Considerations When Buying A Second Property

Thinking About Buying A Second Home

There are numerous reasons as to why you are maybe considering buying a second home. Perhaps you are after a holiday home in the countryside, or maybe you would like to invest your money in property rather than investing it with the Banks. It is worth remembering that a rental property can also be quite lucrative once you retire.

As a home buyer, whatever your reasons for selling maybe, there are a few things that you will need to consider first:

Financing the Second Property

If you have enough spare cash idly sitting in your account then this won’t be a problem for you, otherwise you will be reliant on a mortgage to finance the purchase of a second property. You will then of course need to ensure that you are able to keep up with the monthly payments on the mortgage. If you are planning on purchasing a second property to use as a holiday home then please remember that you cannot rely on it to cover any mortgage payments due to the fact that the income will be seasonal.

Paying Tax on Second Homes

As I am sure that you are aware, Stamp Duty is payable on any residential property in the UK, the rates are 1% if it is above £125,000; 3% if it is over £250,000; 4% if it is over £500,000; 5% if it is over £1 million; and 7% if it is over £2 million. Stamp Duty is payable by the person buying the property and is applicable for buy-to-let in the same way as if it was your main place of residence.

In this situation you need to decide which one of your properties that you would like to list as your main abode; if you decide to sell your second home, you will have to pay Capital Gains Tax on any profit that you make on the property. Your main residence is exempt from paying Capital Gains Tax, even if you make a profit when it is sold. You will therefore be able to offset any money you have paid on Stamp Duty, letting agent’s fees & repairs against the profit, so you won’t actually pay any tax on it at all.

Remember, if you rent out your second property will need to declare the rental income, which will be subject to income tax, and you will of course need to file a Self-Assessment Tax Return. If you decide to go down this route it is worth employing a good accountant to ensure that you do not miss out on any tax breaks that you are entitled to claim.

Renting Out a Second Home

If your intention is to rent out the second property, you should try to find out what the level of rent should be for that particular area and ensure that this covers the mortgage. As a landlord you will have various obligations to your tenants, which will of course incur extra costs along the way. For example, an annual Gas Safety Check is demanded by law and you will also need to make sure that you have buildings insurance, do not forget that you will also have to pay for any repairs that are required due to general wear and tear. If you cannot cover these costs as well on the mortgage from the rent alone, then you need to consider if this is really the correct road for you to be going down.

Renting Your Property Out as a Holiday Home

If you intend to buy a holiday home but rely on a rental income, then make sure that you do your research first! Even if for you it is a beautiful home in your favourite part of the World, if it isn’t going to be of interest to others then you are going to end up out of money in the long-term. As above, you will also be responsible for the cost maintenance and decoration of the property. Holiday homes seem to require a lot more attention when it comes to decorating them and you may therefore need to redecorate it at least once a year. You will also need to make sure that it comes with all of the facilities and mod-cons that most now seem to associate with holiday homes. Disappointed people will result in bad online reviews, which of course means that your business will suffer.

If you find yourself in possession of two properties and would like to sell one of them then you should contact the quick house sale specialists National Homebuyers, who can help you ensure that you sell your house fast. National Homebuyers buy any house, no matter what condition it is in or the location, and they even buy your house directly from you for cash.

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