Buying a Second Property in the UK?
After having your first property for quite some time, you might already be thinking of getting another one.
Buying a second property can mean different reasons for every individual but whatever your reason for purchasing another one, you must first determine how ready you are for the next.
And since you have already an experience with home buying, then you must ask yourself how prepared you are to go through the same experience again.
What are the Advantages of Having a Second Property?
Having a second property can have its advantages and can mean extra income for yourself if you decide to rent it out. This additional income may be used to pay for your other expenses or your mortgage. Additionally, you can also use this property for personal use such as a holiday home or for your weekend getaway.
If you decide to make it as an investment property, you have the option of letting it out either on a short term basis such as an Airbnb that you rent out on a weekly or a daily term or on a long term basis where you could have it rented on a monthly or more term. If you are lucky and you get a property in an area where the value appreciates, then you will be able to sell your property at a higher rate than when you first got it.
Making it as a holiday let on the other hand will allow you to get tax rates that are favourable, but part of the rule is that you should be able to let it for a minimum of 210 days annually in order for it to be classed as a business. Having a second property can be an avenue to diversify your portfolio for investment as it can allow you to build an added equity.
Rental vs Holiday House
When buying a second property and you are weighing your options on whether to use it as a holiday let or a buy to let, there are some factors that you need to consider which includes primarily the financial return.
From this you may have to base your decision according to the amount of your investment on the property as well as its demand on the market and the location. Whatever you choose, both would have their own pros and cons.
A holiday let involves letting out the property to holidaymakers for around 3 nights to some weeks while a long term rental would be from about 6 months to a year. An advantage if you decide to make your property a holiday let it that it is classes as a business so you get to enjoy tax advantages unlike when it is a buy to let where it would be considered as an investment.
A short term let can possibly earn more than a long term let if you have successful and consistent bookings, however the latter may be more predictable and stable. A holiday let though can have a more expensive maintenance and upkeep of the property, and for a buy to let, you may experience an income gap while looking for the next tenant.
What are the Costs?
When getting a second property, you definitely need to be prepared for the costs that are similar to when you first bought your house. This means then that you need to have enough money for the deposit as well as other costs such as stamp duty which would make you have 3% extra surcharge, legal fees, council tax which would be less than the first home, arrangement fees, etc.
Having a second property also means being subjected to capital gains tax in the event that your property’s value increases at the time of selling.
How to Finance It?
Applying for another mortgage to finance your second property would need you to explain how the property will be used. For this you will be required to fulfil some requirements such as a bigger amount of deposit which is a minimum of 25% and a good credit score, etc.
If you will not be renting out your property, then you may apply for a regular mortgage. However, you will need to have a special kind of mortgage if you have plans of letting it out. Interest rates for a second home may be higher than well.
How to Rent a Property
Renting a property in the UK will allow you to have some rights as well as responsibilities through a tenancy agreement which can protect you as a renter but at the same time, you also need to fulfil your obligations such as paying your rent on time and not leaving any unpaid bills.
When renting from a landlord, you should make sure that they are part of an accreditation scheme; and when renting through a letting agent, they must have accreditation from a professional body. Your deposit should not exceed 5 weeks’ worth of the rental cost.
How to Make Money with a Second Home
There are several ways to earn from your second home which includes renting out the entire house or just a portion of it like the bedroom, turning it into a bed and breakfast, letting a space as a storage, or making it a venue for small and private events.
Before doing any of these, make sure though that it is allowed in your location so you will not encounter hiccups on legalities and that you have enough money to cover the necessary renovation costs.
Where to Search for a House
On for-sale.com !
You can also find a second property is made easy by using property search sites like Rightmove, Zoopla, Home.co.uk, on the market.com and the like. These sites would allow you to search for listed properties and compare them. Rightmove and Zoopla also have apps to notify you on sale listings, and Rightmove can give you alerts on your preferred streets.