Is Buying a Second Home a Good Investment?

Findings from Sykes' 2025 Holiday Letting Outlook Report can reveal that nearly 3% of all residential dwellings in England are empty long-term.

Buying a second home has become a smart move for landlords, property investors, and homeowners seeking to diversify their income streams.

Whether you’re weighing up the benefits of buying a second home, wondering how to buy a second home, or delving into the financial implications, Sykes is here to guide you navigate the path confidently.

Contents

Bernie Clarke - Author for Sykes Holiday Cottages

  • by Bernie Clarke - Author for Sykes Holiday Cottages

    Since joining Sykes in 2021, Bernie has gained extensive knowledge in holiday let investment, regulations, and property management.
A row of traditional houses in the UK
A row of traditional houses in the UK

Why Buy a Second Home in the UK?

Buying a second home can be a strategic investment opportunity. Whether you're seeking:

With the right location and management, your holiday home could become a high-performing asset, offering long-term value and income potential.

Second Home Mortgages: What You Need to Know

A second home mortgage differs from your primary residence mortgage. You’ll need to decide the intended use of the property first, as this affects your mortgage type.

Holiday Let Mortgages

Standard residential or buy-to-let mortgages are not typically available when buying a holiday let. Instead, you’ll need a specialist holiday let mortgage, which is tailored for properties that will be rented out on a short-term basis.

Key features of a holiday let mortgage:

  • Higher interest rates compared to standard mortgages
  • Lower loan-to-value (LTV) ratios – typically 50% to 65%, though some lenders may offer up to 75%
  • Larger deposit required – usually a minimum of 25% of the property’s value

Because of the increased risk perceived by lenders, borrowing terms are stricter and rates may vary significantly based on property location, expected rental yield, and your personal financial circumstances.

Find out more about obtaining a second home mortgage in Sykes’ complete guide to holiday let mortgages.

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Buy-to-Let Mortgages

If your second property will be rented out on a long-term tenancy then a buy-to-let (BTL) mortgage may be suitable.

BTL mortgage highlights:

  • Typically available for up to 25 years
  • Lower interest rates than commercial or holiday let mortgages
  • Often interest-only, reducing monthly payments
  • Lenders assess affordability based on projected rental income, not just your personal income
  • They may apply an Interest Cover Ratio (ICR), ensuring the rental income covers mortgage payments by a certain margin
  • Stress testing is common, assessing whether repayments remain affordable if interest rates rise

Note: You cannot use a standard residential mortgage for a buy-to-let or holiday let property.

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Commercial Mortgages

If you're purchasing a property with both commercial and residential elements, or a fully commercial property (like a shop, office, or warehouse), a commercial mortgage is typically required. These loans usually:

  • Require larger deposits
  • Come with higher interest rates than residential or BTL mortgages
  • Are subject to more detailed scrutiny of your business plan and income projections

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Property Tax

Owning a Second Home: Tax Considerations

Council Tax vs Business Rates

From April 2025, councils in England can charge up to 100% Council Tax premium on second homes. If your property is empty, this premium can rise to 300% after 10 years.

However, you can avoid Council Tax by qualifying for Business Rates, applicable to holiday lets available for 140+ nights per year and is let for 70+ nights per year.

Income Tax

Letting your second home (long or short-term) means paying income tax on profits. Allowable expenses include mortgage interest, insurance, utilities, maintenance, and letting fees.

Check out HMRC’s property rental guidance for more information.

Stamp Duty on Second Homes

If you already own one or more properties, purchasing a second home means you’ll be liable for the higher rates of Stamp Duty Land Tax (SDLT) in England.

This surcharge adds an extra 3% on top of the standard stamp duty rates. It's essential to factor these additional costs into your overall purchase budget when planning a second home or investment property.

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Costs of Second Home Ownership

Owning a second home involves ongoing maintenance. Key costs include:

  • Insurance (especially if the property is unoccupied for extended periods)
  • Utility bills (often with standing charges even if unused)
  • Security measures (CCTV, alarms)
  • Maintenance and cleaning
  • Empty property cover (specialist insurance may be required after 60 days vacant)

Leaving a home empty also increases the risk of issues such as damp, burst pipes, vandalism, or squatting, so making regular checks is essential.

Economic and Social Impact of Unused Second Homes

A non-let second home may contribute to:

  • Reduced housing supply for locals
  • Higher local property prices
  • Strain on local economies due to seasonal occupancy
  • Potential resentment in tight-knit communities

Letting out your property helps offset these issues, supporting the local economy and providing more housing options for holidaymakers.

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Holiday Home Management with Sykes

Buying a second home in the UK can be a great way to generate additional income. By letting your property through a holiday let agency such as Sykes, you can maximise returns while staying compliant with regulations and benefiting from expert support.

With over 30 years of industry expertise, Sykes provides tailored marketing strategies, expert property management, competitive rates and access to a large customer base, boosting the chances of your property being consistently booked and well-maintained.

Their team handles everything from maintenance and guest communications to marketing your holiday home, allowing you to enjoy the benefits of your holiday let investment without the stress.

If you're ready to begin the journey of investing in a UK second home, speak to one of the friendly advisors and let your property with Sykes today. Alternatively, browse the range of holiday homes and cottages for sale.

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Ready to Invest..?

We can give you access to a wide range of off-market property investment properties, with an average 8%+ annual yield (beating the UK's average of 3-5%, hands down). There's no commitment - all you have to do is sign up to discover what's on offer - Click below. 

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