A PropTech firm says it has calculated the true cost of being a buy to let investor.
Howsy says the average landlord is left with just over £2,000 from an annual return of £13,000 once “hidden costs” are taken into account.
So, based on a buy to let property costing £183,278 ( the typical sum paid for an investment unit according to Moneysupermarket), Howsy calculates:
- initial start-up costs for Stamp Duty (£6,663) and agency fees to find a tenant (£811) cost the average landlord £7,475;
- the average 23.75 days void per year cost £535;
- some £6,921 payment on an interest-only mortgages;
- an additional £1,622 in agency management fees and an average annual maintenance and repair bill of £2,077;
- these all total £11,147.
The PropTech firm then says that based on an average annual rental income of £8,112, divided by the average B2L property cost of £183,278, the yield is 4.4 per cent or an annual sum of £8,119. Add to this capital appreciation which, at 2.85 per cent, comes to £5,223 and the total return in a year is £13,343.
Deduct the £11,147 from the £13,343 and you get a profit of only £2,140.
“Investing in an area with higher yield is one way to increase profit but you can also squeeze every last penny out of your property by shopping around on things like mortgage rates and which agent to use” says Howsy chief executive Calum Brannan.