Five Factors to Consider When Investing in Residential Property

You must budget for the residential property's purchase price but remember to factor in the other costs associated with a property purchase.

In addition to the professional fees of your solicitor, there are likely to be other costs, such as property searches, Land Registry registration fees, surveys and mortgage broker fees which will increase the costs.

If you require a buy-to-let mortgage, you should factor in that lenders often require a higher deposit than a standard mortgage. Buy-to-let mortgages tend to require deposits of 25% of the purchase price.

Suppose you are purchasing under a limited company name. In that case, it is also not unusual for lenders to require the directors to obtain independent legal advice and sign personal guarantees for the mortgage, which will add to legal costs.

It would help if you also considered the ongoing costs associated with certain properties. Flats will be subject to service charges which can run into thousands of pounds annually.

Houses, whether freehold or leasehold, can also be subject to service charges if there are shared areas on the estate, such as a private road or children's play area. Service charges may not be obvious from viewing the property, but your solicitor will advise you of any service charges you will be responsible for.

If you plan to rent out the property to tenants, consider that if an appliance within the property breaks, as the landlord, you will be the first port of call to get it replaced or remedied. We have explored other costs landlords are likely to incur below.

You are probably hoping for the transaction to complete as soon as possible so that you can get on with renting it out or renovating the property and then reselling it, known as ''flipping''.

It would help if you asked the estate agents or seller to confirm the extent of the chain before you put in an offer, as chains may lead to delays. Remember, the transaction can only move as fast as the slowest party in the chain.

It is worth considering that older properties were not built with today's rules and regulations in mind, and you can sometimes inherit problems, and it may be harder and more expensive to maintain simply due to the age of the property.

From 2025, all newly rented properties must have a minimum EPC rating of C or above. Currently, properties only require a rating of E or above. Existing tenanted properties will have until 2028 to comply.

If you are purchasing a property with renting it out in mind, and the EPC rating is below a C, you will need to carry out improvement works to the property to get the rating to C by 2028.

Older properties are more likely to require the need to make changes to increase the EPC rating, and you should consider the expense of this, which will eat into your return.

As a landlord, you are obligated to ensure that the gas and electrics at the property are regularly inspected and tested to ensure the safety of your tenants. You will require a landlord electrical safety certificate at least every 5 years, and a gas safety certificate every year.