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Second Home vs Investment Property: What’s the difference?

With home being a huge focus, finding second or third homes and investment homes is in demand. For those looking for  properties in Spain we spoke to Spanish property expert and author Sean Woolley who has helped hundreds of people to find the right property in Spain. He has noticed that buyers can struggle when they combine the concept of a second home for themselves and buying for an investment. This is because when the head and heart are both at play, choosing the right place can be challenging.

Sean Woolley

He explains, “Problems can arise if buyers are looking to purchase a holiday home which they intend to use for part of the year themselves but with which they also want to earn a decent rental income. In this highly common scenario there is often a conflict between head and heart as the criteria for investment and personal enjoyment both need to be met. As in all property purchases, a degree of compromise needs to be factored in. After all, buying a property which will appeal to the mass rental market may not necessarily accord with your own personal wish list. For instance, buyers may like the idea of owning a holiday home in the hills, surrounded by nature, but is this the sort of place that would appeal to holidaymakers looking for a family holiday in the sun? A balance that satisfies both financial and emotional needs is often hard to find, but an experienced agent with plenty of local knowledge should be able to guide and assist in cases like this.

We are noticing a shift in the specifications and amenities now required by luxury property buyers and rental clients which need to be kept in mind when purchasing as an investment. Villas now need to include well-appointed office spaces, home gyms and cinema rooms as buyers try to ensure their time at home is used in a variety of ways to suit the changing work and lifestyle trends. This is definitely something to bear in mind during your search, whether you will use it as a second home, or an investment property.”

Here Sean explains the difference between a second home and an investment property to help buyers get clarity on what they are buying for. When you are sure of your primary motivation, you will find it easier to choose and purchase the right property to suit your needs.

What factors make a property a second home?

Choosing a second home is all about YOU, the buyer. What are your personal wants and needs? Here on the Costa del Sol many clients choosing a second home in the sun prefer to be away from areas that are too “touristy”, where perhaps holidaymakers aren’t inclined to show the same level of respect for their temporary homes or indeed for neighbouring residents. Second home owners still want to enjoy a quality of life but want to live alongside people like them, who will respect unwritten codes of conduct in relation to noise, behaviour and mutual respect for their neighbours.

When choosing a second home, rather than a temporary vacation home, issues of property size, space and storage also become important factors. If you are likely to live in your second home for more than three months a year, you are likely to have more of your personal belongings and permanent fixtures around you. You will feel less inclined to sacrifice space or to downsize from your property back at home. Additionally, plenty of second home buyers intend to use the property with extended family members and perhaps even their pets, so consideration needs to be given to how often you will make use of the property, and how much space you ultimately need.

What factors make a property an investment property?

Normally the two gauges used to assess the suitability of an investment property will be a) the potential for capital growth and b) the potential for rental income. For investors it should all be about the financials, the numbers. It may not even be a property that they “like” or “love”. If the figures stack up and there is likely to be a quick and easy exit strategy in the event of needing to sell, then personal taste needn’t play a part in the decision-making process.

What are the key elements of each, and how do they differ?

In typical circumstances, a client should purchase an investment property with his/her HEAD, and a second home with his/her HEART. After all, a second home is personal to THEM, and them alone. It is for their own enjoyment, and therefore when choosing to buy a second home, they should base their decision on what pleases and excites THEM. For an investment property, the criteria should be very different. Decisions should be based on financials, whether it be for potential capital growth or for rental investment. Very often it’s for both of these factors, which can make the search trickier. For instance, there may be more potential for price growth in an area about to undergo regeneration or in a new resort, but these areas may not initially provide an attractive rental yield.

Before you embark on your search, decide why you are buying the property and who for. If it is strictly a business decision, then you don’t need to like it, you simply need to follow expert advice and choose a property which ticks the boxes as an investment and will make you the most money. However, if you will be using the property even some of the time, and renting it out at other times of the year, then you need something which renters will like but you will also enjoy spending time in.

What has changed in terms of desire and buying patterns for luxury property during the COVID-19 pandemic?

We have a dedicated luxury property portfolio on our website and have seen continued demand for luxury properties throughout the pandemic. Due to travel restrictions, virtual viewings have become the “new normal” for overseas real estate agents. We have been using them so that our buying clients can effectively shortlist properties from the comfort of their own home, with the aim of physically viewing their selected options when they are able to comfortably travel to Spain. For clients who are already well-researched and familiar with the areas, there has sometimes been no need to physically visit. Armed with a high-quality camera, a gimbal and a wide-angled lens, we have been able to conduct live walk-through video chats and to produce beautifully edited videos which are almost as good as the real thing. We have been able to sell 4 million Euros worth of property during the pandemic just by using virtual viewings, including two luxury villas in Marbella.

Due to the fact we were all forced to work from home due to COVID and everyone has seen how well it can work, I have already seen a change in buyers who want to use this new trend to their advantage, using their Spanish property as a full time base and commuting back to work as and when they are needed in the office. Of course, it depends on how flexible your schedule is, your proximity to an airport and how well you work from home, but it’s definitely an option and a trend I think will grow. This is leading to more demand for dedicated home office spaces within luxury properties.

Interestingly, the average spend and also the average budget of those who end up viewing properties with us is €1.2m, significantly higher than the average budget of each new enquiry we receive into the business, which is around €700,000. This seems to suggest that although interest is strong across the mid-high end budgets in general, the ability and inclination to purchase lies with those clients at the top end of the spectrum. This could be due to them being under fewer work and travel restrictions than average buyers, or simply that those with top budgets are more resilient to external factors such as this, but it certainly seems that this luxury market is remaining strong and weathering the storm better than the lower end of the market.


Sean Woolley is the Founder and Director of leading real estate agency Cloud Nine Spain. With 20 years’ experience of helping clients buy and sell properties in Spain, he has become known as “The Property Doctor”. For more information, tips and tricks to ensure your Spanish property purchase goes smoothly, read From the Ground Up – The Insider’s Guide to Buying Spanish Property, which is available on Amazon.

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