Cost of Maintaining a Buy-to-Let Hits £12k a Year in Parts of London

Luxury

From the more obvious additional three per cent stamp duty tax to various other tax implications, void periods, mortgage costs, agency fees, the cost of finding a tenant, and more, research shows the average buy-to-let brings an annual return of just £2,000.

With the Government’s continued attack on UK landlords, making the most out of your investment can be difficult and even when you consider all financial commitments for a property, many can still be caught unaware by out of the blue maintenance and repair costs.

Buy-to-let landlords should squirrel away savings in anticipation of these events, and an industry rule of thumb is an annual budget equivalent to 1% of your property’s value.

So what does that equate to?
Across the UK landlords should be tucking away an annual budget of £2,344 to cover repairs and maintenance, with this rising to £4,746 in London, with the North East home to the lowest repair costs at just £1,328.

Of course, markets with higher rent returns may seem promising from an investment standpoint, but the higher the reward, the higher the cost when things do go wrong. In Kensington and Chelsea, this annual 1% saving climbs to an eye-watering £12,292, hitting nearly £9,000 in both the Cities of London and Westminster.

Outside of London, South Bucks and Elmbridge are home to the most expensive buy-to-let maintenance costs at £6,091 and £6,019 respectively.

Head to the likes of Burnley or Blaenau Gwent however, and this yearly maintenance budget drops to less than £1,000 a year.

Founder of Howsy, Calum Brannan, commented: “The buy-to-let sector can be a minefield for the amateur investor and now more than ever, it’s imperative that you do everything you can to maximise the return on your investment.

While technology now allows a higher level of control and service when managing your investment at a lower cost via online platforms, it isn’t just about the financial side of things. Providing a fit for purpose property is not only a legal requirement but essential to ensure a happy tenancy and a reduction in void periods.

Of course, things can go wrong and having the budget available to fix them is a must. In the worst-case scenarios, a cash pot equal to one per cent of your property’s value might not be sufficient, but it should cover you for most eventualities and is a good benchmark to start on.

As with all buy-to-let investments, good preparation, organisation, and education are key, and whether you go it alone or have a great management agent if you stay on top of things, a bricks and mortar investment is still one of the best you can make.”

Data sourced from the Land Registry house price index.

Read more property-related articles in our dedicated section here.

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