How much money do you ACTUALLY need to invest in property? | Home

Tuesday 25 April 2023

Investing in property in the UK can be a lucrative way to build wealth, but it's important to be informed about the real costs involved in purchasing one. Here are some of the costs you can expect when buying an investment 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:

Assuming you will be purchasing with a mortgage & you want to use a broker, there will be a fee to pay for sourcing the best mortgage deal. Always look for a ‘whole of market’ broker so they are looking at all mortgages available.

Amount = £300 - £600

2. Solicitors:

A solicitor helps to oversee the legal process of the sale so that ownership is lawfully transferred to you. When choosing a solicitor, make sure they are a member of Law Society of England and Wales and a member of the Law Society’s Conveyancing Quality Scheme. 

Amount = £800 - £2000  

3.Stamp duty:

This is a tax on property transactions, and the amount you pay depends on the purchase price of the property, as well as the number of properties you already own & where in the world you’re located.  

Amount = Rate varies depending on if you already own a property or are located overseas.

4. Deposit:

Most lenders require a deposit of 25% for investment properties & this is the largest chunk of money required when investing in a buy to let property.  
Amount = dependant on price of property  

5. Home Survey: 

Before buying an investment property, especially for a non-new build property, it's important to have it inspected by a professional. This will help you identify any potential issues that could be costly to fix & allow you to re-negotiate the price. There are different levels of survey which offer a different amount of comprehension. 

Amount = £400 - £1,500 

6. Home insurance:

If buying a property with a mortgage, most mortgage companies require you to have a home insurance policy in place before completing on the property. 

Amount = £150 - £350 

All of these costs are up front costs, to be paid before you have completed on the property. 

7. If the property is not a new build or off-plan property, depending on the condition, you may need to make renovations or repairs before renting it out. This can be a significant expense, and it's important to budget for it upfront. 

Amount = dependant on works 

Case Study Example:

Sarah lives in the UK, owns her own home & is buying her first investment property in her own name.  

The property is a new build flat in Derby for £185,000 & she will be purchasing with a buy-to-let mortgage. 

These are the upfront costs she’s likely to incur: 

- Mortgage broker: £500 Solicitor: £1,200 
- Stamp Duty: £5,550 *Sarah must pay a second home stamp duty of 3% as she already owns a property. - -- Luckily, no residential rate is charged because the property purchase price is under £250,000 
- Deposit: £46,250 
- Home Survey: £0 *As this is a new build property a survey wasn’t necessary 
- Home Insurance: £200 

Total Upfront Cost = £53,700 

As you can see, there’s more costs involved when investing in a property than just the deposit amount. By understanding these costs and budgeting accordingly, you can make a sound investment that will generate long-term returns. 

At ERE Property, we source development deals in high-growth areas with the strong yields and the best long-term capital gain prospects.

Contact us today to discuss our UK property hotspots and find a property suited to your needs and budget!

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