Are Houses the Best Type of Investments?
There are lots of different ways to invest money, but houses do seem to be growing in popularity as a form of investment. There are reasons for this, but there are also risks with buying a home as an investment and it is good to be aware of all of the facts before you decide to take one on. This is written with regards to considering buying a second home as an investment, your first home would not officially be considered to be an investment.
Costs of House Owning
When you buy a house, you will find that there will always be costs that have to be paid. If you buy it with a mortgage then you will have to pay for the interest on this loan as well as any fees as well. If you buy it outright, then once you have paid the solicitor then you will not have those fees. However, there will be other costs that you will have to pay. It is very likely that you will want to have buildings insurance which will protect you and pay out if there is damage to the property. You will need to have this if you have a mortgage anyway as well as life insurance. You will also have to consider that there will be costs along the way as well, such as repairs that might not be covered by insurance, renovations and updates as well as decorating. There will also be additional costs such as council tax if you have no tenants in there. If you do have tenants then you will find that you will have to pay for safety checks and your insurance might be higher. You may also have to pay for it to be decorated more often with tenants in, perhaps between tenants. You may want to pay an agent to sort out the letting for you.
If you have a second home, then you will be able to make money by renting it out. You could either do a long term rental and have tenants living in there or you might find that you will be better off using it for holiday lets. This is something which could bring in more money per tenant but it might be seasonal and so you could find that it will be empty some of the year. You will also need to clean between guests and you will need to wash sheets and towels if you provide those as well. These are costs that you will need to cover, which is why holiday rental is more expensive for guests.
If you have a second home then there is a chance that it will increase in value over time. This means that you will not only gain money if you choose to rent it out, but also from that increase in value. However, there is a chance that it may go down in value as well as up. This is because house prices fluctuate all of the time and there could be times when houses are not in such high demand and prices go down. There could also be a case of the house being in an area where the prices have slumped for some reason, perhaps due to trends or something happening in the area. Therefore, it is a risk to assume that the price will rise, but like with all investments, you will find that the value will be more likely to rise if you keep your money invested for a long time. This means that you should be prepared to keep your money invested in the home for at least five years and it would be better to keep it for even longer if you can.