If you are in the buy to let business or a landlord, you must be aware that buying a property as an investment is something completely different from buying a property as a house you plan to live in, especially in London. Keep in mind that this is all about figures and so many landlords argue there is no emotional element necessary in their decision to invest in properties.
Yet, some landlords, such as residential buyers continue to make the mistake of overlooking all the costs that come with buying a property, which ultimately can trip them financially. As landlords work with estate agents in East Dulwich, this should give them the power to make the best decision in terms of how they should budget the property they wish to purchase.
Read on below to learn about the top six costs that you as a landlord need to keep in mind when you purchase your buy to let property in London.
1. The Stamp Duty
Stamp duty is something that most people do not consider as a factor into their purchase costs, however, some landlords can forget about the minor percentage surcharge that has been introduced on all buy to let as well as second homes.
Note that this could mean you will end up paying about £10,000 on the stamp duty for a buy to let property that is well worth £250,000. However, for further information on how you should calculate the amount you need to pay, you can also get in touch with your estate agent, such as one at Fish Need Water to check out the stamp duty for landlords.
2. Maintenance costs
Keep in mind that the maintenance costs vary; they can be everything from the amount you need to spend to get the property up to the right standard for the rental market. This is to make sure that you know the exact cost of the monthly service charges as well as the ground rents if you plan to buy a property on leasehold.
In London, most flats fall under the leasehold properties, so if you plan to buy a flat, you will need to keep the service charges as well as the ground rent well in mind, and whether the property to rent should be furnished or not, as well as whether any of the parts need any refurbishing.
In addition, you have to study how the lease information will have to be and how the charges could increase in the days, years to come. Every ten years, the ground rents can double potentially, as an example; a recent study showed that the average landlord ends up spending about £2000 just on the maintenance costs.
3. The Appliances
As a landlord, it is your duty and responsibility to replace and repair appliances that you supply, hence the costs of these checks is something that needs consideration in your budget. Legally, it is also your requirement to have an annual check for gas carried out on all the appliances, fittings and flues at your property. Keep in mind that the cost of the gas safety check is something that will vary depending on who exactly provides it, as well as how many items will need checking.
4. Void Periods
If you plan to buy a property through a mortgage with the help of mortgage advisors, this still needs payments, along with utility bills, and whether or not the tenant lives on the property, the need for payments is important. As such, keep in mind that it is worth the budget for void periods. It is also worth it to keep in mind that there are different insurance policies, which will not cover you when the property is unoccupied. Therefore, it is worth it to keep unoccupied property insurance in to consideration, especially when purchasing the policy.
5. The Insurance of the Building
Most of the lenders ask for proof of the insurance of the building if you require a mortgage for the investment property. This will cover the structure of the property even against factors like flooding or fire.
Note that you would want to protect the contents, including the fittings and fixtures against such events. If they were under any damages or experienced a destruction, which you did not insure, you will have to pay for the replacement and repairs out of your pocket.
6. The Letting Fees
This is something vital for cash flow, if your figures all add up and if you have a monthly rent-paying tenant. Typically, keep in mind that agents charge about 10-15 percent of the rent to help the tenants collect and find rent on your behalf.
With letting agents not being able to charge for the rents, your fees could go up, so you have to keep this factor in mind.
In order to avoid additional costs, it is advisable that you keep these tips in mind. Once you add these to your property budget, you will be able to manage the costs well.