This is the question on every new property investor and we are here to address that here but before we get into the breakdown of costs, we need to look at what category each cost belongs to.
The costs associated with investing in Property can be divided into three main categories.
Upfront Costs – which include things like Stamp Duty, legal fees and the purchase price of the property.
Ongoing Costs – such as mortgage repayments, agency and maintenance costs.
Exit Costs – the expenses involved when you sell the property, including capital gains tax, legal costs and agency fees.
The Upfront Costs of BTL
Presently in the UK, the typical property value as per the Land Registry is estimated at £255,535 as of October 2021, however, prices can vary heavily, depending on what type of property you’re looking to buy, and the location of the investment. The range is anywhere from £40k all the way up to £10,000,000. To add to this you have stamp duty to pay which is an average of 3% of the purchase price and typically between £1000-£2000 legal costs to acquire a buy to let property.
Stamp Duty Land Tax
Stamp Duty Land Tax is a tax paid on the purchase price of a property in England and Northern Ireland.
As of October 1, 2021, the Stamp Duty tax holiday, which has been ongoing since July 2020, finally ended.
This means that investors will now pay more on stamp duty than they would have previously.
The tax operates under a progressive tax system meaning you will pay different tax rates on certain portions of the property price.
Want to learn more about Stamp Duty and Tax Visit here.
Legal Fees, Land Registry Fees, and Cash Buffers
Aside from mortgage costs and stamp duty, there are some other expenses you can expect when investing in UK property.
They are:
Legal Fees – A solicitor will need to be hired to handle the legal paperwork. This can cost anywhere between £1,000 and £2,000.
Land Registry Fees – Houses sold between £100,001 to £200,000 will cost a £200 land registry fee, while houses between £200,001 to £500,000 will cost around £300.
Cash Buffer – It’s a good idea to have some cash spare to deal with any surprise costs – potentially around £2,000. You could also use a cash buffer to update furniture.
Ongoing Costs of BTL
Buy to Let Mortgage
Buy to let mortgages work slightly differently than normal residential mortgages, as they require higher deposits, usually 25%. More often than not, buy to let mortgage rates are slightly higher than residential mortgages as well.
Maintenance cost
This typically includes service charge and ground rent (mainly applicable for apartments), management fees which are paid to the agents for arranging repairs of any issues with the property and also finding a tenant and finally the cost of any repairs which is paid to a contractor.
Potential ongoing costs for investing in UK property include:
Mortgage interest rates
Ground rent
Property management fees (if you want a hands-off investment. Check out our guide to how to manage your investment property to learn more).
Maintenance costs
Corporation tax if you form a limited company
Landlord insurance/ buy to let insurance
Rental income tax
Examples of exit costs include:
Capital gains tax | Estate agent fees | Legal fees
Are you considering buying an investment property in Liverpool or Manchester?
Contact us todayto find out about our property services and how we can help you with your investment. 0151 372 0327.
Mason Verdi is one of the fastest growing, property development & investment companies in the North-West UK. This company started life as sales agents and over the years has evolved into two arms of development and sales. Mason Verdi is a Liverpool based Property developer with track record in development in Liverpool and Manchester, northwest UK.
