How Much Money Do You Need to Invest in a UK Property?

Investing in property in the UK can be an effective way of building wealth, but it’s important to be aware of the real costs associated with buying an investment property. Here are some of the expenses you could expect when investing in a buy-to-let property in the UK: To make it easier, we’ve broken it down into the usual order you would carry out each stage. 

  1. Mortgage broker: If you are taking out a mortgage, you may choose to use a broker to help you find the best deal. Go for a ‘whole of market’ broker to ensure that you’re looking at all the options. Amount = £300 - £600 
  2. Solicitors: You will need to use a solicitor to help with the legal process of the purchase, making sure that ownership is lawfully transferred to you. Ensure that the solicitor is a member of the Law Society of England and Wales, as well as a member of the Law Society’s Conveyancing Quality Scheme. Amount = £800 - £2000 
  3. Stamp duty: Stamp duty is a tax on property transfers, and the amount you pay depends on the purchase price of the property, as well as the number of properties you already own and where in the world you’re located.
  4. Deposit: Most lenders require a deposit of 25% for investment properties & this is the largest amount of money required when investing in a buy-to-let property. Amount = dependent on price of the property 
  5. Mortgage Valuation: Sometimes there is a separate fee for the mortgage, bank finance company. 
  6. Home insurance: If you are taking out a mortgage, most lenders will require you to have a home insurance policy in place before completing on the property if it is a house. For apartments the buildings insurance is included in the service fees. For a house the cost is between £150 - £350 and based on the rebuild value. 

Case Study Example: Farah, who lives overseas is buying her first investment property in the UK in her own name. The property is a new build off-plan apartment in Manchester for £170,000 and she will be purchasing it with a buy-to-let mortgage. These are the upfront costs that she is likely to face: - 

  1. Mortgage broker: £1,200
  2. Solicitor (Property Transfer Lawyer): £1,100
  3. Stamp Duty (Property Transfer Tax): £8,500 - Farah must pay a second home stamp duty of 5% which is made up of 3% as she will not be living in the property (purchase will be classed as a second home as she has one overseas) and an additional 2% as she is not living in the UK and is overseas.  As the property purchase price is under £250,000 then there are no additional charges. Apart from the 5%. Over £250,000 and further taxes would apply.
  4. Deposit: £34,000 – 20% deposit and a mortgage of 80%.
  5. Mortgage Valuation: £0 *as this was included in the mortgage fees.

Total Upfront Cost = £44,800 ($55,700)

After the purchase Farah will earn approximately £1,062 per month in rent and the mortgage interest payment will be around £600 per month leaving a profit of £462 (from which she will pay service fees and any management fees).

There are more costs involved when investing in a property than just the deposit amount. Therefore, by understanding these costs and budgeting accordingly, you can make a wise investment that will generate long-term returns.

Back to Blog

Related Articles

Why Property is the Asset Class of Choice for Investment in the UK

With banks and building societies providing poor returns it is not surprising that thousands of...
Read More

HMOs in the UK: A Profitable Investment Opportunity Unveiled

If you're new to property investment, you might wonder what an HMO (House in Multiple Occupation)...
Read More

Rising Yields Boost UK Property Investment

In a promising development for property investors, England and Wales have experienced a consistent...
Read More