How do people buy a second home?

[summerbreezingin]

Hi

I am wondering with real interest how people afford to buy second properties/holiday homes?

We are both in our early 30s, earning good money with no dependents. We would love to purchase a second home. I work in social housing so would want this to be rented out at an affordable rent level.

My question is, just how do people do it? We have stayed in a number of AirBNBs over the years which are owned by people very similar age to us, and I wonder just how they do it?

Inherited houses, spare houses?

Inheritance;
A couple who each had a flat, now living together;
Owning a house somewhere cheaper than where they live, and renting in their own location;

I inherited two. Both and my own as well were all mortgage free.

I was not and still not a millionaire lol

Everyone I know who managed it was a very high earner

I owned a house, mortgage free at 40 due to inheritance from my mum. Rented it out when moved in with dh. Both high earners so thinking we’ll invest in another house when about 55.

They use their first home as deposit for the second.

With inherited money from parents.

I invested in property very early. Then met DH who became a very high earner. My dad died in 2001.

We were given a little holiday cottage by my husband’s boss years ago. We did it up then let it out when we were not using it to save enough to put a deposit on a buy to let. Rent from buy to let paid mortgage off. More recently we bought MILs house rather than her doing equity release. We’re considering buying another holiday house with lump sums when we retire. We’ve got a shepherds hut in the garden we rent out occasionally too.

Trust fund.

I am from the south coast of England. I am so sick of people buying quaint little houses by the sea, ideal for first time buyers, under £200k mark, in my local area as "holiday homes" that are empty most of the year. Moving back to where I'm from is unrealistic, because all of the start up homes that are in our affordability bracket are being snapped up as second homes. How is it fair that I can't give my children the childhood I had where I grew up.
Buy to let is different, as long as you're not an exploitative landlord. But if you have the money to own an empty house half the year then why can't you invest that money into local bnb's and hotels? No one can ever justify buying a holiday home to me when there are so many of us struggling to get in the housing ladder, and have to settle away from where we grew up to make way for the wealthier.

Getmealcupoftea

I think you make some good and fair points, it would probably be good if money was spent supporting local hoteliers rather than air b n bs (having said that, I like to self cater in the UK) and it's a shame to see properties lying empty but WOAH your statement "how is it fair that I can't give my children the childhood I had where I grew up" is damn entitled!

Your children have many rights but a seaside upbringing isn't one of them.

Should children whose parents had the 'misfortune' to be raised in Middlesbrough be confined to a childhood there? There's no room for them, as outsiders, on the south coast because you have succession legacy rights to live there, so they'll need to stay out, eh?

Step up the ladder and keep a foot on each rung!

I bought my first 29sqm flat when I was 30. I was able to get Interest Only at a silly low rate, which I've still got on the flat.

Upgraded to a 2 bedder when I was 34 with a deposit from my low cost/high income life, then bought a 4 bed house at 40. I've still got them all, with significant mortgages on each. It's easier to get a consent to let than a BTL mortgage in my experience.

But... I'm in a bit of mortgage stress now though, with life changes (kids/illness) so we will look to sell the 2 flats as soon as the London market isn't quite as awful as it is.

We bought PiL’s home as they wanted to do equity release. Our own home we eventually rented out when we went abroad and 5yrs later we’d saved enough for a deposit on our current home.

Used my first house as the deposit on the second house. Rented it out, the rent paid the mortgage.

I inherited a house when a family member died. I sold it as it didn't suit my needs (3 bed bungalow in different area of UK), but from the proceeds I'm planning on buying a second home that does suit my family's needs later this year...

Thanks for so many helpful responses everybody.

@Birdie6 was your first home you used as deposit owned outright?

@Newuseroftheweek interesting what you say about it being easier to get permission to rent out than a BTL mortgage!

I'd paid off a good chunk of my original mortgage when I got with him, as had he. We wanted to move area, so instead of buying right away, we moved into rented and got consent to let for mine, renovated his. Now, mine has been remortgaged as a BTL, and his is going on the market soon, which is giving us a deposit for a bigger house together. Because I have a rental background from when I had the consent to let, I was able to get a BTL quite easily. You do need a decent amount of equity in your first house though (I was at about 40% LTV, remortgaged up to 75%, low value area).

We would love to purchase a second home

Why? You've got a home, let someone buy the house instead of you playing landlord.

Rented it out, the rent paid the mortgage

So someone else pays your mortgage instead of their own.

My husband had already bought his flat when we got together - he only had two years left on the mortgage as he'd overpaid for many years. We then decided to buy a house when we had children and our earnings meant we could afford to buy as well as keep the flat. It's currently local to us to ensure we can maintain it easily for our tenants - but long term (like 20years time) we may sell it and buy more of a holiday let to rent out and use in our retirement.

You get a holiday let mortgage, which is based on the potential income of the property If you want a holiday let. Or in your case a bit to let.

For both you need a bigger deposit than a residential mortgage.

When we bought our first home together, we put all our spare money into paying the capital off. When the time was right we released the equity from this house to buy another house for ourselves and first one is now rented out and pays for itself

Sounds like you're after a buy to let and not a second home?
Just speak to a mortgage broker to see if you'd qualify for a BTL mortgage. You'll need a sizeable deposit and the rent on the property will need to be considerably higher than the mortgage payment to cover expenses and taxes. Generally, it's a poor investment for most these days.
To raise the cash necessary, you either liquidate other assets or save up (work more, spend less) unless someone gives you the money (e.g. inheritance).