5 common running costs of buy-to-let property you must consider

Brett Alegre-Wood
July 16, 2018

Learn how to avoid some running costs and increase cash flow

In recent articles, I’ve examined the common questions that you should ask about buy-to-let deposits and buy-to-let mortgages. The third area of buy-to-let finances to consider is the running costs of buy-to-let investment.

Estimate your buy-to-let investment returns with accuracy

If you want to achieve your lifestyle goals, you must invest to achieve your financial objectives. The mechanics of ROI make property investment extremely attractive as a vehicle to make both passive income and capital gains. However, if you don’t accurately estimate your running costs, you are unlikely to achieve the potential you believe exists.

According to some research, three out of four landlords don’t account for the top 10 costs of running a buy-to-let property when they invest. This means the returns on their investment are lower than expected, resulting in them missing their lifestyle goals. In this article, you’ll learn about the five most common running costs of buy-to-let investment (after the mortgage).

1.      Repair and maintenance costs

If you buy existing residential property, the chances are that you will incur repair costs. This might include painting and decorating, new carpets, fixing a leaky roof, repairing the central heating system or replacing the hot water boiler, and so on.

These costs can be unpredictable, though most successful buy-to-let investors allow for 5% of rental income per year towards these costs. Of course, if you buy off-plan property or new build, these repair costs shouldn’t exist.

2.      Property management fees

Unless you want to do all of the day-to-day donkeys work yourself, and carry out tenant vetting, property inspections, rent collection, and all the rest, then you’ll want to hire a good investment property manager.

3.      Landlord insurance

As I explained in a recent article, savvy buy-to-let investors make sure they invest in landlord insurance. For the protection it provides (even against rent default by your tenant) it’s extremely cheap, though it will still cost you an average of more than £200 per year.

4.      Void periods

After mortgage interest payments, this could be your biggest expense. An extended period without tenants is likely to cost a lot of money. Not only will you miss the rental income, but you will also have to continue paying costs such as:

  • Utility bills
  • Council tax
  • Service charges
  • Ground rent

In addition, you’ll need to pay marketing costs to advertise your property and get it re-let as soon as possible.

Void periods also ‘force’ you to undertake other maintenance work such as cleaning and redecorating, to ensure that the property is attractive to new tenants.

5.      Accountant fees

Don’t forget your accountant. A good accountant could save you a large amount of tax. Worth their weight in gold (and the fees can be offset against the cost of owning your property).

What difference does buying new build or off-plan make?

As my regular readers will know, I’m a big believer in buying off-plan and new build property. While new build usually costs more than existing property, the running costs are usually far lower. There is less maintenance to do and the property benefits from builder guarantees for up to 10 years.

Plus, new build property often attracts a premium rent (because people love living in a new property with all the mod-cons). It’s also my experience that tenants who fall in love with a property treat it as their home and stay longer before considering moving. So, the impact of void periods is minimised, too.

New build usually earns a higher income and incurs lower running costs – and that’s positive for cash flow.

Why don’t you book a strategy consultation with Gladfish You could be just a single phone call from discovering how investing in property could change your life.

Live with passion and fun,

Brett Alegre-Wood


Buy-to-let property

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