How to ensure your second home delivers great return on investment

If you're looking to buy a second home as an investment property, then your decision should be all about the bottom line. Contrary to political economist John Stuart Mill’s claim that 'landlords grow rich in their sleep', it will take a lot of good advice and hard work to find the ideal property. Get it right, though, and your return on investment (ROI) will be a significant reward.

Plan for revenue potential

Your second home revenue streams can take a number of forms, depending on the location and use of your property. A city apartment in a booming market like Munich, for example, has potential for significant capital appreciation and rental income, though buyers from abroad should consider the costs and limitations that come with the strict rental market in Germany.

Even if you intend to use your second home regularly, you can target returns beyond capital appreciation. Holiday lets are an option in rural and coastal areas, while stunning properties near inland cities are perfect for events like weddings. City homes in bustling business districts can rent out driveways for parking, a practice popular in the UK and Australia.

Identify your ideal investment locations

Tracking market trends is a key part of choosing a second home: but that job doesn’t stop at identifying a profitable city. Experts like our Engel & Völkers investment consultants are dedicated to discovering the most investable properties in every city, whether it’s the rise of new urban quarters in Milan, or the resurgence of traditional luxury in Paris, and our research can help you spot it too.

You can also identify some key criteria on your own. For example, don’t underestimate the value of a view. According to TripAdvisor, 82% of travellers say a stunning view is the most important part of their trip: so it’s worth the premium to attract visitors and holiday-home buyers. Elsewhere, city flats will benefit from local amenities, prestige developments or new transport links nearby.

Choose the right features for your second home

Whether you’re letting the property or simply ensuring it’s appealing come sale time, choosing the right features to upgrade is essential. Add appeal to vacation homes with modern essentials like fast Wi-Fi and HD TVs, as well as clean and stylish bathrooms and communal spaces. In warm climates, outdoor features like dining areas, ambient lighting or extra rooms can often add significant value.

As well as identifying the most appealing features, you’ll also need to accurately estimate home maintenance costs to ensure they’ll deliver ROI. That means factoring in things like cleaning, maintenance, gardening and repairs.

Seek out sound advice

We’ve already discussed the value of an expert realtor, but there are other experts that serious investors should speak to as well. Local lawyers can advise on the legalities of buying and letting a property and business experts will be able to assist with information about local interest rates, rental markets, and developments or events that may affect them.

When planning how to maximise returns on your investment, you should also consider who can help. Local property management firms can help ensure your second home is well-maintained in your absence, and possibly even handle rentals or holiday lets on your behalf. Spend some time searching for the right partner, as it may make all the difference.