The concept of purchasing a second home is an exciting one but it can also be quite daunting. If you're thinking about buying a second home, it's important to weigh up the pros and cons of the adventure before setting off. By doing so, you'll be able to confirm whether or not it's the right move for you.
Is purchasing a second home the right move?
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: many people are 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 pack-back, 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.
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Non-financial benefits of owning a second home
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.
Tax considerations for second homes
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.
Insuring a second home
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, however long it is unoccupied.
Perfect cover for our second home and very good value. - Trustpilot Tuesday, 17 January 2017