Should I Buy a Second Property?

If you’ve found yourself in the predicament of whether or not to buy yourself a second property, it’s a dilemma that many will envy. In today’s ever-difficult economy, many adults are yet to become homeowners for the first time, let alone have the money to invest in another. For that reason buying a second property needs even more careful thought and planning. Buying a second home may be beneficial – allowing you a bolt hole to escape to at the weekends or when a holiday is long overdue.


Buying a second home isn’t a realistic investment opportunity for everyone. If you’re buying to increase your assets, make sure your property purchase is not emotionally driven; check that financial benefits will definitely outweigh the financial implications you will first have to face.


Perhaps you’re looking to buy-to-rent? Rental income can be a brilliant way to see you through retirement. Make sure you get a rental estimate letter from a letting agent before you commit to buying your new property. This letter will help you establish the rent against any mortgage payments and allow you to understand potential profits. Remember that being a landlord comes with some large responsibility. You need to ensure that the property is kept up to certain health and safety standards and is carefully maintained by yourself and your tenants. You will be responsible for any faults or problems that arise within the building. Keep maintenance and insurance costs in mind as you make your financial projections.


When considering whether to purchase a second property, make sure you evaluate the market. Look at the types of housing which are highly desired and can promise later interest should you want to let it out or sell it on.


When applying for a second mortgage, the lender will want the rental estimate letter already mentioned and is only likely to provide around 50-70% of this rental income estimate as part of the criteria. When you’re not actually purchasing for rental, this means you’ll need to set aside further funds as you won’t have the support of rent. This is because investment properties are of greater risk to lenders; the applicant is essentially taking on more debt than a one home owner. Applicants will need to put down a larger deposit than with their first property too.


You should also be aware that you will be liable to pay capital gains tax if you sell your second property and you will need to consider a number of tax issues if you wish you buy your additional home abroad. Securing insurance on a second home may also prove more difficult, particularly if it is left unoccupied for long periods of time.


In summary, buying a second property is not something that will be possible for everyone and is certainly not something that everyone should do even if it does seem a viable option at present. Take a good look at your financial future and decide whether the risks and obstacles that come with a second home, are worth the lifestyle and financial rewards you could receive.

Author Bio: Saskia Gregory writes on a range of topics offering property and mortgage advice. She gives advice to those who may find it difficult accessing mortgages including those needing I.T. contractor mortgages.