There are many people that choose to buy a second home as an investment so that they can benefit from the extra income, perhaps for retirement income or just to boost their salary. This can seem like a great idea, but it is not a decision that should be taken lightly.
It is worth considering all of the costs that will go into owning a second home. You will need to come up with a deposit and then organise a buy to let mortgage or you will need to pay for it outright. These are pretty obvious, although some people are not aware that the percentage required for a deposit on a buy to let property can be significantly higher than that on a home owners mortgage and the interest rates can be higher as well. If the property is not occupied you will have to cover the costs of the mortgage repayments yourself as well, so the lender will want to make sure that you will be capable of doing that.
As well as those initial costs, there will also be ongoing costs. Properties need looking after and there may be wear and tear to sort out, there will be safety checks to pay for and decorating to do. There may even be bigger repair jobs if the building gets damaged in some way. There will also be the cost of insurance to cover. If you have an letting agent, you will have to pay them or otherwise pay to advertise the property when you are looking for new tenants.
Of course, although there are lots of costs, you should be getting a payment for rent most months. You should be able to set this at a level which is high enough to attract someone to live there but cover your expenses and give you some profit as well. You will need to look into this before you buy, to find out what you will be able to charge for rent and what your costs are likely to be. Of course, if you buy the property outright, then your costs will be a lot lower compared to having a mortgage.
You also need to note that the property will be changing in value as well. Most property will increase in value in the long term and therefore you will gain from that as well. Second homes do attract capital gains tax if they are sold though or if they are passed on in an inheritance it is likely that there will be inheritance tax to pay on them. It is worth calculating if you will be likely to be selling the property and how much it will need to increase in value to offset the capital gains tax and therefore whether it is worth doing.
There is a lot to think about when deciding whether to have a buy to let property. It is worth learning a lot more about it and doing a lot of calculations to work out whether you feel that it will be the right thing to do for you.