Are you looking to invest in a second property? You may believe it is just easy as your first purchase, but investing in additional properties is more complicated than you think, so it is important that you understand the process. More than likely, you’re planning to rent out your property to enable another form of income. To do this, you must understand the difference between purchasing your first property and buying an investment property. Follow this guide to ensure your second purchase is a smooth and successful process.
Long-term goals
One of the common misconceptions associated with investing in a second property is that it is a quick way to earn money. This is the wrong way of thinking, as making any sort of investment should be part of a long-term plan, allowing you to improve your financial situation and retire comfortably.
Thinking on a long-term basis is much more beneficial, especially in regards to property investment, as you want to ensure that the property you purchase will offer long-term appreciation. Therefore, you must ensure that the property you purchase offers flexible demand, allowing you to maintain rental demand and sustain a substantial income.
Plan ahead
Before jumping straight into an investment, you need to plan and research into the property market to uncover the locations with the highest yields. You should also analyse the success of different types of properties and select which is right for you. To do this, you need to establish the type of tenant you want to target, as this will allow you to narrow down your search and produce an effective marketing plan.
If you are struggling to find the right property, you should seek advice from property experts like RW Invest, who can help you find a worthwhile investment. Working with professionals will allow you to achieve success and interest an abundance of tenants, resulting in a significant return on investment.
Finances
One of the most important things to consider when purchasing a second property is whether you have the finances to sustain this type of investment. In comparison to purchasing your first home, a second property will be slightly more expensive. This is because you will incur additional stamp duty charges, which start at three per cent for a property up to £125,000. You need to consider these costs when shopping around for the right property, as it may set you back more than you intended.
If you’re purchasing a second property for the sole reason of renting, you must take out a buy-to-let mortgage. When applying for this, you will be asked to showcase evidence of your rental income and your ability to make repayments. You should also be aware that mortgage rates for a property are usually more expensive, and most likely, you will be asked to fork out at least 25 per cent of the property price as a form of deposit. Knowing this beforehand will allow you to assess whether you’re eligible for such a purchase and if it is an affordable option, you can calculate your expenses to establish how profitable your property venture is.