Do you have plans to invest in a second home to rent out? Or are you dreaming about buying a holiday home? Purchasing a second dwelling is increasingly attainable. These days, the supply is so wide that there is something to suit every budget. Before you go ahead, you should weigh up the benefits and drawbacks carefully.
The benefits of buying a second home
1. Holiday home
Fancy a long weekend or a well-deserved break? Your holiday home is there waiting for you, whenever you want to use it.
2. Student accommodation
Are your kids about to get a taste of student life? In that case, you could choose to buy student accommodation. In the first instance to use yourself and subsequently to rent it out to other students.
3. Second residence
Buying a house or a flat to subsequently rent out is certainly a good idea. You could, for example, consider a 3/6/9 contract. And use that income to pay off your loan, and with a bit of luck, have a little extra to spare.
A second home is also an excellent investment for the future. Your children or grandchildren may benefit from it one day as well. Or you can sell it when you reach the end of your career, and use the proceeds to fund your retirement.
Good to know: a loan for a second home could save you money in tax, as it’s partially deductible as a form of long-term saving. Declaring repayments of up to 2,350 euros (2020 income) in your tax return offers you a tax break of up to 30%, provided you meet a number of conditions. You can also deduct interest payments on the loan from the taxable property income.
All benefits have drawbacks
A second dwelling also brings a lot of costs with it: insurance, maintenance, water and heating. And if you buy a flat, you also have to contribute to the cost of maintaining the lift and the entrance hall.
Have you bought yourself a chalet in a vacation park? If so, the annual costs – depending on the facilities offered by the park and the size of your chalet – can add up to around 5 000 euros. Prefer a little apartment with a sea view? In that case you need to remember that the wind and salt can also drive up your maintenance costs.
Local councils often tax second homes. And you might also be liable for provincial tax and additional environmental levies. What’s more, you do not qualify for a reduction (e.g. for dependent children) on the property tax you have to pay each year on your second home.
And talking about taxes, you are required to declare an additional property, even if you do not rent it out. You will be taxed on the non-index-linked rateable value, plus 40 percent.
Is buying a second dwelling a smart investment?
The answer depends on whether you buy with your heart or your pocket calculator. Decide in advance precisely what you want and expect. And above all be realistic. Buying an expensive apartment on the seafront in order to rent it out will probably not raise enough to justify the purchase. But what if you buy a nice little house by the seaside for you to enjoy with your whole family for years to come and then sell it on later? That certainly constitutes a smart investment.
Whether you are buying a second home as an investment or to enjoy yourself during your holidays, don’t rush your decision and carefully consider all the benefits and drawbacks first.
Calculate the feasibility of your plan
Are you planning to buy a second home? Use our handy tool to check quickly whether your plan is feasible.