Invest in second home

[Mollyeyes]

Hello

I know BTL is not good with all the taxes, fees, maintenance etc. If you buy a second place as investment and don’t let it out what are the costs? Just wondering whether to do this, keep it and hopefully sell in about 8-10 years with hope it has increased in value, Will I have to pay CGT?

Capital Gains at 18% and 28%

Insurance would still be required

Vacant properties are a magnet for squatters, vandalism, damp etc

You'll have to pay CGT if the gain is more than about £15k (just assuming that the current AEA rises continue at the same pace).

It'll be at 18% or 28% on the amount above the AEA. Given that housing pressures are increasing, I would think it probable that more progressive tax rates could be charged on second property owners.

I would assume that insurance on a vacant property would be quite high, as well as the cost of maintenance (presumably you'd still need to heat it in the winter etc. to keep damp at bay).

What is AEA please?

Annual Exempt Allowance

Thank you all

So you're going to buy a house and leave it sitting empty for 8-10 years?

I'm honestly disgusted by anyone that would even think of doing this. You should be ashamed. 😞

Homes are for living in, not for profit. Invest your money elsewhere.

@vagoftheday would you rather I let it out? I am not the only one who is thinking of doing this, what is the problem? We worked hard and no money was given to us to do this.

You'll find it very hard to get insurance.
You will have bills as you can't leave a place without heating etc. Council tax is often higher on unoccupied buildings.

Empty properties are a magnet for thieves, vandals and pests. Your neighbours will hate you. You will still need to do regular maintenance on the property/garden.

Yes you don't make lots of profit on renting it out if you do it by the book, but you will definitely cover your costs.
You can use a lettings agent to keep your involvement to a minimum.

Thanks @sallyshirt, I will give it some consideration and perhaps rent it out, not looking to buy anything substantial, a 1 bed flat perhaps

We let out a flat. It doesn't make us huge amounts of money, some years we just about break even. But our tenants look after the property well

Renting it out cheaply is vastly better than keeping it empty.

@molleyeyes. Take your bills and then add an amount against them all.

Tv licence
Gas standing charge
Water same
Electric same
Ground rent
Council tax
Mortgage
Vacant insurance
Maintenance

I think you’d be very very lucky to make any money.

Why not invest in stocks and shares? My investment are worth more now than they were this day last year? Nothing ‘out there’, just a globally balance portfolio.

To be clear, would it be a second home for your occasional use Or just to leave empty? Disregarding the moral question of either, IMO this is only worth doing if you have loads of spare cash - upkeep on a property is never cheap and chances are you will end up not wanting to spend money on a place you never/rarely spend time at when inevitably there will be something in your primary residence that would take priority. Result is you end up with a run down property to a greater or lesser degree. You are also gambling on value rising which isn’t guaranteed.

On the other hand, buy somewhere where the rental market is good and it could be a great investment. You will need landlord insurance and a rental agent will typically charge 10% pa on rent and then more if you want them to manage it. Holiday rental you will also require housekeepers and be responsible for council tax/utilities (not the case with long term residential let).

We let out a couple of properties, I wouldn't think of leaving them empty though. We don't make a huge amount but it's for our boys when they need to get on the property ladder. If you're doing it for a profit I'm not sure it's any better than investments. You should definitely get advice from a FA.

Thank you everyone

I've been looking at buying a 2nd home in the Orihuela Costa area of spain for about 9 months. The verious taxes add approximately 15% to the purchase price and then there are ongoing costs to maintain the property (eg, community fees, local taxes, utilities, broadband, home insurance etc) and taxes to pay if you sell the property.

I've done a lot of research but covid has stopped me being able to get out to view properties.

As a wider family, we expect to use it 5 months of the year. We are looking at buying as some relatives have health issues which means having a constant base should be easier than trying to find suitable alternative holidays or Spanish rentals several times a year.

I'm not really viewing it as an investment though as there are so many costs involved but I think these should be similar to the money we would otherwise spend on holidays so should break even over 20 years.

Second home for holidays/letting, possibly. If you're absolutely happy with going to the same place year in year out, then seems sensible.

However, a second property purchased to remain empty? You may well make sufficient gains in London to cover all of the costs (stamp duty, council tax, insurances, utilities , upkeep and Capital Gains Tax) but elsewhere, it's a crap shoot whether the value will increase to the same extent.

I would let it. It should cover its costs then and maybe even make you a little. If you get a managing agent you don’t need to get involved. As others said, leaving it empty will cost more.