It’s the dream of a lot of people to own a second home, somewhere they can retire to, or somewhere where they can spend a few months of the year in the sun. Other people buy a second home to provide an income in retirement, either by renting or letting the property.
If you are thinking of buying a second home there are a few points you should consider first;
- Can you afford to buy and maintain your new property?
- Are you going to use the property for only part of the year, what are you going to do with it for the rest of the time?
- Why are you buying the property?
- Are you buying it as an investment?
- If it’s an investment will it make money?
- Are you going to rent the property?
- Are you going to let it long term, or just as a holiday let?
- Are you going to purchase a property abroad?
No matter what your reason is for buying a second home they all pose different problems.
Buying to rent
If you are buying a second property to rent so you have a regular income stream in retirement you should be aware that you will become a landlord, and with that comes some responsibilities. Bad tenants who are poor payers may mean you don’t receive the regular income you expect. It’s important you interview prospective tenants and find out about their past credit records and their current financial status. If they have rented before ask for details and contact previous landlords to find out if they looked after the property and paid rent on time etc.
Make sure you have enough spare cash to maintain the property as you will be solely responsible for the upkeep and maintenance. You will also be responsible for paying council tax on the property, so make sure renting is a viable proposition before going ahead.
If you are going to let either as a holiday let or long term, you should seriously think about placing your property with a letting agency. For a fee they will take care of things like advertising, collecting payments and generally keeping an eye on the property for you. Find a reputable company that’s going to give you a good deal and one that has a good client base so your property is utilised to its full potential. A property that’s going to be empty for periods of time may not be a viable proposition.
There are a lot of things to take into consideration if buying a property abroad. It can take quite some time to complete the purchase of a property abroad; it’s not uncommon for it to take up to 4-5 months in some countries like Greece for instance. Fluctuations in the rates of exchange can take place during this time and your property could end up costing you more than you expected. You can protect yourself from currency fluctuations by agreeing to fix the current rate for a fixed period until completion, or by completing a spot transaction which means transferring the funds immediately at the rate that is on offer on the day.
You will also need to find yourself a reputable local solicitor or lawyer to take care of valuations and the transaction. Your bank or mortgage lender can put you in touch with a lawyer who will speak English, who has experience in buying property abroad and who you can have regular contact with. Unlike the UK in many foreign countries the lawyer will be representing both the seller and the buyer, this means that impartiality can sometimes be lacking. To make sure you are getting the proper advice talk to a British lawyer before signing anything. It is a lot more difficult and in some cases impossible to withdraw from an agreed offer unlike a transaction in England or Wales.
The costs involved in purchasing a property abroad are also more costly. In France for example legal fees can range from between 10-15% of the cost of the property. In some countries there are local property taxes or occupancy taxes if you live in the property for a certain period of time each year. In Cyprus you will be liable to stamp duty on your property as well as annual property tax.
In most countries you will need to open a bank account to pay for service charges and utility bills. Your local bills will need to be paid in local currency and bank charges for the purchase of currency and for each transaction will apply so make sure you take all these costs into account.