When you’re looking at property investment, it’s easy to focus on the purchase price and rental yields. But as any experienced investor knows, there are a range of additional costs that need to be factored in to give a true picture of returns. In 2025, with tax rules, lending rates, and transaction costs all shaping the market, it’s more important than ever to understand the full cost of buying an investment property.

Here’s a breakdown of what investors should budget for:

1. Deposit & Mortgage Costs

Most buy-to-let mortgages still require a 25% deposit, though some lenders may accept slightly lower. On top of the deposit, you’ll also need to factor in:

• Arrangement fees: Typically £1,000–£2,000 or a percentage of the loan (often added to the mortgage balance).

• Valuation fees: Around £250–£600, depending on the property’s value.

• Broker fees: If you use a specialist mortgage broker, expect £500–£1,000.

Interest rates have stabilised in 2025 compared to the peaks of 2023/24, but mortgage costs remain higher than they were pre-2022. Stress testing affordability is key.

2. Stamp Duty Land Tax (SDLT)

If you’re buying a buy-to-let or second home in England, you’ll pay the 5% surcharge on top of standard SDLT rates. For example:

Standard SDLT Rates

For overseas investors, there’s an additional 2% surcharge.

3. Legal & Professional Fees

Conveyancing costs in 2025 typically range between £1,000–£2,000, depending on the complexity of the transaction. This includes searches, Land Registry fees, and disbursements. If you’re buying off-plan, you may also have staged payments that your solicitor will manage.

It’s also wise to budget for survey fees, particularly if you’re buying an older property. A homebuyer’s survey may cost £400–£900, while a full building survey could be over £1,000.

4. Furniture & Fit-Out

For new-build apartments, developers often offer furniture packs costing £3,000–£5,000 for a one-bedroom and £6,000–£8,000 for a two-bedroom. For HMOs or higher-end lets, this can be more. Presenting a property well is critical to achieving the best rental yields.

5. Ongoing Running Costs

Once the property is let, investors need to account for:

• Service charges & ground rent: Common with apartments, often £1,500–£3,000+ per year.

• Landlords insurance: Around £200–£400 per year.

• Maintenance allowance: I usually recommend setting aside 5–10% of rental income for repairs and upkeep.

• Letting & management fees: Full management typically costs 8–12% of monthly rent (plus VAT).

6. Tax Considerations

Tax is often overlooked at the start, but it can have the biggest impact long term:

• Income tax on rental profits (20%, 40%, or 45% depending on your bracket).

• Restrictions on mortgage interest relief (still capped at 20%).

• Capital Gains Tax when selling (18% or 24% for residential property gains from 2024 onwards).

• Corporation tax (25% headline rate) if you buy through a company structure.

Getting the right tax advice before purchasing is essential—structuring the purchase properly can save thousands in the long run.

Final Thoughts

Buying an investment property in 2025 isn’t just about finding the right development or area, it’s about fully understanding the financial commitment involved. From stamp duty and mortgage fees to furniture packs and management charges, the true costs can add up quickly.

For serious investors, factoring these in from day one ensures your rental yields and long-term growth are calculated on a realistic, sustainable basis. The good news? Once you know the numbers, you can plan accordingly—and that’s where the real advantage lies.