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5 Buy-To-Let Costs To Consider

Buy-to-let fees to consider

5 Buy-To-Let Costs To Consider

Buy-to-let properties are a long-term investment, but still remain a popular option for many looking to expand their property portfolio

In fact, it has been reported that during the ‘first quarter of 2022, £8.5 billion worth of buy-to-let properties were bought by landlords’ in the UK alone, emphasising how many people are investing in buy-to-lets. 

That said, if this is the first buy-to-let property you’re considering purchasing, you might be weighing up whether investing in one is a good option for you. 

Before you can decide this, it’s essential that you’re aware of the many costs associated with buy-to-let properties.

Buy-to-let costs to consider include, but are not limited to:

1. Mortgage 

2. Survey and conveyancing fees

3. Tax

4. Letting costs 

5. Maintenance costs 

1. Mortgage 

The first cost associated with purchasing a buy-to-let property is the money that you’ll need to raise for a mortgage. 

If you’re not a cash buyer, and don’t have the funds to cover the entire purchase of the buy-to-let property, you will either need a buy-to-let mortgage or need to remortgage your house to raise the funds.

Typically speaking, you’ll require a minimum of 25% deposit to qualify for a buy-to-let mortgage, though this can vary from 20 to as much as 40%. 

That said, the larger your deposit is, the better position you’re in to secure a better deal on your buy-to-let mortgage.

2. Survey & Conveyancing Fees

The next costs to consider are both the survey and conveyancing fees. 

A house survey is an inspection that will help to determine the condition of the property, highlighting any potential problems that you should be aware of before investing. 

Full structural surveys range from around £630 to £1,500, but this does depend on the company you hire to carry out the survey.

In addition to the cost of a survey, you will also need to consider the conveyancing fee. While it’s not a legal requirement, it is highly recommended that you get a survey carried out to protect your investment and hire a solicitor or a conveyancing expert to carry out the conveyancing.

The conveyancing fees can cost from £850-£1,500 for a buy-to-let property, but this can be more if the property is leasehold

3. Tax

Another cost to consider when purchasing a buy-to-let property is tax.

The type of tax that you will pay will depend on the country that you’re purchasing the property in. For instance, in England you will pay Stamp Duty Land Tax, and in Wales you will pay Land Transaction Tax

If you’re buying a buy-to-let in England, you are required to pay 3% Stamp Duty on the first £125,000 and then an additional 5% for anything that falls within the £125,001 to £250,000 bracket.

In Wales, for purchases over 40,000, LTT is charged at 4% on the full purchase price up to £180,000, 7.5% on the portion between £180,000 and £250,000, and so on. 

4. Letting Costs 

While the yields on buy-to-let properties can be high, there are still costs with letting a property that you will need to consider.

For instance, to comply with legislation, you will be required to pay for a Gas and Safety report for your buy-to-let.

In addition to this, you’ll need to pay for advertising costs if you intend to let your property privately, and there are other costs associated with things like drawing up tenancy agreements.

Additional letting costs include the fees associated with hiring an accountant, as even if you own just one buy-to-let property, you will be required to declare your income and expenditure. As such, you will may wish to appoint  an accountant to prepare your accounts for you. 

5. Maintenance Costs 

Lastly, you will need to consider the costs associated with property maintenance.

How much you spend on the maintenance of your property will largely depend on the age of the property, as an older property will likely need more work. 

That said, maintenance costs can range from replacing furniture to purchasing landlord buy-to-let insurance

Many landlord buy-to-let insurance policies include a range of things, like building insurance, contents insurance, and legal cover, which comes in use should you require help with any potential disputes with tenants. 

That said, you will want to ensure that you do your research to ensure that your policy covers everything that you need it to. 

We hope that this article has given you a better understanding of the costs to consider when purchasing a buy-to-let property.

If you are a landlord looking to invest in a buy-to-let property, you can get in touch with us to find out how we can help you.