Owning a Second Property- what to consider:
It is estimated that around 10% of home-owners have a second property, either to use as a holiday home or as a rental property. If you are looking to purchase an additional property, that won’t be your main home, here are the key things to consider:
- If you are purchasing with a mortgage you will need to make sure that the mortgage product you have is suitable and that the lender knows what you plan to do with the property. Be aware that a common feature of buy to let mortgage offers is the requirement that any renter be independent i.e. not family.
- Stamp Duty Land Tax (‘SDLT’) will be more expensive. On a first property purchase you will not pay any SDLT on the first £125,000. From £125,001 to £250,000 you will pay 2% and as the purchase price increases so does the percentage payable, in small increments. With a second property you will pay an additional sum on top of the typical SDLT payment. Meaning a £400,000 purchase goes from £10,000 to £22,000.
- There will be tax implications on sale with Capital Gains Tax likely being due. This is an area that you will need to discuss in detail with your accountant.
- It has been reported that the seaside town of Whitby in Yorkshire is looking to pass legislation that reduces the opportunities for investors to purchase holiday homes/ second homes. It is worth noting that not everywhere will welcome a resident that only comes when the sun shines.
- If you are looking to rent the property out (to long or short term tenants) you will need to be prepared to meet the costs of running the property during any time it is empty. These costs can rack up quickly: council tax, gas and electricity plus any insurance. If you have insurance (which will be a requirement of any lender if you purchased with a mortgage) you will need to make sure you can visit the property regularly or hire help to assist you as the insurer will want to make sure no post has built up at the door (fire hazard) and that pipes haven’t burst during any cold spells.
- As a landlord you have safety obligations that you must fulfil- you must fit and test fire alarms and carbon monoxide alarms. Every year all gas installations (boiler, cooker, gas fire) must be checked and serviced.
Having a holiday home is a great luxury but if you are not fully aware of the reality it can ruin the dream.
If you have any questions about renting out your property or purchasing a second home please contact the team on 01206 577 676 or email [email protected]