Many of us dream about owning a holiday home whether it’s at home or abroad but how do you make that leap up on the property ladder?
Considering owning a second home is a wonderful position to be in and whether you intend it for personal use or as an investment, the benefits are clear on both sides. There are a number of things to consider, though, before making this property jump, not just in terms of location and style of property but also in financial and legal terms.
Why are you buying a holiday home?
First things first, you need to be clear with your objectives for the holiday home. Do you intend to keep it as a home to enjoy for yourself and your close friends and relatives or is this a business venture?
Just for me: If you intend the home solely for personal use then be clear on what you are buying it for – is it to relax and unwind at the weekend or is it for big extended holidays? Perhaps you are you retiring and selling your existing property to live by the coast permanently but whichever best describes your circumstances it’s important to be clear from the outset as these will ultimately determine where and what you will buy.
Holiday lets: If you would like to buy a holiday home for financial gain then it becomes a little more complicated. You need to consider how much of the year you are likely to receive income from lettings – do you need the property to be in an area where people will want to travel all year round to ensure you reach a good return on investment? And if you can reach a good yield from seasonal lettings, will you be able to maintain it yourself off season or do you need to instruct a management company. Furthermore, you need to ensure it has good local amenities, tourist attractions and transport links to make it appeal to tourists from both the UK and abroad.
Mixed use: If you intend on using your property during the year for personal holidays and breaks but would like to have some income from it too to help with costs, then deciding to go for a mixed use property is best. This will mean you have to consider the implications of both personal and business use to make sure you are happy with the property but also that it will appeal to the tourist market too. You might like a totally isolated chateau in rural France but are you going to get enough trade to make it a worthwhile property investment?
Where will you buy your holiday home?
Location is probably the single most important factor after affordability. It really comes down to your personal preference and personality. Are you going to buy in the UK or abroad? If you prefer the assurance of sun, sea and sand all-year-round then buying an apartment in the Canary Islands might be the best option, but will the uncertainty of Brexit influence your decision? For some, the fun and unpredictable nature of British caravan holidays are just too good to miss out on.
Think about how you will utilise the property if it’s mainly for personal use. If you’re looking for somewhere to escape to over a weekend then a location in the UK that you can access within a couple of hours might be better but If you intend to make longer extended trips for a month or more at a time, you might look a little further.
In any case, you need to assess its accessibility – identify how much it costs to get there both in terms of regular flight costs and transfer costs or petrol and train fares. Is it easy enough to get about while you are there or will you need some form of transport while you are there – maybe a car or a bike and are these obtainable locally.
Is the environment what you need? Are you looking for lots of nightlife, cafes and restaurants or do you want to be kayaking on rivers, if you are looking for a quiet retreat, buying in the middle of Puerto Banus will just disappoint you! What’s more, if you are buying abroad, will there be a language barrier and do you need to learn the local lingo?
It’s important not to rush your decision, there are many financial and legal considerations to think about including the 3% stamp duty on a second home over £40,000 (including holiday homes and buy-to-let properties) and this percentage rises depending on the cost of your home.
What’s more, don’t forget about the legal side of things in terms of declaring rental income and making sure you submit your self-assessment tax return on time. It’s always best to have a conversation with the HMRC or vsiitwww.gov.uk to discuss your situation and make sure you are doing the right ‘paperwork’ to avoid any nasty tax bills.
Remember to find the right home for you and your personal circumstances and don’t forget to enjoy it!