Costs of letting out your buy-to-let property

Management cost

Management costs can vary depending on location and your management companies level of service. Some will provide a cheap service as low as 5% others may offer an all bells and whistle service at a premium rate of 15%. A premium service may include finding you a tenant and then assisting tenants with everything from utilities to maintenance. A premium agent will likely have a far bigger operation that includes a tenant app (for maintenance, bills, utilities) to make tenants life as easy as possible.

This can help with tenant retention which will then reduce void periods and may help you hold onto good tenants. A cheaper service may be sufficient for the daily operations and all your tenants’ essential needs, depending on your management company it may also include finding you a tenant. However, it is also likely that a tenant finding fee may be applicable which could vary from a fixed cost of £150-£300 (depending on location) rather than a percentage.

As a middle of the road figure calculate 10% or to be safe calculate a 12% of your gross income as a management fee. In addition to these fees you will need to add standard VAT.

Finding a tenant

As covered briefly above your management fee may cover finding a tenant. However, this may not be the case depending on your agreement. So, it is worth asking and considering when you are looking for a management company. It could be a fixed fee of £150-£300 or part of the package. These costs cover the price that management companies/estate agents spend advertising your property.

As an example an account on Zoopla is around £800 and an account on right remove can start from £1000 per month. Other platforms for STL like Airbnb charge around 3% of total booking price. There are ways of doing this for free if you are willing to take charge yourself. Sites like Strike or Open Landlord allow anyone to list their property for free, and then take care of enquiries and viewings themselves.

Maintenance

Maintenance can vary greatly depending on the condition of your property. If you own a property long term then eventually you will need maintenance, but you will likely need maintenance from the get-go even with a new build. We would estimate on our own experience budgeting 10% of rental income on regular maintenance. It can vary greatly on the type of tenants you have to, an HMO with students is likely to cost more than having professionals or families as long-term tenants. Short-term-let tenancy will also cost a lot more in property damages leading to higher maintenance.

Monthly operating expenses

Much of the operational costs may be included in the management fee. However, you may wish to budget a further 10% into your budget for further ad-hoc operational costs and void periods in the property.

Property Insurance

Your annual insurance can range from £150 - £250 depending on the property and its operational purpose. £170 will be an average.

Accountancy fees

Accountancy fees can be found from around £1000-£2000 for your yearly books and tax submissions.

Refurbishment every 7-10 years

If your property is not get up-to-date you will start losing money on rental price and large void periods. A refurb can cost you anywhere from £10,000 - £30,000 depending on the level of spec you need the property. This ranges from just paint job,  plastering repairs, carpets, re-tiling etc… to whole new kitchen bathroom refurbs.