Take equity out of house to buy seaside rental?

[Mollylikestodance]

Hello,

My husband and I own one property - our family home.

It's not our 'forever' house, but it's been a great home for us for us - 4 bed, right by kids school and nursery (2 DC ages 5 and 1 so still v young) close to family, extended kitchen, driveway, up and coming area. There are some downsides - it's terraced, and it's on a main road (turns into a high street with a park and shops about 200 meters up. Very convenient but noisy).

We bought the house in 2015 and the area has seen a huge growth. We had £37,500 as a deposit and now have £270,000+ of equity in the house. (I know how lucky we are).

We are thinking about next steps -

Sell up and buy a 'forever home' in the area.

OR

take some of the equity out of the property and invest it into a small holiday flat on the coast - somewhere that we can visit but mainly it would be a holiday let.

WWYD? Has anyone done the latter?

Thanks for your thoughts!
x

Why do you want a second property? If it’s to be truly wealthy, the last thing you should do is take on debt.

There’s an American called Dave Ramsey on youtube, very wealthy do good er, but his company surveyed over 10,000 millionaires.. Over 80% of them started with £0, they all had their own plans and methods to achieve such wealth, but they had one thing in common, their house was paid off.

ALL debt is toxic. It can bite you no matter how much you think you are worth. Some guy just lost £20billion in two days due to debts becoming due in the past two weeks.

Whatever your decision, good luck, we are a country who have built a lot of wealth based on mortgages and property, so there’s a decent chance you will be successfull, but as someone with 7digits to his name, you are in a great position right now, you could be in a greater position if you eradicate the debt you already have, incl CC and Car Loans etc, because you will be eradicating risk, rather than going for gold.

Thanks again everyone for your thoughts - I can see it's a divisive issue.

@Bard6817 thanks for your thoughts, I can completely appreciate what you're saying about debt.

If we did this we would be increasing our debt across two mortgages and it's really made me think.

We have no credit cards, car loans - nothing. The only debt we have is this mortgage, which we could overpay instead. Or move to a 'dream' home.

Thanks everyone - lot to think about xx

Have you actually run any numbers or are you just attracted to the idea of a holiday home?

How much do you know about the market in that area? Bear in mind that Covid biased the domestic holiday market in 2020 and 2021; if the world recovers from Covid in 1-2 years, how many people will want to go to your holiday house vs somewhere sunnier abroad?

The cost of your initial investment will have to include the stamp duty (with the 3% extra as a 2nd home), all your fees, refurbishing, furnishing etc.

Any income you get out of it will be taxed.

If you use it yourself, presumably you will use it in the summer season, and therefore you won't be able to let it out when you use it.

Have you run any numbers, any at all, on costs profits etc? If you haven't, then, sorry for being blunt, but you have no idea what you are talking about.

Also, who will manage the property? When (not if but when) something breaks down and needs replacing or fixing, who will handle it and how if you are a 2-hour drive away?