When it comes to the world of property investment, deciding if you want to purchase a second property and what to do with it is an opportunity that can leave you feeling as though you are at a crossroads. Whether you wish to turn your second residence into a holiday home, rental property, future retirement property or even a seasonal holiday let are just some of the decisions you may find yourself facing.
In this blog post, we will be looking at second home ownership, whether you should rent it out, and if buying a second home is the right financial decision for you.
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A property trend that appears to have been on the rise in recent years is an increase in second homes. In 2021-2022, there were 809,000 second homes owned by households in England. This means that there has been a 13% rise in second home ownership from 2010-11, or just under 100,000 second homes.
The Office for National Statistic (ONS) 2018/2019 survey on second home ownership stated that the reasons why homeowners were purchasing second properties were as follows:
When it comes to the decision of owning a second home to rent out, there are both pros and cons involved. It is not a decision that you should run into headfirst, you should instead carefully weigh up both the benefits and drawbacks that an investment decision such as this can bring. Over the past few years, the decision to buy a second house has been one that has risen in popularity, with buyers being spurred on by market conditions and the option to earn an extra income.
Below, we are going to take a closer look at the advantages and disadvantages that renting out a second property can bring…
As with any investment opportunity, there are advantages to owning a second property, such as:
However, there are also disadvantages to owning a second home, such as:
When you own a second home UK, there are extra costs that you will need to factor in, as well as the added responsibility of maintaining the property. Before you start the process of second home ownership, you should consider the following costs:
Yes, you can typically convert a second home into a rental property. However, there are several considerations and steps you may need to take to ensure a smooth transition. Here are key factors to keep in mind when looking into purchasing a second home to rent:
You may be wondering if your current property is suited for renting. Below we take a closer look at some of the circumstances were renting out your home may be the way forward:
Market conditions
The property market plays a big role in whether or not you should rent out your property. Good conditions means that you will more than likely fare well and earn a steady income, whilst a poor market could result in rental voids. According to data from HomeLet in 2021, rent reached its highest level ever in the UK. Furthermore, Savills predicted that property prices may continue to rise util 2025.
By renting out a property for even a few years, you will be able to wait until your second home reaches peak price before you sell.
Tenants
Being able to attract good tenants is another aspect that you will need to complete in order to rent out your property. If you live near a city full of young professionals or a student hub, then you should have no short supply of candidates.
Rentability
Exactly how desirable your property is will also play a role in whether or not it is a good idea to rent it out.
It is also worth noting that:
Time
If you are hoping to hold onto your property until the time is right to sell, then renting could be the soloution that you are after. It will allow you to generate income to keep things ticking over, will keep it occupied whilst you wait to seek, or it can give you time to decide whether you wish to move to a new location.
Financially viable
If you are relying on the money that you will receive for the sale of your current property in order to purchase your next home, then renting is not the appropriate avenue for you. But if you are struggling to sell your home, then renting can give you generate you extra income to cover a mortgage.
If you look back over the history of the price of property in the UK, it shows an incredibly promising trend for those looking for an investment. According to data from the HM Land Registry, during 2005-2022, the average price of property has risen from £150,000 to over £250,000.
Whilst during this time period there was the financial crash of 2007-2009, prices continued to soar after originally dipping between January 2008 to February 2009. Because of this, it is clear that purchasing a second home to rent can be a good long-term investment.
When purchasing a second home, you will need to take a look at your budget. You may be able to afford to purchase right out with cash, or you may need to take out a second mortgage.
If you are still paying off the mortgage for your current home, you will still be able to take out another mortgage to buy a second home.
If you wish to take out a second mortgage, then you will need:
Determining whether buying a second house to rent is worth it depends on various factors, and it’s essential to carefully evaluate both the potential benefits and challenges. By renting out your home, you have access to a steady rental stream, however, it is also worth noting that you will undertake a lot of responsibility as a landlord.
Whether or not it is a good idea to rent out your second house is a decision that only you can make. It is critical to weigh up the pros and cons as listed above and evaluate how they may potentially affect your life, income, and savings.
It is possible to buy a second home before selling your current, however it is not a selling decision that should be made by everyone, and it is one to be taken with caution.
The majority of people will not have enough cash lying around to purchase two properties and will be unable to fund a transaction of this size.
As with any decision like this, there are both pros and cons to purchasing a second home before selling the original…
Pros
Cons
This covers everything you need to know about buying a second home. If you have any questions, queries, or insight into the matter, please feel free to get in touch!
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Alexandra is junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.
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