The Ultimate Guide to Buy to Let Property Investment

Buy To Let Property – Everything Investors Should Know

Amy Jackson
Amy Jackson
Property Editor
Updated 07 October, 2021
5 Min Read

When it comes to investing your money, few investment strategies are as popular and lucrative as buy to let. 

If you’ve been thinking about investing in buy to let property in the UK, but you’re not sure whether this is the right investment for you, read our guide. 

We offer a detailed look at what buy to let is, the benefits of buy to let investing, tips on how to get started, and more. 

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    Buy to let property investment opportunities in the UK Buy to let property investment opportunities in the UK

     

    What Is Buy to Let?

    First thing’s first, what actually is buy to let? Put simply, buy to let, often also known as invest to let, is a term that refers to purchasing a property to let out to a tenant in order to make rental income. 

    Let’s explore the definition of buy to let and the basics of these investment properties in a bit more detail. 

    A buy to let property is a property that has been purchased by an investor in order to be let out to tenants. 

    Buy to let investors buy a property and make money from the rent paid by their tenant. When buying a property to let, you can either purchase it outright or with a buy to let mortgage.   

    Buy to rent in the UK has the same meaning as buy to let – it’s when someone owns a property and rents it out to tenants to generate regular income.

    Buy to rent is simply an alternative piece of terminology that’s often used. Buy to rent has the same meaning as buying a property to let.

    Rental yields are a percentage that indicates the return on investment you can expect from a buy to let property investment.  

    A rental yield of 5-6% or above is often considered desirable, and when looking for a buy to let opportunity, rental yields are one of the main things investors focus on. 

    Buy to let has been popular since 1996, growing increasingly more prevalent over time. As of 2007, there were over a million outstanding buy to let mortgages, increasing from half a million in 2004.  

    Now, in 2022, buy to let property investment is considered one of the best property investment strategies for those who want to make a lucrative income thanks to buy to let returns.  

    More people are buying investment property after recognising the potential to make a lot of money from ownership of a rental property.  

    You can increase the popularity of your own buy to let property by providing attributes like fast broadband, which is one of the most important qualities looked for in rental property. 

    When you buy a property for buy to let purposes, it’s not usually possible to live in the property. 

    This is because many investors will use a buy to let mortgage to pay for their purchase, and the majority of mortgage lenders and mortgage broker’s deals don’t allow this. 

    However, those who purchase a buy to let investment property without seeking a mortgage deal are free to live in their property if they please. 

    Learn more about the question ‘can I live in my buy to let property?’ with our helpful guide filled with information. Click to find out whether you can live in a buy to let property yourself as an investor. 

    What Is Buy to Let Property?

    A buy to let property is a property that has been purchased by an investor in order to be let out to tenants. 

    Buy to let investors buy a property and make money from the rent paid by their tenant. When buying a property to let, you can either purchase it outright or with a buy to let mortgage.   

    What Does Buy to Rent Mean?

    Buy to rent in the UK has the same meaning as buy to let – it’s when someone owns a property and rents it out to tenants to generate regular income.

    Buy to rent is simply an alternative piece of terminology that’s often used. Buy to rent has the same meaning as buying a property to let.

    What are Rental Yields?

    Rental yields are a percentage that indicates the return on investment you can expect from a buy to let property investment.  

    A rental yield of 5-6% or above is often considered desirable, and when looking for a buy to let opportunity, rental yields are one of the main things investors focus on. 

    How Popular Is Buy to Let in the UK? 

    Buy to let has been popular since 1996, growing increasingly more prevalent over time. As of 2007, there were over a million outstanding buy to let mortgages, increasing from half a million in 2004.  

    Now, in 2022, buy to let property investment is considered one of the best property investment strategies for those who want to make a lucrative income thanks to buy to let returns.  

    More people are buying investment property after recognising the potential to make a lot of money from ownership of a rental property.  

    You can increase the popularity of your own buy to let property by providing attributes like fast broadband, which is one of the most important qualities looked for in rental property. 

    Can You Live in Your Buy to Let Property?

    When you buy a property for buy to let purposes, it’s not usually possible to live in the property. 

    This is because many investors will use a buy to let mortgage to pay for their purchase, and the majority of mortgage lenders and mortgage broker’s deals don’t allow this. 

    However, those who purchase a buy to let investment property without seeking a mortgage deal are free to live in their property if they please. 

    Learn more about the question ‘can I live in my buy to let property?’ with our helpful guide filled with information. Click to find out whether you can live in a buy to let property yourself as an investor. 

    Is Buy to Let a Good Investment?

    Is property a good investment to make? Should you consider buy to let?   

    These are some of the most common questions people have about buy to let property investment.   

    Buying a property to rent can be a very lucrative and rewarding investment to make, offering a lot of potential to those who wish to increase their cash flow over time.  

    Like any venture, there are some benefits and risks to investing in buy to let property. 

    The Benefits of Buy to Let 

    The main benefits of buy to let property as an investment are:  

    • The UK property market is performing highly, with21.5% expected growth for UK house prices by 2025.  
    • Rental costs are rising due to demand for rental properties. In 2021, it took landlords just 8.9 days on average to rent out a property, which is up from 31.9 days in 2019.  
    • Buy to let property investment is considered lower risk than other investment strategies due to the property market’s proven resilience.  
    • Owning a buy to let investment property gives investors returns from bothrental income and capital growth. 

    The Risks of Buy to Let 

    Some of the possible risks of buy to let properties include:  

    • Property prices can fluctuate depending on housing market performance.   
    • Void periods, where you lose rental income due to a property not being tenanted, are possible if you don’t invest in the right area.   
    • Some taxes, such as stamp duty tax, can be higher with buy to let property purchases.  

     

    When weighing up the benefits and risks of buy to let properties, it’s important to remember that while things like possible void periods and market changes could negatively affect your investment for a short period, the benefits of buying a buy to let property far outweigh these risks.  

    With the proper research and knowledge, you can also minimise any potential risks and boost the likelihood of a profitable venture.  

    Once you feel confident and prepared for any risks, you should move forward with your buy to let UK investment to take advantage of the opportunities on offer.  

    If you’re still wondering ‘is buy to let a good investment in 2022?’, take a look at our handy blog post filled with more information. Click now to read why buy to let investment is a good option for 2022. 

    How Do You Invest in Buy to Let?

    It’s normal to find yourself wondering, ‘how does buy to rent work?’, especially when you’re new to the concept.  

    In a nutshell, the concept of buy to let works in three steps:  

    • The investor purchases the property of their choice from an estate agent or property investment company. 
    • The buy to let investor finds a tenant who will agree to pay the regular monthly rental instalments.  
    • The investor receives a return on investment through rental payments.  

    Of course, you’ll also need to know about the process of actually buying your buy to let property, as well as things like buy to let mortgages and tax on buy to let purchases. 

    We’ve put together an easy-to-follow guide containing information on how to buy a buy to let property in the UK, including tips on selecting your property, the best areas to look at, and the different stages of the purchase process.

    Find out more abouthow to buy a buy to let property with our informative step-by-step guide.

    You can also discover more about buy to let mortgages with our buy to let mortgage guide.

    Before reading those guides, take a look at the following helpful questions and answers about how to invest in buy to let property

    A buy to let mortgage is a mortgage that helps investors pay for a buy to let purchase. The investor puts down a deposit and then pays regular mortgage payments – normally on a monthly basis. 

    Buy to let mortgages are a good option for those who want to buy rental properties without having the full amount of cash available. Rental income will usually cover the cost of mortgage payments while leaving the investor with a profit. 

    The minimum amount of money you can put down for your buy to let mortgage deposit is usually 25% of the property price. However, some mortgage lenders may require up to 40% as a deposit, particularly when there’s a high buy to let market demand. 

    Whether or not you can obtain a buy to let mortgage without already owning a home of your own depends on the mortgage lender you use. Some lenders will be willing to accept first-time buyers for a buy to let mortgage, but the majority will likely view this as a high-risk scenario. 

    You may want to first purchase a home of your own, using a residential property mortgage, before looking to secure a buy to let mortgage as an investor. 

    What Is a Buy to Let Mortgage?

    A buy to let mortgage is a mortgage that helps investors pay for a buy to let purchase. The investor puts down a deposit and then pays regular mortgage payments – normally on a monthly basis. 

    Buy to let mortgages are a good option for those who want to buy rental properties without having the full amount of cash available. Rental income will usually cover the cost of mortgage payments while leaving the investor with a profit. 

    How Much Deposit Do I Need on a Buy to Let?

    The minimum amount of money you can put down for your buy to let mortgage deposit is usually 25% of the property price. However, some mortgage lenders may require up to 40% as a deposit, particularly when there’s a high buy to let market demand. 

    Can I Get a Buy to Let Mortgage Without Owning a Home?

    Whether or not you can obtain a buy to let mortgage without already owning a home of your own depends on the mortgage lender you use. Some lenders will be willing to accept first-time buyers for a buy to let mortgage, but the majority will likely view this as a high-risk scenario. 

    You may want to first purchase a home of your own, using a residential property mortgage, before looking to secure a buy to let mortgage as an investor. 

    Do You Pay Stamp Duty on Buy to Let Property?  

    Investors buying a buy to let property will need to think about different buy to let costs involved with a property investment purchase, and one of those costs is for stamp duty tax on property. Those buying a second property will pay an additional 3% surcharge on stamp duty purchases, regardless of the property value.  

    This will apply to you if you currently own your own home (you’re not a first-time buyer) and are buying an additional property for buy to let purposes.  

    You also need to pay stamp dutywhether you own a freehold or leasehold property.  

    You can use a stamp duty tax cost calculator to determine how much this could cost you for your buy to let investment.  

    As a rule of thumb, buy to let investors pay 3% tax fees on properties up to a value of £125,000, 5% on properties up to £250,000, and 8% on values of up to £925,000.  

    Click here to view our guide to stamp duty on buy to let propertyfor more information. 

    What Buy to Let Rules Should You Know About?  

    There are many buy to let rules and taxes that buy to let property investors need to know about before buying a second property to rent out.  

    The main taxes included with buy to let property investment are:  

    • Stamp duty tax on buy to let property   
    • Capital gains tax on buy to let investments   
    • Tax on buy to let rental income   

    While stamp duty is a tax payable when purchasing a buy to let property, capital gains tax is a tax on any profit you make from the sale of an asset.  

    This applies to buy to let, so capital gains tax should be expected when selling a buy to let property.   

    In fact, the capital gains tax when selling buy to let properties is actually higher for landlords, with tax rates on buy to let property of 18% for basic-rate taxpayers and 28% for additional rate taxpayers.   

    Then there’s buy to let income tax, which is a tax paid on rental returns. Investors will need to declare any rent they receive in their Self Assessment Tax Return.  

    The rate of income tax will depend on the amount of income you receive.  

    We have a detailed guide to help you learn about the taxes you need to know about when investing in buy to let property in 2022 and any tax relief and buy to let rules that investors should be aware of.   

    Click here to read our buy to rules and buy to let tax rulesguide. 

    How Does Buy to Let Compare to Alternative Property Investments?

    As beneficial as an investment buy to let is, investing in a buy to let property isn’t the only way to get involved with property investment. 

    There are different strategies out there that you may want to know about before deciding on buy to let investment. Here is some information about alternative ways to invest in property. 

    With buy to sell, rather than buying a property with the intention of letting it out and generating rental income, buy to sell investments focus on buying property and generating a large lump sum return on investment from the sale of the property. 

    But how does it compare with buy to let? Well, the main difference between the two options is that with buy to let, you benefit from two types of return from both rental yields and capital appreciation. Whereas, with buy to sell, capital growth is the only way you make a return.  

    With this in mind, buy to let is the stronger venture if you want to really maximise your investment returns. 

    Also known as REITs (Real Estate Investment Trusts), Real Estate Investment Funds are companies that own real estate on behalf of investors (shareholders).  

    This investment method is favoured by some who don’t want a hands-on investment where they purchase the property themselves.  

    Compared to buy to let, however, which can be equally as hands-off when investors use a property management company, investing in a REIT offers lower returns and a higher risk level. 

    One method of investing in property involves purchasing a property to be used as a holiday let. These types of properties are let out to guests over a short period when they need a place to stay during a trip.  

    Holiday lets can be appealing to those who want to maximise rental returns and would prefer to just have short-term guests stay in their property rather than tenants. Compared to traditional buy to let, holiday lets can be lucrative due to higher rental costs, but there is a lot more work involved. 

    An investor of a holiday let has to think about paying for and managing the cleaning of the property in between guests, dealing with a lot of administrative work, and paying fees to any holiday let advertising services they use. 

    Overall, buy to let is better if you want consistently high returns combined with strong growth and a hands-off venture. 

    Buy to Sell

    With buy to sell, rather than buying a property with the intention of letting it out and generating rental income, buy to sell investments focus on buying property and generating a large lump sum return on investment from the sale of the property. 

    But how does it compare with buy to let? Well, the main difference between the two options is that with buy to let, you benefit from two types of return from both rental yields and capital appreciation. Whereas, with buy to sell, capital growth is the only way you make a return.  

    With this in mind, buy to let is the stronger venture if you want to really maximise your investment returns. 

    Real Estate Investment Funds

    Also known as REITs (Real Estate Investment Trusts), Real Estate Investment Funds are companies that own real estate on behalf of investors (shareholders).  

    This investment method is favoured by some who don’t want a hands-on investment where they purchase the property themselves.  

    Compared to buy to let, however, which can be equally as hands-off when investors use a property management company, investing in a REIT offers lower returns and a higher risk level. 

    Holiday Lets

    One method of investing in property involves purchasing a property to be used as a holiday let. These types of properties are let out to guests over a short period when they need a place to stay during a trip.  

    Holiday lets can be appealing to those who want to maximise rental returns and would prefer to just have short-term guests stay in their property rather than tenants. Compared to traditional buy to let, holiday lets can be lucrative due to higher rental costs, but there is a lot more work involved. 

    An investor of a holiday let has to think about paying for and managing the cleaning of the property in between guests, dealing with a lot of administrative work, and paying fees to any holiday let advertising services they use. 

    Overall, buy to let is better if you want consistently high returns combined with strong growth and a hands-off venture. 

    So, Is Buy to Let Property Investment Right For You? 

    To decide whether or not buy to let property investment is the right option for you, you need to ask yourself whether the following benefits are what you’re hoping to gain from buy to let investing: 

    • Lucrative returns through both rental income and capital appreciation. 
    • The freedom to make rental income while you focus on your usual day-to-day commitments.  
    • The ability to build a diverse portfolio with different types of buy to let properties across different areas.  

    If the above points are exactly what you’re looking for, then take your first step towards investing in buy to let property in the UK and enquire with RWinvest. 

    Find Buy to Let Properties in Top UK Areas 

    When it comes to property, buy to let offers some of the best prospects for building a lucrative income. Here at RWinvest, we have the right knowledge and the best opportunities to help you succeed.  

    No question is off-limits when it comes to purchasing the right property for your buy to let investment.  

    Whether you’re concerned about risks and returns or want to be sure you know the best buy to let areas for growth and demand, we can help.  

    Whatever your query, our dedicated team is happy to offer further top tips for buy to let success and provide helpful advice to make your investment journey run as smoothly, safely, and securely as possible.  

    If you’re ready to find a buy to let property for sale and get involved in your first buy to let scheme, contact us today to explore our buy to let investments for sale in the UK.  

    We find the best buy to let properties in some of the top UK locations like Slough, Birmingham, Liverpool, and Manchester, bringing our investors buy-to-let flats with high yields and strong capital growth prospects.  

    Click the links below to discover the best buy to let investment opportunities in the following cities:  

    Buy to let properties for sale Liverpool 

    Buy to let property for sale Manchester 

    Buy to let property for sale Birmingham 

    Buy to let property for sale in Luton 

    Buy to let property for sale London 

    Amy Jackson
    Amy Jackson
    Property Editor

    Amy Jackson is the property editor at RWinvest. Amy has over three years of experience working in the property content sector and has a keen eye for finding the latest news, statistics, and must-have property investment information.

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