaway, a second income, or a renovation project, it’s important to weigh up the pros and cons of purchasing a second home. I would like to offer some guidance on what to think about in regards to a second property.
The idea of purchasing a second home can be an exciting one, but it can also be daunting. Naturally, there are benefits. A second home can provide rental income, act as a money-making renovation project, or be a place to escape on weekends and holidays.
The first step is to have a clear idea of why you are re-entering the market, as this will ensure your new purchase is fit for purpose.
If you are buying as an investment, think clearly about your timeline. Buy-to-let properties tend to reap benefits as longer-term investments, while renovation projects are ideally shorter term. Long-term second home investments will generally accumulate value over time, depending on trends in property prices, and can generate a rental income in the interim. A short-term second home investment depends largely on your ability to spot a good-value property and make significant improvements to raise the value. The risk is greater with a short-term investment, as property prices tend to rise slowly over time, so clever renovation and commitment to completion is vital.
For UK properties, remember the Stamp Duty surcharge that has been in place since April 2016. Second homes are subject to a surcharge of three to 15 percent, depending on the value of the property. It’s worth inputting the figures into a stamp duty calculator when you’re looking at your finances.
Financing your property is a key consideration. For a second property, it may be a cash purchase using savings, a new mortgage, or remortgaging. Your lender will take into account your reasons for purchasing a second property and your repayment feasibility, so discuss the options with them before you start looking. Our Financial Services Department can offer independent advice.
Regardless of why you are considering a second home, or where you hope to invest, the process should be just as thorough as when you bought your first home. Think about your reasons for investing, get your finance in place, research potential locations thoroughly, and find an agent who knows the areas you’re considering, or with international reach if owning overseas is your goal.
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