Thursday, 04 September 2014
The Benefits of Owning a Second Home
The concept of purchasing a second home is an exciting if daunting one. If you are looking to purchase a second home, it is important to weigh out the pros and cons of the adventure prior to setting off. By doing so, you will be ascertain whether or not it is the right move for you.
Is purchasing a second home the right move for me?
There are a number of reasons why people decide to buy a second home. You might buy to let as a tangible investment for your future, with many people opting to use a rental income to augment their pension in retirement. Some choose to purchase a second house as a holiday home, providing an escape to the countryside whenever the mood takes them. Others might buy to renovate and sell, offering an opportunity for a quick pay-off, before reinvesting again elsewhere.
There are two ways that people might benefit from second home ownership, one being long-term investment and the other short-term. Long-term investments include buy to lets and holiday homes, while 'fixer-uppers' are (ideally) taken up on a short-term basis.
Long-term second home investments will generally accumulate value over time, dependant on trends in property prices, but may also generate a rental income in the interim. There are a number of mortgage options available when buying-to-let that might help you to get the most from your investment, and are well worth investigating.
A short-term second home investment depends almost entirely on your ability to a) spot a bargain, and b) make sufficient improvements to raise the value enough to turn an immediate profit. The risk element with this kind of purchase is much greater than a long-term investment, as you are unlikely to see a particularly beneficial fluctuation in house prices over such a short period of time. If you are going to attempt to fix up a property, it helps to have contacts in the building trade to minimise your construction costs, and you must have the level of commitment required to see a project through.
Buying a second home for personal use can be a much more fulfilling investment, as the benefits extend beyond the financial. Having access to a holiday home can be seen as a lifestyle change. Your second home becomes your own private getaway, where you can escape the stress of work in more idyllic surroundings. If you choose carefully, you might also be able to rent-out your holiday home while you're not using it. Holiday lettings may not generate a great deal of income with a small property portfolio, but with luck it will provide you with enough to maintain and manage your second home.
There are a number of tax considerations to make if you own a second home, both in and outside of the UK. As a UK resident, you will become liable for capital gains tax when selling your second home, unless you spend a certain amount of time living in it where you can declare it as your primary residence. If you are a foreign national, or if your second home is outside of the UK, you will still have a number tax issues that you will need to research thoroughly before you make any purchase.
No matter what purpose you put your second home to, you will need to make sure you have adequate home insurance. This might not be easy if you are leaving your property unoccupied for an extended period of time. Many insurers will require that your second home does not stand empty for more than thirty days at a time, which can be difficult to achieve in certain circumstances, making insurance for unoccupied homes hard to secure. With HomeProtect you can obtain an online insurance quote for your second home, with certain restrictions, no matter how long it will be unoccupied for.