With many still looking at buy to let as the best option for investing funds including pensioners exploring the new pension rules it is essential that any potential property investor looks at buy to let costs as this can greatly affects yields and return on capital.
With a variety of different types of property available to the property investor the buy to let costs of each property being considered may persuade individuals to re-evaluate their potential property investments. It is important that property investor does not overestimate the level of income that the investment property will produce. So terms such as return on capital, return on investment and net yields should be investigated fully.
What does net yields mean to the buy to let investor? Has this taken into account the buy to let costs?
There are one off costs such as solicitor fees that can be added on to the purchase price to understand the total capital outlay but if the property investment is to provide good income levels which is the focus for most property investors, then the other ongoing buy to let costs need to be researched and identified . The true net yield or income may be lower than anticipated
Firstly letting fees , i.e. finding a tenant these come at differing levels depending in whether you require the letting agent to part or fully manage the property of even manage it all . Their fees depending on the service may be payable upfront at the beginning of the tenancy or ongoing every month. In the case of leasehold properties there is the cost of the lease ongoing i.e. ground rent bit also there may be block charges to cover general maintenance and cleaning of the communal areas as well buildings insurance. It is important to clarify what the maintenance covers as some properties will also have additional contributions required for maintenance of the building and also there may be a contributing for a sinking fund. Even if the property is not leasehold maintenance is required and allowances for the property should be taken into consideration. If furnished costs for future replacement may also be required. Some freehold properties also have an estate charge or similar.
These are basic buy to let costs and do not take into account the costs of any finance or mortgage that the property investor may have used to purchase the property.taxation is also a consideration although some costs may be offset against tax . Investment Property Consults are experienced in assisting property investors and work with experienced tax advisors who work with Uk and international property investors. We are happy to discuss the buy to let costs and other points to consider when investing in property with those considering buy to let.