4 finance tips if you’re looking to invest in a second homeJoshFebruary 23, 20174 viewsHome Finance0 Comments4 views 0 For those who are in the position to invest in a second home, it can be a decision that is both exciting and stressful. Before you begin your search for your next property, you should first consider these financial factors. Establish your principal private residence There are important things that distinguish second homes from holiday homes. If you’re looking for a residence that is purpose built to be a holiday home, then it may not have the right legal permissions for it to be a year-round residence. This is worth considering if your reason for buying a second property is to turn it into a retirement retreat. There are also tax implications when it comes to deciding which of your properties will be your principal private residence. Once the purchase of your second home is complete, you only have two years before you’re able to “flip it”, which means you sell it for a profit. There is currently a 10-15% council tax reduction on a second property, but you must pay capital gains tax on resale. Consider a buy-to-let More often than not, the main reason that people decide to invest in a second home is so that they can gain a fair amount of income via renting it out to others either in the short or long term. Rising property prices in many areas combined with high rents and low mortgage rates have made property an attractive and feasible option for many people looking to supplement their pension. If you are young, investing in a buy-to-let property will provide you with a lump sum when you eventually decide to sell it thanks to capital growth. Think of the fixed costs Alongside the initial outlay required to purchase a second home, there’s the added pressure of monthly fixed costs. Things such as gas, electricity, broadband, water and insurance for your second property can quickly add up, and make the prospect if owning another property all too expensive. Before you make the jump and sign on the dotted line, make sure that you have carefully calculated all of the fixed and variable costs associated with owning a home, including utility bills, council tax, mortgage repayments and insurance. Doing so will help you avoid any unnecessary surprises when you do take over ownership of the property, and ensure you avoid falling behind on repayments. Plan carefully As with any expensive purchase, you should make sure that you’re not buying a second home just through impulse. Research the area you wish purchase a property in and consider if it’s located in a risky area. If your property is buy-to-let, another thing to involve in the planning process is to determine whether or not you need to hire a property manager to help you deal with handling a workload that will include contracts, deposits, maintenance and advertising.