Understanding the potential costs of a buy-to-let investment holds the key to a profitable BTL venture, however, many prospective investors fail to look beyond basic buy-to-let rates (i.e. loan interest) when assessing affordability.

If considering the purchase of a second home to generate rental income, use our helpful buy-to-let calculator for an overview of what to expect. After which, we would be delighted to conduct a complete market comparison on your behalf, in order to help you find the best possible buy-to-let mortgage.

Costs Vs Returns: In Summary

Returns on a buy-to-let investment can be generated in two ways:

  1. From the monthly rent you collect
  2. From property price growth over time

Depending on the type of property you intend to purchase and where, buy-to-let can be a relatively safe haven for investors. This is particularly true where annual house price growth is strong and consistent, though capital gains must be considered alongside rental yields to ensure a profitable investment.

In addition, could be several further costs that should be factored in when assessing the affordability of a buy-to-let investment. The most important examples are as follows:

  • Stamp duty
  • Valuation fees & surveys
  • Legal costs
  • Mortgage arrangement fees
  • Income tax payable on rental income
  • Class 2 National Insurance (if letting as a business venture)

Although some mortgages offer free legal & valuation costs etc. each of these can heavily affect the initial affordability of a buy-to-let property purchase opportunity. The APR of the loan taken out will subsequently have the biggest impact on the overall balance of the loan to be repaid.

Day to Day Costs

Assessing all day-to-day costs is also important as they are tax deductible and can be subtracted from your taxable rental income. Examples of day-to-day costs to be factored in include the following:

  • Essential maintenance and upkeep
  • Decorating and improvements
  • The interest only portion of the APR charged on your mortgage payments
  • All letting agent and marketing fees
  • Gas & electrical safety checks and other routine maintenance
  • Rent and landlord’s insurance
  • Purchasing of furniture and fixtures

Increasingly, pressure is growing on landlords to ensure their rental properties are in the best possible state of repair and are comprehensively safe for their occupants to reside in. It is therefore worth bearing in mind that the vast majority of money spent on your buy-to-let property on an ongoing basis is tax deductible.

Independent Expert Advice

If you are interested in buy-to-let though have questions or concerns about affordability, we would be delighted to provide you with an obligation-free consultation. Use our online buy-to-let calculator for an overview of associated costs, after which we will conduct a whole-market comparison on your behalf.

No fees or commissions payable to us – the advice we provide are obligation-free and cost-free for our customers. Call anytime to learn more or send us an email detailing your requirements and we will get back to you.


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