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First time landlords guide: Understanding the cost Vs return

Income

Buying to let investment come from two potential income streams: rent and capital growth of the rising value of the property.

The property market has ups and downs, so if the value of the property goes down, your outgoings exceed the rental yield, or if the property is vacant for a period of time, you can lose money. Being a landlord is therefore a danger of investment in the medium to long term

Outgoings

  • Valuation
  • Property survey
  • Legal costs
  • Stamp duty

Mortgage arrangement charges (If you already have a property with a standard mortgage, you must seek approval from your Lender to rent it out)

Income tax on your rental revenue is payable, minus daily operating costs. Specific laws apply to landlords abroad

If you rent your property as a company, you will have to pay national insurance in Class 2

Day to day costs

It is essential to factor a property’s day-to-day operating expenses into your rental yield calculations.

Here is a list of the main costs:

  • Mortgage interest
  • Landlord’s insurance
  • Letting agent’s fees
  • Redecorating
  • Annual safety checks (gas, electric)
  • Rent insurance (design to protect the landlord again having tenants in arrears or failing to fill your property)
  • General building maintenance