Buy To Let Property Investment Guide | Top UK Investments - 2024 Skip to content

Buy To Let Property Investment Guide - Top UK Investments in 2024

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    All About Buy-to-Let Property

    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 are unsure 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 Criteria

      What Is Buy-to-Let?

      First things first, what 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 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.

      What is Buy-to-Let Property?

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

      Buy-to-let investors buy a property and make money from the rent paid by their tenants. 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 investment property.

      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.

      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.

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      How to calculate stamp duty

      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, with 17.9% expected growth for UK house prices by 2028 per Savills.
      • Rental costs are rising due to the demand for rental properties. Rental prices rose by 9.9% annually from April 2023, according to Homelet.
      • Buy-to-let property investment is considered lower risk than other property investment strategies due to the property market’s proven resilience.
      • Owning a buy-to-let investment property gives investors returns from both rental 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 2024?’, take a look at our handy blog post filled with more information.

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      Buy-to-Let Costs

      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:

      1. The investor purchases the property of their choice from an estate agent or property investment company.
      2. The buy-to-let investor finds a tenant who will agree to pay the regular monthly rental instalments.
      3. 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 taxes on buy-to-let purchases.

      Find out more about how to buy a buy-to-let property with our informative step-by-step guide, including tips on how to make money from property, the best areas to look at, and the different stages of the purchase process.

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        Taxes and Interest Rates Explained for Buy to Let Mortgages

        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 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 duty whether 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.

        Click here to view our guide to stamp duty on buy-to-let property for more information.

        Buy-to-Let Investment Guide

        Want to become a successful buy-to-let investor? Get our free investment guide today for all the latest tips!

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        Off-Plan vs Completed Property

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        Buy-to-Let Mortgages

        One of the most common ways investors purchase a buy-to-let property is by using a buy-to-let mortgage.

        These differ from traditional residential mortgages as you pay back the interest you accrue during the term of the mortgage rather than the amount you have borrowed. You only pay back the money you’ve borrowed at the end of the mortgage’s term.

        Buy-to-let mortgages also have a higher initial deposit than traditional mortgages, with most requiring around 25% of the property’s cost as a down payment instead of the usual 10%.

        Interest rates on buy-to-let mortgages are also higher, so you will have to pay a higher rate than you would for a traditional residential mortgage.

        For a more in-depth look at buy-to-let mortgages and if they are right for you, try reading our free guide on ‘buy-to-let mortgages’ by following the link.

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          How to Get a Buy to Let Mortgage

          How to Sell a Buy-to-Let Property

          Selling a buy-to-let property is a great way of making a large profit, as capital appreciation means you will likely see the value of your investment property rise over time.

          You may choose to sell for a variety of reasons, be it to make a profit or to move on from your investment, but the process is similar to selling a residential property.

          The likely method will be to use an intermediary such as an estate agent or property investment company to help you find a buyer and go through the process.

          There are also several taxes and charges you will need to be aware of, as you will have to pay Capital Gains Tax on any profit you make from selling a buy-to-let property.

          Taxes and Interest Rates Explained for Buy to Let Mortgages

          The Best Buy-to-Let Areas

          If you want to achieve high returns from a buy-to-let property investment, an important factor to consider is where you want to invest.

          The best areas to invest in have a combination of high rental yields, affordable property prices and a high demand from tenants looking for rental properties, and generally, major cities are a good place to start looking.

          Liverpool and Manchester are widely considered the two best cities to invest in, as both have high rental yields and affordable prices. Liverpool has an average rental yield of 7.92% (per the Land Registry and Home.co.uk), far above the UK average of 4.93%.

          Other cities like Sheffield, Nottingham and Birmingham are also solid options due to the affordable prices and high demand from tenants that these cities have.

          For a full breakdown of the best buy-to-let areas in the UK, follow the link to read our free guide.

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            How do I pay Stamp Duty?

            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 ones revolve around the Tenant Act of 2019, which dictates what you can and cannot charge tenants for. This includes:

            • Rent
            • Refundable security and holding deposits
            • Ending a tenancy agreement early at the tenant’s request
            • Requesting changes to the tenancy agreement during the term
            • A fee for lost keys or late payment of rent

            This also covers how tenants should be treated by landlords, and what you can and cannot do.

            For more details, please read our guide on buy-to-let rules.

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              Buy to Let Mortgages - What's Involved

              Buy-to-Let Taxes

              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. The rate of tax you will pay again depends on the income you make.

              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, the same as with capital gains tax.

              Click here to read our buy-to-let tax rules guide.

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              Buy to Let Criteria

              Buy-to-Let Properties for Sale

              Finding high-quality buy-to-let properties for sale can be a difficult and frustrating experience, with many converted HMOs or old residential properties being more trouble than they are worth due to the high cost of repairs and renovations.

              Here at RWInvest, we have many new-build buy-to-let properties for sale in some of the biggest cities in the UK.

              These combine high yields and affordable prices in popular areas for young professionals, making them ideal investment properties for both beginners and experienced investors.

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                The Best Buy-to-Let Areas

                Liverpool is one of the best buy-to-let cities in the UK, with low property prices, high yields and a thriving young population looking for affordable rental property.

                This North-West city is ideal for any property investor, and thanks to the major regeneration schemes that are currently underway, the future for Liverpool looks bright.

                Why not consider looking at our buy-to-let properties for sale in Liverpool, to see why this city is so popular with investors?

                Manchester is another city that is a key part of the Northern Powerhouse and is the fastest-growing city in the UK.

                The thriving business sector and major employers located in the city make it a perfect landing spot for young professionals, and the high number of graduates who remain in Manchester post-university means that rental property is in high demand.

                Our buy-to-let property for sale in Manchester always sells fast for these reasons, so consider seeing what we have to offer our clients now.

                As one of the largest cities in the UK, Birmingham property investments combine the affordable prices, high yields and large demand that all investors should be looking for.

                With a high student population, a growing number of major employers located in the city and massive regeneration schemes set to transform run-down areas, Birmingham’s future looks incredibly bright.

                See what buy-to-let property for sale in Birmingham we currently have in stock by following the link.

                As the nation’s capital, London is always in high demand, with thousands moving to the city for work.

                Higher property prices mean you may struggle to see as strong a return on your investment as you would with other cities in the UK, but depending on where you invest you can still make a solid profit through rental income.

                Our buy-to-let property for sale in London has proven to be popular in the past, so make sure to see what we have to offer.

                Just a short distance away from London, Luton is an ideal place for young professionals looking to work in the capital whilst avoiding the sky-high prices that come with it.

                This also makes it a great option for property investors, who can make the most of the growing community of young professionals and more affordable prices that Luton offers.

                Find out what our buy-to-let property for sale in Luton can offer you as an investor by following the link.

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                  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.

                  Contact our dedicated team who are 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.

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                  Author

                  Reece Pape

                  Reece Pape is a property writer at RWinvest. Utilising up-to-date property statistics and data, Reece aims to keep investors informed on the latest market developments.

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