If you’re considering investing in your first buy-to-let property, there are a lot of things you need to know and consider before entering the property market. One of the most important elements of investing in a buy-to-let is stamp duty, which is a form of tax that must be paid to buy and rent out your property.

In order to understand stamp duty and how it works, read this guide to help you decide if property investment is for you and how you can find success in the property sector.

The effect of Buy-to-let stamp duty

As of 2016, it was announced that anyone purchasing a second property – mainly landlords – would incur additional charges from at least 3% on each property purchase worth more than £40,000. This was put in place by the government to help improve the affordability of housing for first-time buyers, which is a great initiative, although it has had a significant effect on the buy-to-let market.

To work out the cost of stamp duty for a second property, you must first consider your property budget, as stamp duty is calculated on the basis of the house price. For example, if your property is worth no more than £250,000, then you should pay around £10,000 in stamp duty tax. If you’re planning to invest in more upscale properties, then this fee will naturally increase, although you will expect to receive lucrative returns on this type of investment.

Landlords investing outside of London

Due to the rise in stamp duty, more and more property investors are looking outside of London and investing in other locations, with evidence showing that there has been a 17% decrease in London buy-to-let purchases. Instead, investors are looking to the North West – where there is high rental demand and great returns.

If you’re interested in gaining profits up North, then you should speak to an expert property investment company like RW Invest, who have plenty of lucrative developments in Manchester and Liverpool, where you can find some of the top rental yields in the country. These cities are currently the best place to invest with a rising student population and job growth, and it is no wonder that landlords and tenants are heading North.

Benefit from rising rent

One of the main advantages of the additional stamp duty tax is that this enables landlords to up their monthly rental income. There is actually evidence to show a significant rise in rent in the UK, with an average of £969 per month being paid out by tenants across the country. This means that the funds you lose to stamp duty can be paid back to you in rental income, which will allow your investment to maintain good cash flow.

While rising rent may be off-putting to tenants, you can prevent this by adding genuine value to your property. This can be achieved through improving its kerb appeal by changing the exterior of the property, as well as maintaining the green space if it has any. You should also consider redecorating the interior and installing smart technology to make your property more modern and attractive to tenants.