You find a flat listed at £250,000, the rent looks healthy and the numbers seem to work. Then the tax bill arrives, followed by the lender’s fee, the solicitor’s invoice and a boiler that needs replacing before a tenant can move in. By the time the keys are handed over, the property has cost far more than the figure on the listing. The asking price tells you what the seller wants. It tells you very little about what the property will cost you to own.
Why the Purchase Price Only Tells Part of the Story
Whether a property is a sensible investment depends on the total cash you put in and the return it produces over several years. Two flats at the same price can perform very differently once tax, finance, repairs and running costs are added. Looking at the full commitment before you make an offer is the simplest way to avoid a purchase that looks good on paper and struggles in practice.
Purchase Taxes and Upfront Fees
Stamp Duty Land Tax is usually the largest cost after the deposit. In England and Northern Ireland, buyers who will own more than one residential property usually pay 5% on top of the standard rates, according to GOV.UK. On a £250,000 purchase, that means a bill of £15,000 rather than £2,500. Scotland and Wales have their own property taxes with different rates, so check the rules for wherever you are buying.
On top of tax, there are legal fees, searches, a survey and the lender’s valuation. If you use a mortgage broker, there may be a broker fee too. Individually these look small, but together they can easily run into several thousand pounds.
The Real Cost of Borrowing
The interest rate is the figure most investors compare, but it is only one part of the cost of finance. Which? reported that the average fixed-rate buy-to-let mortgage stood at 5.79% at the start of October 2026, up from 5.47% in August. It also pointed out that some of the lowest headline rates come with arrangement fees of up to 5% of the loan, which works out at £10,000 on £200,000 of borrowing. Comparing the total cost over the fixed period, fees included, gives a truer picture than the rate alone.
The right type of finance also depends on the property, your strategy and your timescale. A standard buy-to-let mortgage tends to suit a property that is ready to let. A property that needs major work may not be mortgageable at first, so some investors use short-term bridging or refurbishment finance and then refinance once the work is finished. Broker Rangewell, for example, sets out the different property finance options available, from buy-to-let and HMO lending to bridging and refurbishment loans. No single product suits every purchase, so it helps to understand the options before committing.
Refurbishment and Maintenance
Even a property described as “ready to move into” can need work before it meets letting standards. Rental properties need gas safety checks, electrical inspections and a suitable energy performance rating, and older buildings often hide damp, roofing or wiring problems. It’s sensible to build a contingency into any refurbishment budget and set aside money each year for ongoing maintenance. Our guide on how to mitigate risks in real estate investments covers why surveys and due diligence matter here.
Ongoing Running Costs
Once the property is let, regular outgoings start. These typically include:
- Landlord insurance, which we break down in how much is landlord insurance
- Letting or full management fees, usually charged as a percentage of the rent
- Service charges and ground rent for leasehold flats
- Licensing fees, where your local council requires them
- Accountancy costs and tax on rental profits
Tax is worth watching closely. The Which? report also notes that income tax rates on property income are due to rise by two percentage points from April 2027, which will reduce what many landlords keep from their rent.
Rental Voids and Cash Flow Pressure
Every property will sit empty at some point, whether between tenancies or while repairs are carried out. During those weeks the mortgage, insurance and bills still need paying. A small change in borrowing costs can also make a difference over time. Which? calculated that a £200,000 loan over 25 years costs £35 more each month at 5.8% than at 5.5%.
Before buying, test your numbers against a few less comfortable scenarios. What happens if the property is empty for two months, the rent drops by 10%, or your rate rises when a fixed deal ends? If the investment only works when everything goes to plan, it may be stretched too thin.
How Much Cash Do You Really Need? An Example
Here is an illustrative example for a £250,000 buy-to-let in England, bought with a 75% mortgage. The legal, refurbishment and reserve figures are examples only.
| Cost | Amount |
|---|---|
| Deposit (25%) | £62,500 |
| Stamp Duty Land Tax (with 5% surcharge) | £15,000 |
| Lender arrangement fee (3% of £187,500) | £5,625 |
| Legal fees, survey and valuation | £3,000 |
| Initial refurbishment | £8,000 |
| Cash reserve (about six months of interest at 5.8%) | £5,450 |
| Total cash needed | £99,575 |
The headline deposit is £62,500, but the cash needed is closer to £100,000. Some lenders let you add the arrangement fee to the loan, which lowers the upfront cost but increases the interest you pay.
Looking Past the Listing Price Before You Commit
The figure on the listing is only where the real costs begin. Adding up tax, finance, repairs, running costs and a realistic cash buffer shows whether a property can carry itself or will rely on your savings to stay afloat. Doing that maths before you make an offer puts you in a stronger position, whether you go ahead, negotiate the price or walk away. If you are planning more than one purchase, our tips on building a profitable rental portfolio in the UK are a useful next read.
