Buying a second home is a financial and personal achievement, but there are things you should keep in mind before finalising that purchase.
Investing in Malta real estate or investing anywhere for that matter, is often described as ‘the biggest investment you’ll ever make’, but it’s not the first time people opt to buy a second one. And, often, it turns out to be a very worthwhile investment, but there are some things you must keep in mind when going down this road.
Be clear about your finances. Buying a second home is no mean feat, particularly if you still haven’t paid off your first one. Sit down and make a list of your monthly expenditure; consider whether you would like to have (more) children – as that will add to how much cash-in-hand you’ll need; think of how old you’ll be when you finish paying off both houses – do you really want to keep on working until you’re 85? With all this in mind, can you really afford another mortgage? If you’ve done the sums and it all adds up, then go for it.
Do you want a summer house? If you want a holiday home then consider where you’d like to spend your time when you’re on holiday – do you want to stay put in Malta, have a home in Gozo (or vice versa) or go abroad? If it’s the latter then don’t forget to check the law and tax payments on houses in your chosen destination. You could also consider renting it out for the remainder of the year.
In fact, if you are thinking of a rental investment your best bet is to buy a property in St Julians or Sliema, Bugibba or maybe even Attard, amongst some others that are very popular rental destinations. Find out what the rental yield is and check prices first! Apparently, you’ll get a much better rental income from a one or two bedroom apartment but can you afford a property in these locations? If not in these areas, how sure are you that the property you’re buying will rent out? How many months can you afford to go without having a tenant? Think about the worst-case scenario and work your way back from that. Anything better is profit! Consult with a Malta real estate agent to guide you better and choose an experience estate agent. Don’t just choose him/her because their your friend. Make sure they know their business.
Keep the taxman in mind. During the last 2012 budget in Malta, the law was changed so that tax on a first property is now calculated at 3.5% on the first €150,000 and 5% on anything above that. Second and third properties are then calculated at 5% on the whole amount, meaning that you’ll be paying more tax on your second -time purchase. Can you afford it?
Being objective as to why you want a purchase a second property is fundamental to making the most of it; so is being true to yourself as to whether you can afford it or not. If you really can and genuinely want one or circumstances allow for you to purchase another property, then go on and go forth! Done correctly, a second property can be a brilliant investment and great fun as a home-away-from home, so it’s well-worth considering.