Investing in a UK buy-to-let property can be rewarding, but it’s important to understand the full costs of being a landlord. Beyond the purchase price, landlords face taxes, insurance, maintenance, and management fees, all of which affect profitability. This guide provides a clear overview of the true costs and considerations to help you make informed buy-to-let investment decisions.
As property finders/buying agents we help homebuyers from different walks of life with their property search and acquisition – from first-time buyers, down-sizers, up-sizers, tree changers not to mention people looking for a second home, holiday home or countryside retreat for weekend escapes from the hustle and bustle of city life.
Over the last few years we have also seen an increased number of investors seeking our property finding services – from time poor busy seasoned investors (both from the UK and overseas) to people brand new to property investment, wanting to dip their toe into this asset class investment to make their hard earned cash or pension work better in terms of returns.
I consequently thought I would write a little blog post on the subject of buy-to-let property investment, and focus in particular on the true costs of being a landlord. As a buying agent, this is one of the very first subjects we discuss with anyone new to residential property investment.
So what are the true costs of being a landlord?
Firstly, there are the various costs to be factored for residential BTL investment:
Capital Costs and Expenses (CAPEX) – Fees associated with property purchase and disposal:
- Stamp Duty (SDLT)
- Valuation Fees
- Property Survey
- Legal Costs (Solicitor/conveyancer fees and disbursements eg.
search fee, registration fees, etc) - Mortgage Arrangement Fees
- Income Tax – payable on your rental income, minus day to day
running costs (specific rules apply for overseas landlords) - Class 2 National Insurance – if renting properties is a business
- Estate Agents Fees (on sale of asset)
- Capital Gains Tax (CGT) on disposal of the property
Operating Costs (OPEX) – List of the day to day running costs to factor:
- Letting Agent Management Fees
- Mortgage Interest
- Landlord, Building and Rent Insurance (designed to protect you
against having tenants in arrears or failing to vacate your property) - General Building Maintenance (e.g. redecorating)
- Annual safety checks (on the boiler, etc.)
- Tenant Acquisition
- Empty/Void periods
FYI – upon starting a new tenancy, the landlord must serve a tenant:
- an Energy Performance Certificate (EPC) for the property
- a gas safety certificate (if your property has gas appliances)
- Smoke & Carbon Monoxide alarms
Here is a useful links on the subject of landlord costs with more detailed information on the items listed above:
https://www.axa.co.uk/landlord-insurance/hidden-costs-of-being-a-landlord/
One important consideration is how you will hold the property. By this we mean, will you own the property in your name as an individual or will you set up a company and hold it under the company name? It is essential that any potential investor, no matter how experienced, speak to an accountant before purchasing a property as there are technical and complex tax implications that can be difficult and expensive to unpick at a later date.
In my next blog, I will be discussing some of the options available for UK property investment, looking at the pros and cons of each.
As property buying agents, we offer a complete end-to-end service that covers every aspect of the buying process, from strategy discussion and consultation through to search, shortlist, due diligence, inspections and viewings, negotiation and overseeing the conveyancing all the way to completion/hand over to a letting agent.
Since we are property investors ourselves, we have the knowledge and experience in sourcing a diverse range of investment properties to suit various investment strategies and objectives: for capital growth, high yield and income generation, portfolio creation/building and one-off investments.
UK buy-to-let property investment offers potential income and long-term capital growth, but success depends on careful planning and understanding the costs involved.
By working with a knowledgeable buying agent and property experts, investors can identify the right properties, manage risks, and optimise returns in the UK rental market.
For more information about Domus Holmes Property Finder, please contact:
Jerome Lartaud: jerome@domusholmes.co.uk or follow Jerome on LinkedIn
Feel free to also follow Domus Holmes Property Finder on LinkedIn or Instagram
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