Last Updated on: 21st November 2023, 09:38 pm
If you’re among the 10% of Brits who own a second property, either in the UK or abroad, congratulations — you’re officially part of the real estate elite. As you’re no doubt aware, investing in property can offer many benefits to those willing to put in the work, including tax advantages, income potential and a property to use as a holiday home. Unfortunately, however, like with most good things in life, there are also certain drawbacks.
Dealing with the expenses of owning a second property, such as stamp duty surcharges, rental income fluctuations, and increased maintenance costs, can be challenging. If you find yourself in this scenario, you might be thinking about how to make the most of a second home to help offset these financial burdens, which is where we can help.
In this article, we’ve put together three tips on what you can do with a second property. Let’s jump in.
1. List it
With over 900,000 bookings (and counting), Airbnb has evolved to include a wide range of rental properties, from short-term vacation rentals to accommodation fit for longer-duration working visits. This diversity allows homeowners to transform any space into a lucrative income stream with Airbnb.
It’s true that renting your home can be a daunting task, particularly if you’re new to the process. You might worry about total strangers living in your home, rummaging through your personal belongings, throwing parties, or destroying priceless heirlooms. And what about the organisation of it all?
However, with proper preparation and planning, ‘Airbnb-ing’ your property can be a profitable and straightforward experience, and there are several steps you can take to mitigate risks and ensure a smooth process.
For starters, remember that it’s your house — so it’s your rules, and you can set clear guidelines and expectations for your tenants. Whether you choose to prohibit smoking and pets or designate certain areas as off-limits, your house rules will help to protect you. If something does come up, Airbnb’s Host Guarantee — which includes property damage and liability insurance — will cover you.
To handle the management of their property, some hosts hire Airbnb management companies that cover tenant screening, maintenance, and any emergencies. Some services may even take care of the listing process for you. For instance, Frank Porter offers a variety of tailored services, ranging from “in-house interior design and staging to cleaning and maintenance between stays”.
2. Sell it
If you want to entirely free yourself of ownership responsibilities, selling your house and reinvesting the cash might be the best option. However, once you’ve put your home on the market and set a price, it can be challenging to attract potential buyers and close a sale.
This is where staging comes in, which involves setting up your home in a way that showcases its best features and makes it more appealing to potential buyers. This could involve rearranging furniture, changing the decor, and making repairs where necessary. According to the property-validating experts over at Zoopla, home staging can add 10% to your sale price and enable you to sell up three times faster.
It’s important to note that the ultimate goal of home staging is to help your potential buyers see themselves in the property. Therefore, “decluttering is the first job you should tackle when home staging. Clutter is distracting for buyers – their eyes will be drawn to your belongings and not the rooms. The rooms themselves will look smaller and untidy if cluttered, too,” advises Home and Gardens.
Remember that first impressions count too. The outside of your home should also look attractive and welcoming to potential buyers. Studies show that 68% of house hunters are willing to pay more for a property that looks good from the street. Some of the external features that are most likely to make buyers offer a higher price include double-glazed windows, a well-kept roof, and healthy plants and trees.
3. Gift it
Transferring a second home to your children can be a good way to pass on a valuable asset to the next generation. “Gifting a property or rental income to family members is not only very generous but it can be a way to save on tax,” The Times’ money experts explain. It can reduce inheritance tax (IHT) for your loved ones when you die and it could cut your tax bill while you’re alive too.”
However, it’s important to be aware of certain considerations before gifting. Firstly, you should be aware that if you want to leave your property to your child before you die, you must live for at least seven years from the date of transfer in order for them to avoid paying IHT. If you pass away before this point, your children could be required to pay between 8-40% IHT, Quittance Legal Services points out.
Secondly, in order to transfer property to a family member as a gift, you must have a ‘Deed of Gift’, or ‘Transfer of Gift’ — a formal legal document. As you might expect, there’s a lot of paperwork to complete in order to obtain this, but your solicitor will be able to provide you with the most up to date information on how to do so.
Finally, know that there are criteria that need to be met before obtaining a Transfer of Gift, including:
- The homeowner should be of sound mind
- The property should have no outstanding debts secured against it
- The owner is listed as such in the Land Registry’s proprietorship register