Costs

On purchase

Stamp duty: stamp duty is payable on all properties worth more than £125,000, or more than £150,000 in certain government-designated disadvantaged areas. The rates are: 1 per cent on properties worth £125,001 to £250,000, 3 per cent on properties worth £250,001 to £500,000 and 4 per cent on properties worth £500,001 or more.

Legal fees: Expect to pay at least £500 in legal and conveyancing fees.

Related Internet Links

• Property guides

A guide to househunting on the web

Househunting goes high-tech: technology is transforming the way we search for our next home. Our buyers test-drive top property websites

• A step-by-step guide to selling your home

• Gumtree founder, Simon Crookall, puts his £1.5m home for sale online

BACKGROUND

• Why can’t we sell our home?

• ‘I didn’t want a profit; I just wanted out’

• How to sell your home in a hurry

BACKGROUND

• Overseas property: where, how and what to buy

• How to get onto the property ladder

• Guide to buying above a shop

BACKGROUND

• How to sell your home

• Buying a property at auction

• Home improvement

• Eco homes

• Step-by-step guide to buying your first property

Related Links

• Ten things you need to know about... buy-to-let

Mortgage arrangement fees: These are considerably higher than they used to be. In some cases fees are charged at a flat rate, which is usually upwards of £1,000. It is now more common for fees to be charged as a percentage of the sum borrowed: rates of 2 to 2.5 per cent are common.

Survey: A standard homebuyer’s report costs £350 to £450 plus VAT; for a more detailed structural survey, which is recommended for properties built before 1900, you will pay upwards of £700 plus VAT.

During the life of the investment

Insurances: You will need to buy buildings insurance, and if you are letting the property furnished you may want to buy contents insurance as well. In addition, you must have landlord’s liability insurance which covers you in the event that a tenant or contractor is injured on your premises.

Service charges: If the property is a flat, you will have to pay service charges to the freeholder or managing agent. These vary hugely depending on the building, as of later this year the freeholder will be legally obliged to provide regular, itemised service charge statements.

Lettings agents: Lettings agents generally charge 10 to 20 per cent of rental income to manage the property.

Income tax: Income tax is payable on your rental income, although you can offset mortgage interest payments against tax.

Selling

Home information pack: When you sell your property you will have to put together a seller’s pack: this may cost anything from £300 to £1,000; some agents include Hips free as part of their service

Estate agents’ fees: A growing number of agents charge a flat fee – usually of £700 or more – for their services. In most cases you will pay 1 to 2.5 per cent of the value of the property.

Capital gains tax: Capital gains tax is payable on the profit made on investment property, over and above the annual CGT exemption, which is £9,200 in the 2007/8 tax year. At present, CGT is charged at 40 per cent, although the rate is set to fall to 18 per cent in April 2007. While this sounds like great news for investors, it is not in fact good news for those who have held their properties for many years, since they have been granted ‘taper relief’, which gradually reduces the CGT bill from 40 to 10 per cent over time.