If you’re considering buying a property to rent out, you need to consider how much it will cost you to maintain, on top of any mortgage you may need to pay. You won’t be able to exactly predict all the costs because you never know when the fridge may break or the bathroom may spring a leak. However it’s best to make predictions including room for any unexpected fixes!
Howsy, a property management platform, has calculated the yearly costs of maintaining a buy-to-let in different areas of the UK.
On average, if we include the 3% stamp duty surcharge, other taxes, periods the property sits empty, mortgage payments, letting agency fees, costs for finding a tenant, and more, it’s predicted that the average annual return is £2,000 on a buy-to-let.
With these average profits not being that high, it’s best to put aside some money every so often for any maintenance needed out the blue. This could vary from under £100 to thousands depending on the issue. An industry rule is to save away an annual amount of 1% of the property’s value that you’re buying to let.
What does this saving average in different regions?
The average to save annually is £2,344 in the UK, but how does this differ per area of the UK? As expected, London has a higher charge at £4,746, compared to the lower costs in the North East at an average of £1,328.
In the most expensive areas of London, this 1% annual saving for unexpected maintenance increases to a huge £12,292 in Kensington and Chelsea, and to nearly £9,000 in Westminster.
What about the most expensive outside of London? This falls to South Bucks and Elmbridge, with costs of £6,091 and £6,019. The areas where the recommended annual saving are Burnley and Blaenau Gwent.
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How can I increase my yield?
With governmental changes to the rental market, if you’re new to the game it’s important to do all you can in order to maximise the return on your investment. Perhaps give the home a lick of paint and a new kitchen so you can charge more per month in rent. Some simple home improvements could yield you great returns if it attracts the right tenants for the right price. Furthermore, happy tenants means lower risk of void periods where your house sits empty and doesn’t bring in any rent, while still costing you council tax.
Will a 1% saving always be enough?
This 1% saving pot of the property’s value is just a rule of thumb, bear in mind that costs could amount to more. If you can, it’s a good idea to save up a little more. If you’re a few years into renting out property, you may find that previous years with lower costs have allowed you to save up more for anything larger that may be round the corner.
There is of course the option to either manage the property yourself, or having a letting agent do it. Whichever you choose, it may not be the easiest but investing in property can be one of the best forms of investment. Just ensure you’re prepared for the unpredictable!
How much do you save for your rental properties? Let us know in the comments below.
I began writing for Property Press Online in October 2019. Particular areas of interest are housing market news and new developments in the market.