As we reach an older age we may find we have a little extra money to invest in something. This could be money left to you in a will, or perhaps you have been busy saving since you were young and now have a healthy amount in your bank account (or stuffed under your mattress) Perhaps you have just met a new partner and you both own homes but are ready to move in together or even, you have decided it’s time to downsize but fancy investing some of the equity from your old home into a project. Whatever your reason we have some great tips for investing in a second home.
If you decide to buy a second home for the family to enjoy then you may be looking at a property in a different country. Something you could rent out to holidaymakers and then use a few weeks of the year to unwind and relax. It’s important to choose a destination that is popular as well as something that you loved. Some people are choosing to have a self invested pension plan (SIPP) where they put money into a property and build it through rental income. This can help you with your personal tax so get chatting to a good accountant about the best way to move forward. You may find it easier to purchase a property which is in good order and already used as a rentable villa. Opting for a lower value home which needs to be restored could become very expensive, especially if it is in a foreign speaking country and many thousands of miles away from your home. You need to consider the reality pragmatically. Then source some good support from expats living in the area.
Buying abroad is great fun and means you can share your investment with the whole family. It gives you a base to head to every year which means you will make better friends and become a part of the community. It may also give you a complete change of lifestyle or different direction for your retirement. Perhaps you will decide that you would rather spend your retirement out there, enjoying the sun and a new culture. However it can also be incredibly hard. Building a team of people who will look after your property really well, knowing you aren’t there to drop in and check up on things, will require a great deal of patience and trust. You might find you are constantly chasing people to get things done, or you get complaints from your guests over details which really matter to you but are not being kept on top of by your house team. It’s a big commitment and you need to be sure it is right for you before investing your money. Selling a foreign property quickly might see you losing a lot of money. Get as much advice as you can and get to grips with their local economy too.
You may opt for a project build a little closer to home. There is a great rule that you should always buy the worst house on the best street. This is a great idea if you are looking to build something up and then sell it on for a little extra income. If you are buying a house which has been neglected then you will probably pick it up for a great price, either from the agent or through auction. Bear in mind you will need a strong team of professionals to ensure you are buying something worth your money and time. The structure is incredibly important so it’s worth getting two surveys done, just to be sure. Also before you buy, find a superior roofer and invest some money in him checking over the roof for any issue. Roof repairs can be extremely costly and in some cases, may make the house unsafe. Also a good electrician should inspect the property too, especially if it is an older home. It may be that the house has complicated and out of date wiring which needs completely reworking, meaning your floors need to come up. So make sure you have all the facts before you hand over your cash.
Once you have bought the home then decide what parts of the project you will take on yourself and what you will employ people for. Listen to your builders and take their advice on who to work with and how long to allow for the build. You may be best served staying out of their way for the busy jobs. However you can save yourself money by getting involved with clearing the plot and sorting the garden. You can also get your hands dirty when any decorating needs to be done.
Set yourself a budget and then expect to go over it. You need a strong contingency. However do ensure you set an overall budget which includes this and do not go over it. The temptation to throw money into a building can result in an overall financial loss. Talk to local estate agents about the state of the property market in that area and what a realistic rental and sales income would be. Then make sure you are well short of that figure when it comes to your investment.
If you manage to save money on one area, do not be tempted to think you can spend more on another. Issues come up on builds all the time and if you have saved $4000 on the clearing and demolition of the property, then spend that $4000 on an extra cool kitchen, before discovering the electrics need another $3000 dollars spent, you aren’t doing yourself any favours. So pocket the savings until you get to the decorating stage and then decide if it is worth splashing a little more cash at the end.
Always do your research, whichever path you are taking. Don’t rush into a decision, understand the issues that you could be faced with and take lots of advice from the professionals.