How Much Money Do I Have Available to Invest?
This stage is perhaps the most important of all when embarking on your first property investment purchase, as it’s the stage that you will think about how much money you’re actually willing to invest and establish an investment budget.
It’s possible to invest in property with a range of budgets, and you may be surprised how little you need to get on the buy to let property ladder.
Can You Afford Your Deposit?
If you are thinking about using a buy to let mortgage for your investment, you should consider how much you can afford in the form of a deposit.
Generally speaking, you will need around 25% of your property purchase price ready for a down payment.
And, of course, the amount you may end up paying to secure your investment property will differ depending on the overall property price.
For instance, if you are buying an investment property worth £100,000, you will need to pay a down payment of at least £25,000.
Think about how much money you have available for a down payment, and then you’ll gain a better idea of the property price you can afford.
Can You Afford Property Taxes?
There are different taxes involved with owning a rental property. The main ones for you to factor into your purchase include:
- Stamp duty tax
- Rental income tax.
Stamp duty tax is a tax you’ll pay when first buying your rental property. Rental income tax is a tax you’ll make on any income generated from your investment property.
The cost of your taxes will depend on the overall price of your property, and the amount of rental income you generate from your investment.
Use our free stamp duty calculator to determine how much stamp duty tax you could potentially be paying for your buy to let investment.
Can You Afford Maintenance Costs?
There are different maintenance costs involved with running a rental property.
This could include anything from having to re-decorate in between tenancies to paying for unexpected household issues such as plumbing problems.
This is most likely where your emergency fund will come into play, but you should also think about generating enough rental income to cover unexpected maintenance costs that arise.
If you don’t wish to manage the property yourself, you’ll also need to contemplate hiring a property management company to run the day-to-day duties of owning a rental property on your behalf.
A property manager will find suitable potential tenants, deal with rent payments, and respond to tenant issues. Many investors find having a property manager highly beneficial, but this will incur an extra cost that you’ll need to factor into your budget.