How to Buy a Buy to Let Property

How to Buy a Buy to Let Property: a Step by Step Guide

Amy Jackson
Amy Jackson
Property Editor
Updated 01 October, 2021
9 Min Read

How to Buy a Buy to Let Property How to Buy a Buy to Let Property

Many people around the world are drawn to the world of buy to let. 

Whether you’re looking for a way to make passive income, want to make your investment portfolio dreams a reality, or want to grow your retirement fund, buy to let helps millions of people achieve their financial goals. 

Starting is always the hardest part of any new venture, though, and knowing how to buy a buy to let property can be tricky for a beginner investor. 

If you want to know how to get a buy to let property of your own, keep reading.  

We’ll offer a step-by-step guide on how to buy a buy to let property in the UK, offering advice on buy to let mortgages, navigating the UK property market, and taking your investment from enquiry to exchange.  

This is your must-have guide on how to become a buy to let property investor in the UK today. 

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Selecting Your Buy to Let Property Selecting Your Buy to Let Property

1. Selecting Your Buy to Let Property

The first step in how to buy a buy to let property is to decide what type of property you want to invest in 

For some of you reading this, this may be an easy choice if you’ve already done some market research and thought about the type of property you’re interested in. 

For others, who are in the very early stages of their purchase, you may still be undecided.  

In this section of our step-by-step guide on how to buy a buy-to-let property, we’ll cover the three most important elements to consider when choosing your buy-to-let property.  

These are: 

  1. The type of tenants you want your rental property to appeal to. 
  2. The part of the UK you’re interested in investing in. 
  3. Your investment goals, your budget, and the returns you expect to make. 
Think About Your Potential Tenants Think About Your Potential Tenants

Think About Your Potential Tenants 

When it comes to buying a buy to let property, putting a focus on the potential tenants living in your property can put things into perspective on the type of property you should buy. 

The main groups of people in the UK who commonly rent properties are: 

  • Students. 
  • Young professional singles or couples. 

Less common, but a demographic worth considering, are: 

  • Families. 
  • Retirees. 

As you would expect, each of these tenant groups requires different things from their rental property 

Students want properties within walking distance of their university campus. In contrast, families prefer a property close to schools and parks. 

If you buy a property that doesn’t tick all the boxes for your ideal tenant, you could face multiple ‘void periods’, which is a length of time where your property is untenanted.  

If you’re planning to buy your buy-to-let property from a property investment company like ourselves, the new build city-centre apartments are more typically suited to students and young professional renters. 

If you decide that a student tenant is who you’d like to rent to, then a student property would be your obvious investment choice. Whereas a residential property would suit a young professional. 

Whatever your tenant, keep a close eye on qualities such as transport links, local amenities like bars and restaurants, and high-speed internet as these are all important to both tenant groups. 

However, things like remote working areas, onsite gyms and spas, and proximity to nearby offices are qualities more appealing to a young professional demographic. 

Be sure to really assess each opportunity and put yourself in your tenant’s shoes to consider whether this particular property will encourage tenant demand.  

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Explore Different UK Areas  

In the UK, there is so many buy to let hotspots to choose from.  

And unless you’re planning on being a super hands-on investor who wants to live close to their rental property, you have a wide choice of areas to consider. 

As of 2021, the top 10 cities for buy to let property investment are: 

  1. Liverpool 
  2. Manchester 
  3. Birmingham 
  4. Leeds 
  5. Sheffield 
  6. Nottingham 
  7. Edinburgh 
  8. Newcastle 
  9. Glasgow 
  10. Leicester  

Outside of cities, there are also some notable towns to consider, which are beneficial as investment areas due to their proximity to London: 

  • Luton 
  • Slough  

If you’re planning on using a letting agent to manage your rental property on your behalf, then you can select a property investment opportunity in an area far away from your home.  

Spend as much time as possible researching the different buy to let areas in the UK and pay attention to past and current property market performance, average house pricesrental yields, and property price growth. 

Read our guide to the best places to invest in property for more insight into each of these UK cities and towns.  

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Consider Your Goals and Budget

With the last two tips in mind, another step in finding your ideal property is to think about your personal investment goals.  

How much money do you hope to make from your investment? What kind of budget do you have? And are you more focused on short-term or long-term income? 

Both the tenant group you rent to, and the location of your property play a part in this.  

Student properties, for instance, can offer high rental income but may not generate as impressive capital growth rates as residential property. 

Whereas, buy to let hotspot cities like Liverpool offer the best rental yields and affordability, while Manchester boasts sky-high capital growth. 

To help put things into perspective, here’s some information on how to buy a buy to let property depending on your potential goals. 

Invest in student or residential property in areas where property prices are low, but returns are high.  

A good example is Liverpool, where the average property price stood at £162,259 as of July 2021.  

If you’re keen to invest in the South with a lower buy to let budget, Luton is a good option, where house prices average £250,027. 

Student properties are typically more affordable, but finding residential properties that meet a lower price point isn’t difficult, especially when looking in the right area.  

If your main reason for exploring how to buy a buy to let property is because you want to make high rental returns every month, Liverpool is once again a great city to consider. 

Here, yields can reach as high as 10% in certain city-centre postcodes, and finding rental yields of above 7% or 8% isn’t difficult.  

Student accommodation sometimes has the upper hand when it comes to rental yields due to lower prices and high rental costs.  

However, the market is also full of fantastic residential opportunities with yields of 8% or above.

The North West region is, without a doubt, the best place to look if you’re after high capital growth returns in the long term.  

Savills predicts that property prices will grow here by 28% on average by 2025.  

Manchester, in particular, saw average price growth of 6.5% in the year to May 2021, with Liverpool property growth following closely behind at 6.3%. 

Residential properties are the best choice if you’re thinking about the best property type for capital growth, so make sure you keep young professional tenants in mind when selecting your property. 

Pairing high rental returns with strong capital growth is the winning formula for knowing how to choose a buy to let property.  

This way, you’re taking advantage of the full benefits of buy to let and maximising your short-term and long-term income.  

Liverpool is once again one of the best places to invest if you want to get good returns from both rent and house price growth.  

Since residential properties are also more inclined to grow in value significantly while also offering high yields, this is the property type you might want to consider.  

However, some student properties are also capable of generating attractive capital growth returns, so be sure to investigate each opportunity further. 

If You Have a Lower Budget

Invest in student or residential property in areas where property prices are low, but returns are high.  

A good example is Liverpool, where the average property price stood at £162,259 as of July 2021.  

If you’re keen to invest in the South with a lower buy to let budget, Luton is a good option, where house prices average £250,027. 

Student properties are typically more affordable, but finding residential properties that meet a lower price point isn’t difficult, especially when looking in the right area.  

If Your Focus Is on Rental Income

If your main reason for exploring how to buy a buy to let property is because you want to make high rental returns every month, Liverpool is once again a great city to consider. 

Here, yields can reach as high as 10% in certain city-centre postcodes, and finding rental yields of above 7% or 8% isn’t difficult.  

Student accommodation sometimes has the upper hand when it comes to rental yields due to lower prices and high rental costs.  

However, the market is also full of fantastic residential opportunities with yields of 8% or above.

If Your Focus Is on Capital Growth

The North West region is, without a doubt, the best place to look if you’re after high capital growth returns in the long term.  

Savills predicts that property prices will grow here by 28% on average by 2025.  

Manchester, in particular, saw average price growth of 6.5% in the year to May 2021, with Liverpool property growth following closely behind at 6.3%. 

Residential properties are the best choice if you’re thinking about the best property type for capital growth, so make sure you keep young professional tenants in mind when selecting your property. 

If You Want a Combination of High Rental Income and Capital Growth

Pairing high rental returns with strong capital growth is the winning formula for knowing how to choose a buy to let property.  

This way, you’re taking advantage of the full benefits of buy to let and maximising your short-term and long-term income.  

Liverpool is once again one of the best places to invest if you want to get good returns from both rent and house price growth.  

Since residential properties are also more inclined to grow in value significantly while also offering high yields, this is the property type you might want to consider.  

However, some student properties are also capable of generating attractive capital growth returns, so be sure to investigate each opportunity further. 

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Financing Your Buy to Let Investment Financing Your Buy to Let Investment

2. Financing Your Buy to Let Investment 

One of the main questions around how to buy a buy to let property is actually about how to fund a buy to let property 

It’s a good question, especially for those who want to invest but don’t have the full sum of money available to them right away. 

There are typically three ways to finance your buy to let investment, which are: 

  1. Using a buy to let mortgage. 
  2. Splitting the cost of an off-plan property into smaller chunks. 
  3. Paying the full property price in cash. 

Let’s look at each of these options in more detail to help you understand which one is right for you when considering how to fund a buy to let property purchase. 

This section will also answer some common questions about financing a buy to let property, such as how much deposit for buy to let is needed when using a mortgage, and how to invest in buy to let property with a payment plan. 

Buy to Let Mortgage Buy to Let Mortgage

Buy to Let Mortgages 

Using a buy to let mortgage is a popular method when it comes to how to invest in buy to let property. 

For those who don’t have the full property price already available, paying for a buy to let property with the help of a buy to let mortgage allows investors to put down a lump sum deposit and pay monthly mortgage repayments. 

These mortgages work in much the same way as regular residential mortgages. The main difference is that the deposit needed is usually higher. 

So how much deposit for a buy to let property is needed? Typically, buy to let mortgage lenders expect at least 25% of the property value. However, some lenders will want up to a 40% deposit, so the more you can offer, the better. 

When deciding on a buy to let mortgage, it’s essential to work out whether your expected rental returns will pay for the repayments while still leaving you with some income each month. 

You can use our rental income calculator to determine how much rental income you need to generate to satisfy buy to let mortgage lenders. 

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Splitting the Cost of the Property Price Splitting the Cost of the Property Price

Splitting the Cost of the Property Price  

If you’re considering buying an off-plan property for your buy to let investment, you’ll often have the option to split the overall property price into smaller, more manageable chunks. 

This is a payment option that we offer for many of our properties at RWinvest. It proves popular with those who don’t have the total amount right away but don’t wish to use a buy to let mortgage to finance their investment. 

If you’re wondering how to invest in buy to let property in the UK with a payment plan, here’s an example of the different payment structures for one of our current buy to let properties: 

Option A: Pay the reservation fee followed by 50% of the property price on the reservation and the remaining 50% once the property is complete.  

Option B: Pay the reservation fee followed by 35% of the property value on the reservation, 15% mid-way through construction, and 50% once the property is complete. 

Option C: Pay the reservation fee followed by 75% of the property price on the reservation, and then pay 25% once the property has been completed. 

This is just one example of how the payment structure works when splitting the cost of your buy to let investment. 

Each investment opportunity will be different, so if this is something you’re interested in, be sure to get in touch to discuss the various options available. 

Paying For a Property Outright Paying For a Property Outright

Paying For the Property Outright 

If you’re lucky enough to have the whole sum of cash available and you want to pay for your property purchase outright, this is another option. 

Aside from not having to think about how to fund a buy to let property and create a payment strategy, there are many advantages to financing your property in this way. 

For one thing, you don’t have to worry about keeping on top of mortgage payments or paying money in the future, as the payment of your property is already taken care of. 

This is a common payment option for those who buy fixer-upper properties or investors who want to know how to buy a buy to let property via an auction, as paying with cash is often the preferred option in these cases. 

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3. Purchasing Your Buy to Let Property

If you’re looking for a step-by-step insight into how to invest in a buy to let property, this section of our guide is for you. 

Here, we’ll outline the main stages you can expect to go through when taking your property purchase from reservation to completion. 

Depending on the property you’re buying, negotiating the price and making an offer may be possible. 

If you’re working with estate agents to buy your buy to let property, this is something you’ll do. Keep in mind that due to UK housing market demand, properties are selling for  

This step applies more to those looking for tips on how to invest in a buy to let property through an investment company. 

If you’re purchasing a unit within a property development, you’ll reserve your unit by paying a fee to make sure nobody else can buy it while you go through the final stages of your purchase. 

The next thing you’ll need to do is instruct a solicitor to help you with the legal side of your purchase. 

If you’re buying a property with a property investment company, you’ll often be given a trusted and recommended solicitor to work with.  

There are benefits to using these recommended solicitors, such as gaining access to discounted rates.  

If you’re planning on using a buy to let mortgage, your next stage of the investment process will focus on searching for the best buy to let mortgages available. 

Different mortgage providers offer different deals, and it’s a good idea to do some research to find the best mortgage deal for you.  

Also, consider whether you want your mortgage to be fixed-rate or variable, bearing in mind that interest rates can vary between the two.  

When using a buy to let mortgage to fund your buy to let investment, the mortgage lender will conduct a valuation survey before approving your offer. 

If you’re investing in an old property, a full survey may be needed.  

Formerly known as a Structural Survey, this type of survey looks at any issues within a property that you might want to know about before you buy. 

The final step in the process of how to buy a buy to let property is to exchange contracts.  

This is done once all formal paperwork and documentation are taken care of, and the required funds have been sent and received.  

At RWinvest, our talented client care team will help get your buy to let purchase from reservation to exchange, taking the hassle out of the process.  

This is a huge benefit of working with a property investment company for your buy to let venture.  

Step 1: Make an Offer

Depending on the property you’re buying, negotiating the price and making an offer may be possible. 

If you’re working with estate agents to buy your buy to let property, this is something you’ll do. Keep in mind that due to UK housing market demand, properties are selling for  

Step 2: Reserve your Investment Property

This step applies more to those looking for tips on how to invest in a buy to let property through an investment company. 

If you’re purchasing a unit within a property development, you’ll reserve your unit by paying a fee to make sure nobody else can buy it while you go through the final stages of your purchase. 

Step 3: Instruct a Solicitor

The next thing you’ll need to do is instruct a solicitor to help you with the legal side of your purchase. 

If you’re buying a property with a property investment company, you’ll often be given a trusted and recommended solicitor to work with.  

There are benefits to using these recommended solicitors, such as gaining access to discounted rates.  

Step 4: Arrange Your Mortgage (If Using One)

If you’re planning on using a buy to let mortgage, your next stage of the investment process will focus on searching for the best buy to let mortgages available. 

Different mortgage providers offer different deals, and it’s a good idea to do some research to find the best mortgage deal for you.  

Also, consider whether you want your mortgage to be fixed-rate or variable, bearing in mind that interest rates can vary between the two.  

Step 5: Arrange a Survey

When using a buy to let mortgage to fund your buy to let investment, the mortgage lender will conduct a valuation survey before approving your offer. 

If you’re investing in an old property, a full survey may be needed.  

Formerly known as a Structural Survey, this type of survey looks at any issues within a property that you might want to know about before you buy. 

Step 6: Exchange Contracts

The final step in the process of how to buy a buy to let property is to exchange contracts.  

This is done once all formal paperwork and documentation are taken care of, and the required funds have been sent and received.  

At RWinvest, our talented client care team will help get your buy to let purchase from reservation to exchange, taking the hassle out of the process.  

This is a huge benefit of working with a property investment company for your buy to let venture.  

Managing Your Buy to Let Investment Managing Your Buy to Let Investment

4. Managing Your Buy to Let Investment  

The final stage in our guide on how to get a buy to let property is to look at how you will manage your investment. 

Owning a buy to let property comes with a lot of work, and you may want to consider whether you plan to manage your property yourself or hire a rental management company to do so for you. 

Once you’ve purchased your buy to let property, there are also some legal considerations to know about and taxes that will need paying. 

Find out more in the final section of our guide on how to invest in a buy to let property. 

Taxes to Know About 

The main taxes that you need to know about when it comes to buy to let investment are: 

  • Stamp duty tax – Payable when buying your property. 
  • Capital gains tax – Payable upon the sale of a property, provided your property has grown in value. 
  • Income tax – Payable on the money you make in rental income throughout each tenancy. 

In recent years, taxes for buy to let have changed with new rules introduced in Summer 2020.  

In order to make property purchases easier and strengthen the housing market during covid-19, a stamp duty holiday was introduced. 

It meant those buying a buy to let property, a first home, or a second home, could save on stamp duty tax. 

As of October 2021, however, the stamp duty holiday has officially ended, meaning stamp duty tax rates have reverted to pre-Covid levels.  

If you’re wondering how to buy a buy to let property, stamp duty on buy to let property is something to factor into your overall costs. 

The amount you pay in stamp duty tax varies depending on the type of buyer you are.  

The majority of buy to let investors will pay a higher rate of tax than first-time buyers, for instance, as those who already own a home who are buying a second property to rent out pay a stamp duty surcharge. 

Find out more about the latest buy to let tax rules and things you should know about for 2021 with our helpful blog post. 

Using a Rental Management Company Using a Rental Management Company

Using a Rental Management Company: Is it Right For You? 

When thinking about how you’ll manage your buy to let investment, it’s essential to consider whether you want to have a hands-on or a hands-off venture. 

Having a hands-off buy to let investment strategy means you don’t need to worry about landlord duties like finding tenants or responding to tenant issues.  

Instead, a rental management company will do this for you. 

Benefits of using a rental management company include: 

  • More free time to take on usual commitments like your day job. 
  • The ability to make passive income. 
  • Rental managers have skills in finding the best tenants for your property. 

However, if you want a more hands-on strategy to become a landlord, using a rental management company isn’t for you. 

It’s essential to think about what kind of strategy you want, as this will help you understand how you should manage your rental property once you’ve purchased it.  

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Ensure Your Investment Is Safe and Secure Ensure Your Investment Is Safe and Secure

Ensure Your Investment is Safe and Secure 

While it’s crucial for those who invest in buy to let properties to make sure their rental property is safe for the tenants who live there, it’s also vital that the investor feels safe and secure in their venture.  

You’re putting a lot of money into your buy to let investment and have high hopes for the kind of returns you’ll generate. 

That’s why you should take the following steps to ensure your property is protected and you’re unlikely to face any major issues. 

Use Due Diligence  

Due diligence is one of the most important buy to let tips for all investors embarking on a new venture.  

Using due diligence means to thoroughly research the property you intend on buying and the developer behind it.  

The main things you want to look out for are the developer’s level of experience, what past clients have to say about them, and whether or not they seem like a reliable company that creates high-quality investment properties. 

Get Insured 

Different types of insurance are recommended for those who buy an investment property.  

Taking out insurance helps to protect your buy to let properties against things out of your control.  

Here are some of the most common types of insurance to consider if you’re buying a property to rent. 

  • Building insurance. 
  • Loss of rent. 
  • Contents insurance. 
  • Loss of rent. 
  • Deposit insurance. 

Do some further reading to find out more about these different types of buy to let insurance and whether they apply to you. 

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Buying an Investment Property: Your Next Steps 

Now that we’ve covered the main elements of buy to let and offered top property tips on how to succeed as a first-time buy to let investor, your next step is to explore current buy to let investment properties in the UK. 

Be sure to keep the following things in mind when searching for your buy to let property: 

  • Look for properties that are within your budget.  
  • Find buy to let property investments offering yields of over 6%. 
  • Make sure the buy to let property you select is based in a UK property hotspot where rental demand, rental yields, and capital growth prospects are high.  

Contact us today to find out about our latest buy to let properties for sale in the UK. We have some great opportunities available right now to invest in the best UK areas.  

Click the links below to learn more about our latest buy to let properties and request more details: 

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

If you’re unsure where you want to invest and want more guidance, use our live chat service to speak to an agent today.