Benefits of Owning A Second Home
Whether you decide to purchase a second home as an investment, a holiday home or a quick money maker, the benefits of owning a second home can be financially and personally rewarding. As more people in the UK and the world in general continue to buy property as a way of securing their financial future, some of the benefits of owning a second home become much clearer.
Financial Benefits of a Second Home
There are a few different financial ways of looking at a second home. Firstly, you can look at buying a home as an investment where you simply purchase, rent out and keep hold of the property for a lengthy time.
This method means that you usually gain through capital growth as the price of your property increases, yet your mortgage remains at a fairly stable rate. You can sometimes make money in this way through rental also, but this depends on your initial outlay and the rental return you can be guaranteed. If you decide to buy a holiday home, you can of course rent it out for the period of time when you won’t be occupying it. This makes sense financially as you will be making some money to cover any outstanding debts on the home, and you’ll also hopefully make enough income from it to pay for any management company or general upkeep of your holiday home.
The third way of financially benefiting from a second home is by looking for a ‘fixer-upper’. Keeping your eyes peeled for a bargain home that needs some redecoration can be a great way of getting a cash boost in a short period of time. Many people will buy properties simply to redecorate and then sell on for a profit. This can be a very profitable business overall, but you really need to have contacts within the trade industries as well as the stamina to see a project through to the end. It is also slightly more risky as changes in the house buying market over shorter periods are less drastic, so you may put in a lot of work for very little return.
Lifestyle Benefits of a Second Home
If you choose to buy a second home as a lifestyle change, you’re more likely to consider it a holiday home. The lifestyle benefits can be immense as the feeling of knowing you have a home away from home to visit when you please is a very comforting emotion to have. If you enjoy your home comforts even when on holiday, owning a second home is a very positive lifestyle option and can increase your enjoyment of regular holidays when you take them. Not only that, but you can open your second home up to family and friends if they need it and for many it becomes a regular occasion to have large social events there. Even having a holiday home as a weekend getaway can be fun as you can switch off completely from your working week and enjoy the relaxation of knowing you’re having fun and hopefully through capital growth making some money long term too.
Tax Benefits of a Second Home
If you’re a UK resident, you’ll be liable for capital gains tax on your second home. This means that if you go to sell your home, you’ll be taxed at the highest CGT rate possible. There are ways of avoiding this however and many people are unaware of it. The easiest way is to live in your second home for a period of time and declare it as your primary residence during this time. You have two years to elect which of your homes is your primary residence when you first buy a second home and you don’t even have to be living in it at the time.
After two years you will lost this right to make the nomination as to which house is your primary residence and at this stage you will have to prove that you were living in the second property to avoid the nasty CGT trap. If you live in a second home property as your main residence even for only one year, you will be surprised at the tax savings you can make. It can lead to your property being exempt for a period of time even when let, so it’s definitely worth considering. If you live in other countries there are variations on this tax issue, so it’s always essentially to check with the correct local authorities first.
