Can I Afford An Investment Property?

Purchase and stamp duty

This probably goes without saying, but having a clear idea of the price of the purchase with the added stamp duty is essential, as this will affect everything. You will need to put forward a deposit, and for a buy-to-let property this tends to be a minimum of 25% for most lenders, if you’re buying with a mortgage. If you’re buying with cash, it will be down to the seller what deposit needs to be paid and at what stage.

Legal and conveyancing fees

Certain legal fees apply to any property purchase by both owner-occupiers and investors. Conveyancing is usually carried out by a solicitor or conveyancer, and involves legally transferring home ownership from the vendor to the buyer. The process begins when an offer is first accepted on a property – this is the stage at which the buyer instructs a conveyancer or solicitor to act on their behalf – and continues right through to completion when you are handed the keys to the property. The rate you pay for this service will depend on the individual solicitor. Most agents will recommend a local solicitor to use, but buyers can also shop around.

Mortgage and valuation costs

Most lenders will charge an arrangement fee, and many buyers will also choose to use a broker who can find and arrange the best deal, which may involve an additional cost. Further to this, lenders require a bank valuation of the property to be carried out to ensure there’s no discrepancy between what is being paid and how much the bank deems the property to be worth. This can cost anywhere in the region of £250 to £1,000 plus VAT, depending on the property value. Buy-to-let mortgage rates are currently very competitive, although still tend to be higher than traditional residential mortgage rates.

Furniture packs

When buying an investment property, many landlords and investors want to offer a fully furnished apartment. One way to do this is to buy a “furniture pack”, where the whole home is furnished to suit your budget and property. It can make it easier to budget rather than trying to source items individually. It also saves time for busier landlords and investors, and the brand new furniture can be a selling point for potential renters. Costs will vary depending on the size of the property and the quality of the furniture.