This should really be entitled “so I finally rented out my new rental” but hurray! It is done. I have been talking about moving on my rental journey since I started this blog, and my last post which was almost three months ago (sorry dear readers, long story which I might come back to) set out the decision making and purchase of that property.

I wanted to talk a little bit about the financial side of it here. I paid £230,000 for the property. In my home town, that amount would barely even buy you a garage, but further north in the UK it really does buy you more. I’ve written extensively about choosing to sell my rental in my home town but maintain a rental in the UK so I won’t go back over it here, but it was a decision that took a long time – and realistically I still have doubts about. But it’s done, so on we go!

I also bought the property free and clear, so it has no mortgage on it. I saved this money essentially in equity from my previous house, which I had laser-focused paying off over the last five years. Whilst I hadn’t fully paid it off, issues with rising mortgage rates and my challenges of spending so much time overseas meant that the mortgage cost of it was starting to really increase. There were costs associated with the purchase and legal elements but because it was such a relatively cheap property, these were significantly (and disproportionately) lower than my last house. A big element is that the stamp duty threshold in the UK – basically a tax on a house purchase – doesn’t kick in until a property is worth more than £250,000, meaning I didn’t have to fork out the £7,000 additional amount that I did last time. The house is a new build and is on a company managed estate. This means there is a monthly fee (of about £60, payable by the tenant) but there was additional set of costs for the purchase based on legal assessment and sign up to the management company. In total this all came to £2,636.

Legal and purchase costs
Standard legal and purchase fees	£       1,968
Legal and purchase fees relating to estate management	£           668
	£ 2,636

In addition to the standard costs, it took three months to rent out, following about six months of the purchase process since I struggled to find what I wanted, and it took some time for the process to go through. This period has a financial implication as well. In addition there are a few costs needed to get the house tenant-ready, and between these I paid out an additional £1,233.

Pre-tenant and compliance costs
Compliance maintenance (electrical check, smoke alarms etc)	£           300
Payment of 3 months estate management fees	£           178
Payment of council tax	£           354
Landlord insurance (one year)	£           401
Total	£       1,233

So at this point in time, I have £230,000 of my capital tied up in real estate. In addition, buying and preparing the property for rental required an outlay of £3,869 or about an additional 1.7% on top of the purchase price. As noted, this is unique to a low cost house, as these costs disproportionately increase with homes in higher price brackets.

And now it’s rented out! The rent is set at £850 per month, which is quite a bit less than the UK average of £1000 (excluding Greater London) but that’s based on the location. Minus the letting agent fee which I need as a) I don’t live near the property and b) I am utterly useless at household maintenance, of 10%, I will make an initial net of £765, from which I will need to pay any additional maintenance or upkeep, as well as continued landlord insurance for which I will keep back 10% of the net, or about £1,000 per year. So with a projected profit of about £8,000 per year, I will not be retiring fully on my rental empire. But it works – to stay invested in the real estate market; have some money which isn’t at the whim of the stock market; to have a second option for my family in case the s**t hits the fan; and to have a regular stream of income. And I am glad it’s set up so I can leave it to tick along whilst I focus on other things!