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Having a second home in London creates four opportunities for property owners to earn income. Long-term letting provides stability but is regulated by the Renters’ Rights Act. Short-term letting offers peak income potential but is restricted by London’s 90-day rule. Mid-term letting strikes a balance between both, while flexible letting switches between letting strategies to keep a property occupied and fully compliant.
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 can lead to higher council tax, insurance, and service charges, as well as maintenance issues, not to mention missed rental income. The longer a property remains vacant, the more expensive it becomes to maintain.
- 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.
The State of Second Home Ownership 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, incurring unnecessary taxes and fines for owners. 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 had been their main residence and that they chose to keep it even after upgrading to a better property.
These figures highlight an important trend. Many second homes were acquired with a financial objective in mind. However, changing regulations, higher council tax rates, and rising holding costs threaten that objective. Owners have to continually develop a clear income strategy to justify keeping a second 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 they would leave it empty, since 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 found to be 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, affecting the property’s overall condition and value.
Did you know:
Several London boroughs now apply a 100% council tax premium to second homes, doubling the council tax bills for furnished properties that are not used as primary residences. When combined with insurance, utilities, service charges, and maintenance costs, leaving a property empty can reduce your overall investment returns.
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 and limited housing supply in the market. Add to this the current global conflict, which has led to a decline in new homebuyer enquiries, creating opportunities for landlords seeking stable occupancy and predictable income.
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.
Although revenue potential varies by location, property type, seasonality, and occupancy levels, having a property in a well-connected location in central London offers the benefit of stronger nightly rates and higher booking demand.
According to our data, professionally managed properties can achieve back-to-back bookings and earn up to £6,000+ a month, with peak-season performance often higher during major tourism periods.
Fortunately, platforms like Airbnb and property management companies can help property owners turn 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.
Mid-term letting has become increasingly appealing to landlords and hosts, following the introduction of the Renters’ Rights Act and the continuing enforcement of London’s 90-day rule. Second-home owners have started to realise how it can help rental properties generate income during the off-peak tourism season while avoiding frequent guest turnovers and maintaining flexibility compared to long-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 based on occupancy trends, market conditions, and regulatory requirements.
For instance, a second home could operate as a short-let during London’s peak tourism season from June to August. Once the 90-day limit is reached, they can switch to mid-term corporate rental during the autumn and winter seasons. When the demand rises again, they can return to short-term accommodation.
This approach helps reduce vacancy periods while allowing owners to maximise income opportunities throughout the year, not just during the peak season.
Which Letting Strategy Works Best For Your Second Home?
Choosing the right letting strategy requires you to consider your financial goals, desired level of involvement, and how often you want to use the property yourself.
- Long-term letting is best if you prefer a predictable monthly income with minimal turnover.
- Short-term letting suits you if you’re focused on maximising revenue during peak seasons, particularly if your property is in Central London.
- Mid-term letting is ideal if you want a balance between income potential and operational burden.
- Flexible letting is perfect if you like to combine multiple strategies and adapt to changing seasonal demands and evolving regulations.
At City Relay, we noticed that second-home owners opt for flexible letting, benefiting from peak summer short-let demand before switching to mid-term stays during quieter periods. This approach keeps their properties occupied year-round while remaining compliant.
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 avenues for generating 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. In our experience managing second homes across London, the properties with the strongest performance are rarely tied to a single rental strategy. Profitability occurs when properties adapt to changing demand patterns throughout the year while balancing occupancy, profitability, and regulatory compliance.
Don’t let council tax fees drain your profits. 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. Allow us to 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 serve as a reliable 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.
The strongest-performing second homes are typically those that remain occupied for most of the year. Occupancy will not just generate income. It can also offset fixed ownership costs like council tax, service charges, insurance, and maintenance.
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 earns money while you don’t use it.
