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Key Takeaways:
- A second home in London offers an opportunity to earn extra income, as it capitalises on the city’s popularity as a tourist destination and its reputation as a business and financial hub.
- Leaving a second home empty will lead to higher council tax, maintenance issues, and financial risks, sometimes it can cost you up to £12,000+ a year.
- Market conditions, even when not ideal, still offer numerous financial opportunities for second homes.
- Flexible letting enables second homes to become a stable, scalable financial asset.
A second home is a residential property that the owner does not use as a main residence. For council tax purposes, these are identified as properties not used as a main home but are furnished. It’s often acquired for investment purposes or used occasionally as a holiday home.
Got an Empty Second Home in London?
Owning a second home is common in the UK. The English Housing Survey 2021 to 2022 revealed that more than 2 million households have at least one second property, with 22% of them living in London.
60% of these second properties are in the UK, while 40% are outside. In London, most of the second homes are flats, and 0.7% of them don’t have a usual resident.
What does this mean? It means there are thousands of second homes sitting empty and costing owners unnecessary taxes and fines. It’s such a waste considering there are more than 130,000 homeless families waiting to live in a decent home.
Why do property owners have a second home?
There are cases in which people inherit or are gifted a second home. But most of the time, it’s a conscious investment for UK households. The English Housing Survey revealed that households choose to invest in another home for the following reasons:
- 45%: holiday home
- 35%: long-term investment
- 9%: retirement home
- 4%: for working away from home
7% of respondents in the survey reported that their second home used to be their main residence, and they opted to keep it even after upgrading to a better property.
Why should you keep your second home occupied?
For those who were gifted the property or inherited the second home, it’s not surprising that they would leave it empty because it wasn’t really part of their future plans. However, leaving it vacant is not as simple as it seems. In fact, leaving a second home empty is often more expensive.
Council tax is one cost you need to consider. In the City of London, a second home is charged an additional 100%, even if it sits empty. Not only that, but the longer a property stays empty, the higher the council tax charge, ranging from an additional 100% to 300%.
Apart from this tax, you also have to consider holding costs. Utilities will also continue to incur standing charges, which are the cost of being connected to the service line even if no service is being used.
Insurance premiums will also increase if a home is proven unoccupied. If you have a leasehold property, you still have to pay service charges even if the property is not used.
Maintenance can also be an issue, especially if nobody can spot damage early. Structural issues might worsen and end up costing property owners in repairs and replacements. Over time, these will compound and affect the property’s overall condition and value.
Did you know:
Empty second homes can cost a property owner almost £13,000, with most of the expense coming from council tax (£4,000+), and potential loss of rental revenue (£7,000+). – Cheshirewestandchester.gov.uk
How to Turn Your Second Home Into a Profitable Asset
Turning your passive second home into an income-generating asset goes beyond renting it out. You have to choose the right letting strategy.
There are 4 ways to unlock profitability for your second home in London.
Long-term letting
This letting method is the most stable and traditional option for second homes in London, offering a predictable rental income for at least 6 months. It involves longer lease terms in which the tenant is partly responsible for certain expenses, such as utility bills. Not only that, this letting strategy requires less day-to-day involvement once the tenants move in.
Although the Renters’ Rights Act has reshaped how landlords manage tenancies and limited their ability to adjust terms, it continues to provide income stability amid economic volatility. It may not be as flexible as other letting options, but it does bring a strong demand, specifically from households facing affordability challenges in the housing market. With the current global conflict, new homebuyer enquiries have declined, prompting households to rely on long-term letting in the meantime.
Short-term letting
Transforming your second home in London into an Airbnb or short-term rental will generate significant profits. After all, London attracted 24 million tourists in 2024, with 20.9 million from overseas.
This consistent high demand appeals to thousands of property owners, which is why the short-term letting sector in London is always competitive. Not only that, this letting method has the highest nightly rate among other alternatives. With the right property management help, you can enjoy back-to-back bookings and earn up to £6,000+ a month
Fortunately, platforms like Airbnb and property management companies like City Relay can help property owners transform their second homes into short-term rentals. City Relay, in particular, can help with active property management, from guest communication to cleaning and maintenance to compliance with local regulations such as the 90-day rule.
Mid-term letting
This is the sweet spot between short-term and long-term letting. You’re renting your second home for less than 6 months at a time. This type of letting strategy is gaining traction in London as property owners are stuck between the Renters’ Rights Act and London’s 90-day rule. Mid-term letting allows property owners to enjoy higher rental rates than long-term letting without the frequent turnovers and maintenance requirements of short-term letting.
This type of letting agreement is perfect for corporate travellers, professionals on a temporary assignment, or relocators.
Flexible letting
This is also another option that will help property owners maximise their second home’s income potential. You don’t have to use just one letting strategy. The Private Rented Sector (PRS) is a volatile market. Demand changes with the seasons, sometimes because of local events.
Flexible letting allows you to switch between short, mid, and long-term strategies, not just to maximise income but also to stay compliant. Once you’ve booked 90 days, you can go from short-term letting to mid-term.
Of course, switching between letting strategies should not be done on a whim. It has to be data-driven to ensure you’re choosing the right approach.
Turn Your Second Home Into A Profitable Asset
Don’t leave your second home in London empty. You’ll only waste its potential while incurring unnecessary costs and missing income.
Use it to open a financial opportunity that capitalises on London’s popularity as a travel destination or reputation as a business and financial hub. The rental market continues to offer various pathways to generate returns. You can use long-term, mid-term, or short-term letting to tap into this income stream.
Of course, the key to success is not just to let your second home. You need to approach it strategically.
While these offer strong potential, execution requires time, expertise, and a deep knowledge of the market demand.
Property management companies like City Relay offer solutions to help your second home deliver consistent income while preserving its value and supporting your long-term plans. We’ll handle the operational side of letting, from pricing and bookings to maintenance and compliance. We’ll keep your second home occupied while you focus on reaching your financial goals.
Would you like to explore the potential of your second home in London?
FAQs
Is a second home a good investment in London?
Yes, it is, but only if you manage it strategically. A second home is not just there to increase your portfolio. It can be used as a secure source of income. Don’t let it sit empty, because it will incur costs (e.g., service charges and holding costs) and will still be taxed at a higher rate than a standard home.
With London’s strong rental demand, you can explore different ways to earn from your second home. When done effectively, it can help you achieve financial stability.
What is the best letting strategy for a second home in London?
The best letting strategy depends on your priorities as the owner of a second home. If you want stability and a secure rental income, you can choose long-term letting. If you want higher revenue potential, short-term letting is the best option. If you want to balance the two, you can opt for mid-term letting.
Ultimately, some property owners choose flexible letting to combine different strategies. This allows them to maximise occupancy while controlling their property’s availability.
Are there additional costs associated with second homes in London?
Yes, second homes come with financial responsibilities. You still have to pay council tax, which will be higher if you leave it empty. There are also insurance premiums, utility bills, and repair and maintenance costs to consider.
This is why renting the property to earn extra income will help you cover these costs and still have extra to add to your monthly cash flow.
How can I rent out my second home if I want to use it sometimes?
You can choose either short-term or flexible letting if you want to use your second home at different times of the year. You can block off a schedule so the property won’t be available for guest bookings.
This ensures the property is free for you to use, and it will earn while you don’t.
