Buy to Let Costs: How Much Does It Cost to Be a Landlord?

Venturing into real estate and becoming a landlord can be a very lucrative long-term investment, but first-time property owners have a tendency to underestimate the costs involved. First-time landlords typically focus too much on the rental income itself and underestimate buy-to-let costs such as maintenance, insurance, legal fees, and the impact of vacant periods on their bottom line. 

Understanding the full scope of buy-to-let costs means taking a look at not just the initial purchase costs but the ongoing expenses associated with managing a property. 

This guide will cover both the upfront and ongoing costs that landlords are likely to encounter when entering the rental market.

The Upfront Costs of Buying a Rental Property

Before you start earning rental income, there are substantial upfront costs to account for. These one-time expenses can affect your initial investment and should be carefully included in your financial planning.

Deposit & Stamp Duty

The biggest initial expense for landlords is the mortgage deposit. And unlike typical residential mortgages, buy-to-let loans usually require a bigger deposit - often around 25% of the property value. Some lenders will accept lower deposits but at higher interest rates, which often raises the overall borrowing cost. 

Besides the deposit, landlords also need to factor in Stamp Duty Land Tax (SDLT), which includes a 3% surcharge on additional properties. The total amount varies based on the property's value and location, with Scotland and Wales following different tax systems—Land and Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales.

For example, purchasing a £250,000 property would require a £62,500 deposit and around £10,000 in Stamp Duty. 

Legal & Mortgage Fees

Conveyancing fees typically range from £1,000 to £2,500 and cover solicitor charges, property searches, and essential legal checks. Mortgage arrangement fees vary by lender, usually falling between £1,000 and £3,000, with additional broker fees if you choose to use an intermediary.

Property Refurbishment & Compliance Costs

Before letting out a property, landlords must ensure it meets legal and safety standards. This can range from minor touch-ups to major renovations. Some of the main compliance costs include:

• Gas Safety Certificate (£60-£100 per year)
• Electrical Installation Condition Report (EICR) (£150-£300, required every five years)
• Energy Performance Certificate (EPC) (£60-£120, with a minimum ‘E’ rating—soon increasing to ‘C’ for new tenancies)

Related: Landlord Responsibilities and Legal Obligations: The Checklist

Some landlords may also need to budget for furniture, white goods, and minor repairs, which can add anywhere from £1,000 to £10,000 to their initial expenses.

Ongoing Buy-to-Let Costs

Once the property is occupied, there are several regular expenses that impact cash flow and profitability. Managing these costs effectively is key to maintaining a healthy return on investment.

Mortgage Repayments

In most situations, mortgage repayments will be the biggest recurring expense. Many opt for interest-only mortgages to keep monthly costs lower, while repayment mortgages gradually build equity in the property over time.

For example, a £200,000 interest-only mortgage at 5% interest would cost around £833 per month, while a repayment mortgage at the same rate over 25 years would be closer to £1,169 per month.

Letting Agent Fees vs. Self-Management

Many landlords hire the services of a letting agent so that they can take a more hands-off approach when it comes to finding tenants and collecting rent. However, this convenience comes at a cost:

• Tenant-Find Only: £500-£1,500 (or 8-12% of annual rent)
• Rent Collection Service: 5-8% of monthly rent
• Full Management: 10-15% of monthly rent

For a property renting at £1,000 per month, a fully managed service could cost between £100 and £150 monthly, adding up significantly over a year. 

To cut these costs, some landlords choose to self-manage their properties using digital tools. Platforms like Landlord Studio allow landlords to track rent payments, expenses, and maintenance requests efficiently without relying on an agent.

Landlord Insurance

Standard home insurance doesn’t cover rental properties, so landlord insurance is a must. Policies can include:

• Building Insurance (£150-£500 per year)
• Contents Insurance (£100-£300 per year if letting a furnished property)
• Rent Guarantee Insurance (£200 per year, protecting against tenant non-payment)

Maintenance & Repairs

Keeping a rental property in good condition is not just the right thing to do, butit helps with retaining tenants and also in avoiding costly emergency repairs. It’s advisable to set aside 1-2% of the property’s value per year to cover maintenance costs. 

Common expenses include:

• Boiler servicing: £80-£150 annually
• Roof repairs: £500-£2,000
• Plumbing issues: £80-£400 per callout

Though it can be tempting not to budget for these expenses, if you don’t, they can really catch you off guard and impact your profitability. Baking these costs into your business model will ensure it is profitable from the get-go. 

Void Periods

Even well-managed properties go through void periods between tenancies. During these times, landlords must still cover mortgage payments, council tax, and insurance without rental income. 

To stay financially prepared, it's wise to budget for at least one month of vacancy per year.

Hidden Buy-to-Let Costs That Landlords Often Overlook

Some expenses catch landlords off guard, particularly taxes and regulatory fees.

Tax Liabilities

• Income Tax: Rental profits are taxed based on the landlord’s income bracket.
• Capital Gains Tax (CGT): Payable when selling a buy-to-let property, with rates of 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. 
• HMO Licensing Fees: If renting to multiple tenants, an HMO licence can cost £500-£1,500, depending on local council requirements.

Tenant Evictions & Legal Fees

If a tenant falls into arrears or a dispute arises, legal action may be necessary—and it can be expensive. Eviction proceedings under Section 8 or Section 21 can cost between £1,500 and £3,000 in legal fees, not to mention the loss of rental income during the process.

Council Tax During Vacancies

While tenants typically cover council tax while living in the property, landlords are responsible for payments during void periods. Some councils offer discounts for vacant properties, but costs can range from £100 to £400 per month, depending on the property’s council tax band.

How to Reduce Costs and Maximise Profits

With rising expenses and tighter regulations, landlords must actively manage costs to ensure profitability. Here's how:

• Use Digital Tools: Platforms like Landlord Studio can track rental income, expenses, and maintenance requests, reducing reliance on agents.
• Review Mortgage Rates Regularly: Refinancing at a lower interest rate can save thousands over the life of the loan.
• Prevent Long Void Periods: Keeping tenants satisfied and maintaining the property reduces tenant turnover.
• Maximise Tax Deductions: Properly tracking all allowable expenses can lower taxable profits and increase net income.

Final Thoughts: Is Buy-to-Let Still Worth It?

Despite rising buy-to-let costs, property investment can still be a strong way to generate income and build long-term wealth. Success, however, depends on careful budgeting, smart cost management, and strategic decision-making.

Landlords who stay on top of their expenses, maintain accurate financial records, and manage their properties efficiently are better positioned to navigate increasing costs and maintain profitability. 

Want to learn more about how you can cut costs and simplify your property management?

Create your free Landlord Studio account today and take full control of your rental finances.

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