Landlords are losing a third of their rental income to meet the costs of running a buy-to-let property, new research has revealed.
A survey by Kent Reliance found the average costs of owning a rental property, excluding mortgage payments, came to £3,632 per year. This accounts for about 34% of the average landlord’s rental income.
While the report shows that the highest costs are in London, where they can top £10,000 a year, it is landlords in Wales who lose the most income on their running costs.
We’ve created an interactive map to show you how costs vary from region to region.
- If you’re looking for a mortgage on a buy to let property, you can contact our experts at Which? Mortgage Advisers on 0808 252 7987.
The most expensive places to let a property
Perhaps unsurprisingly, landlords in London spend the most on keeping their rental properties in order.
In Kensington & Chelsea, running costs (excluding mortgage repayments) average £13,346 per year. This is closely followed by the London boroughs of Westminster (£10,542) and Camden (£9,025). Outside of the capital, the most expensive areas include South Bucks (£5,105) and Elmbridge (£5,068).
Low running costs, however, are not necessarily the sign of a good investment.
In each of these regions, high costs are partially offset by high rental incomes. Running costs account for just 24% of the average rental income in Westminster and Kensington & Chelsea, 25% in Camden and 26% in South Bucks and Elmbridge.
By contrast, the least expensive areas to let a property also have some of the country’s lowest rents. While letting a home in Blaenau Gwent costs just £1,320 a year, this is a whopping 46% of the average landlord’s rental income.
Similarly, the costs of running a property amount to 38% of rental income in Burnley (£1,380), and 43% in in Merthyr Tydfil (£1,410 ).
What do landlords spend their rental income on?
The biggest cost facing landlords tends to be upkeep, maintenance and servicing – Kent Reliance estimates landlords spend £1,025 a year on this type of work.
Letting agent fees are also a major expense, coming in at around £870 on average. Not using a letting agent, however, could result in prolonged void periods – costing a further £652 a year.
Other major annual expenses include service charges (£312), insurance (£181), utilities (£170) and legal or accountancy fees (£121).
Does your property have the potential to grow in value?
When searching for a buy-to-let property, you need to weigh up the potential costs, including expenses and mortgage payments, against the expected rental income.
This calculation will show how much will be in your pocket each year.
At the same time, you should consider your property’s growth potential. It’s possible a low-yield property in a high-growth area may deliver you a bigger return over the long-term – but keep in mind that house prices can go down as well as up.
In all cases, you need to ensure you can meet your mortgage repayments, even if your property is vacant or needs major repair work.
Your home may be repossessed if you do not keep up repayments on your mortgage. Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.