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25 Things You Should Know Before Buying an Investment Rental Property

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    Looking At Buying a Rental Property?

    Knowing how to purchase a rental property can be difficult, especially if you want to know how to invest in property as a beginner. If you’re wondering how to buy your first rental property, you’ve come to the right place. Keep reading to learn the 25 key things you need to know before buying a house and renting it out.

    So, you’re thinking of buying a rental property? Buying a rental property has quickly become the most popular investment property strategy in the UK.

    Buying a rental property as an investment can be a fantastic way to increase income through consistent returns; however, it can get complicated.

    You may be hesitant to start your investment journey as you simply have no clue where to start.

    There’s so much terminology and jargon out there and other factors to consider that it can become incredibly confusing.

    Don’t worry, though; you’re not alone. Many first-time investors feel the exact same way as you.

    But how do you get over this learning curve? How do you prepare yourself for a property venture?

    The answer? Research!

    Understanding the absolute basics of property investment is vital. While you can stumble blindly and make a successful investment, you could limit your potential and might not get the most out of owning a rental property.

    Thankfully, this guide is here for you.

    Before buying an income property and getting started with a buy-to-let investment, it’s a good idea to do your research, and this helpful guide contains information on 25 things you should know before buying an investment property.

    Suppose you’re interested in owning rental property and want to know how to buy rental property, maximise your returns, the costs involved, the risks and benefits of owning a rental property, and much more. In that case, our tips will help you get started.

    Continue reading to learn how to buy a rental property in the UK.

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      What is a Rental Property?

      So, what is a rental property?

      Before we figure out how to buy rental property, and explore our 25 things to know before you invest in rental property, it’s important to set some groundwork. What is a rental property?

      If you’re completely new to the property world, you may not know exactly what we are referring to.

      Rental property is a property purchased with the express purpose of renting it to another person, usually referred to as a tenant.

      There’s several different types of rental property and investment property, some of which we will talk about later in this guide.


      1) Identify Your Personal Goals

      Before we jump into the nitty-gritty stuff, it’s important to think basic. What exactly do you want out of your investment?

      Maybe you’re thinking ahead to retirement or just want some more money on the side. Whatever your reasons, buying rental property is an excellent choice.

      However, your goals can impact what sort of property you should buy and what area to invest in.

      For instance, if you’re looking at retirement, you may want a property with high growth potential so you can sell it on for a big payday for retirement.

      Alternatively, if you’re just looking at monthly income, you may want an area with high rental income and may not be too interested about your return on investment.

      While we will explore these options later on in this guide, it’s important to keep your goals in mind when evaluating each aspect of a successful rental property investment.

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      2) Get to Grips With the Terminology

      There’s a lot of jargon and terminology in the property world, and we’re going to be using a bunch of it in this guide to “how to buy rental property.”

      With this in mind, we will help you to get to grips with some commonly used key phrases and concepts.

      Take a look at some of the following definitions to help you understand the basics of rental property investment.

      This is not an exhaustive list but gives a good baseline of some important concepts you will likely encounter upon buying rental property.

      Base Rate

      The rate of interest the Bank of England charges. Often the Bank of England’s base rate is used as a benchmark for other interest rates and will be used by mortgage lenders.

      Bridging Loan

      A short-term loan designed to allow a person to buy a property before selling their current one.


      Sometimes known as buy-to-rent, buy-to-let is the purchase of a property with the intention of letting to a tenant. It is another term for rental property.


      Also known as equity, capital represents the amount of money you have invested into an asset like a property.

      Capital Appreciation/Growth

      This is the increase in a property’s value over an amount of time. It can both depreciate and rise in value.


      A legal representative, such as a solicitor that deals with the legal aspects of purchasing or selling a property.


      The legal process that refers to the transference of ownership of a property.

      Exchange of Contracts

      Sometimes just referred to as “exchange”, the exchange of contracts is when the buyer and seller both sign a contract for the sale. The exchange is actioned by the conveyancer. From the point of exchange, the sale is considered binding, and terms can no longer be changed.


      A form of property ownership where you own both the property and its land. This is different to leasehold, where you own the property for a set period of time, which has been agreed with the freeholder.

      Ground Rent

      An annual charge paid by the leaseholder of a property to the freeholder.

      Land registry on a monitor

      Get to Grips With the Terminology Continued

      Land Registry

      A government office in charge of record holding of land ownership and charges against property such as mortgages.

      Land Registry Fee

      A fee is paid to the Land Registry upon selling a property.


      A legal document that allows one party, i.e. a tenant, to rent a property owned by another party for a set period.

      Maintenance Charge

      A charge, typically on leasehold properties like flats, covers the costs of insurance and maintenance of a building.

      Rental Yield

      The return on a property investment you earn through rent. It is calculated by dividing your yearly income by the original purchase price and multiplying it by 100 for a percentage.

      Rent Arrears

      The money owed when rent hasn’t been paid.

      Stamp Duty Land Tax

      A tax paid to the government by those purchasing a property in England and Northern Ireland. It has different names and rates in Scotland and Wales, but the concept is the same.


      A report from a qualified surveyor that checks the structure of a property and identifies any faults.


      The agreed-upon possession of a property by a tenant under the lease terms.

      Tenancy Agreement

      A contract between a tenant and landlord allows the tenant to live in the property as long as they follow the rules and pay rent.

      Void Periods

      The time a property isn’t generating rental income when it is vacant.

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      3) Is Rental Property a Good Investment?

      This may seem quite silly, given that you’re currently reading a detailed guide on investing in rental properties.

      However, you would be remiss for not asking yourself, “Is rental property a good investment?”

      A lot has changed over the years, particularly with the huge economic impact of Covid-19 and the ensuing lockdowns worldwide.

      In 2023, the UK  returned to relative normalcy, aside from some economic turbulence at the tail-end of the year.

      However, it’s still important to ask yourself if you’re making a suitable investment and whether rental properties are good.

      The good news is that buy-to-let is performing exceptionally well and is far more reliable than the stock market.

      Rent prices are increasing nationally, with huge capital growth predictions for the coming years.

      Taxes have changed somewhat in the past few years, though, so you may earn less monthly income than before 2017.

      While we will discuss some of these concepts later in the guide, the bottom line is that you can still make comfortable profits in the UK. However, you may need to be a bit pickier about where you invest.

      Real estate can breed success if you do it right. While this is also true for the stock market, the reality is that it can be perilous to invest in stocks.

      Rental property investment has a historical track record of returning from economic turmoil.

      Take 2020, for instance. House prices in the UK dropped between March and April by about £2,000 at the start of the first UK lockdown.

      Fast forward to the end of the year, though, and house prices reached a record high, growing at the highest rate since 2004 and surpassing £250,000 for the first time.

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      4) The Risks and Benefits of Property Investment

      While buying rental property can be incredibly fruitful and safer than the stock market, that doesn’t mean it doesn’t come with risks.

      If you’re asking “how to buy a rental property” and want the best investment possible, you need to do some due diligence and accept that each investment comes with risks.

      If Covid-19 has proved anything, it’s that the future is never certain. Stocks can rise and fall on a whim, and house prices could follow suit. There’s really no way of knowing.

      With the right sort of investment, though, you can alleviate these risks and set yourself up for success.

      Knowing about possible risks helps you identify opportunities that you should avoid and be more prepared for the unexpected.

      The most obvious risk involved with buying a rental property is that the housing market can change, affecting your potential earnings.

      If, for instance, property prices were to fall, you would not get a good return on investment when it comes to selling your property during that time.

      Of course, while the market can sometimes experience changes and fluctuations in property prices, the housing market is very resilient and always bounces back.

      That’s why it’s a good idea to research the market beforehand and avoid exiting your investment at the wrong time.

      On the flip side, one of the biggest benefits of owning rental property is that you’re able to make huge returns through rental income and capital growth.

      If you want a safe investment, investing in rental properties is far safer than the stock market.


      • You earn regular monthly income through rent.
      • You can earn a significant profit on the sale of a property over a long period of time.
      • Many cities, such as Liverpool, Manchester, and Leeds, offer huge potential for significant returns on investment.
      • Less risky than stocks.
      • Can be highly affordable depending on the property location.
      • You can take out various insurance to cover losses such as rental income.


      • Tax changes mean profits can be affected.
      • If you choose to not use insurance, you can risk losing out on profits or income when the property is vacant.
      • Property prices can drop in certain areas, and you can lose a lot in capital growth. It’s important to note, though, that selling in the distant future will alleviate these issues as property values continue to grow over long periods.
      • There’s a bunch of other costs to consider, like stamp duty and general maintenance.

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      5) Understand What Property Investment Involves

      This is quite a broad topic, and we’ve discussed some aspects already, but understanding the fundamentals of property investment is vital.

      Unfortunately, finding out how to buy a rental property isn’t as simple as handing over a cheque. There are many steps in place and rules and regulations you must keep in mind if you decide to buy a rental property.

      First, let’s look at a step-by-step guide for buying a rental property and renting it to a tenant in the most basic terms.

      • Step 1 – Identify a Property
      • Step 2 – Make an offer
      • Step 3 – Have the offer accepted
      • Step 4 – Arrange a mortgage if applicable
      • Step 5 – Hire a conveyancer
      • Step 6 – Consider a survey
      • Step 7 – Provide a deposit
      • Step 8 – Exchange contracts
      • Step 9 – Complete the sale and get the keys
      • Step 10 – Pay Stamp Duty and other legal fees
      • Step 11 – Ensure the property is suitable for tenants
      • Step 12 – Research the area and set rent appropriate for the neighbourhood
      • Step 13 – Find a qualified letting agent if you want to use one.
      • Step 14 – Get references so you know your tenant or guarantor can pay the rent
      • Step 15 – Organise the tenancy deposit (usually done by the lettings agent) that needs to be registered with the Deposit Protection Service
      • Step 16 – Sign the tenancy agreement and move tenants in

      Now, these steps can change dramatically depending on a variety of factors.

      For instance, if you use the services of an investment company, choose a different type of property investment, or use a property management company, there may be additional steps and things to consider.

      However, these 16 steps are a decent baseline for your expectations on your rental property journey.

      If you’re asking “how to buy a rental property?” these 16 steps are likely what you will have to traverse on your purchasing journey.


      6) Are You Ready to Be a Landlord?

      A lot of the steps in tip number five revolve around the fact that you will become a landlord.

      While you don’t have to become a landlord to rent a property (a common misconception that will be addressed next), it’s important to understand exactly what it means to be a landlord if you choose to go down this route.

      Simply put, being a landlord can be a lot of work. Not only do you have to find tenants, but you also have to maintain the property and keep it in shape.

      From clogged toilets to organising inspections, a landlord needs various skills to keep the property ticking.

      Owning rental property can be a big responsibility. You need to understand the wealth of legislation in place with private renting.

      Safety Responsibilities

      As a landlord, you must maintain the safety of a property. From gas and electrics to fire safety, you will be subject to several guidelines.

      Gas safety

      According to the official government website, as a landlord, you must:

      • Ensure gas equipment is safely installed and maintained by a Gas Safe registered engineer.
      • Have a registered engineer do annual gas safety checks on every appliance and flue.
      • Give a copy of the gas safety check record to a tenant before moving in or within 28 days of the last check.

      Electrical Safety

      Likewise, for electrical safety, you also must:

      • Ensure the electrical system, such as sockets and light fittings, is safe.
      • Ensure all appliances connected to these systems are also safe, i.e. cookers and kettles.

      Fire Safety

      Finally, landlords must:

      • Provide a smoke alarm for each storey of the property.
      • Provide a carbon monoxide alarm in rooms with a solid fuel-burning appliance like a wood-burning stove.
      • Ensure there is access to escape routes at all times.
      • Make sure all the furniture and fittings you supply are fire-safe.
      • Provide fire alarms or extinguishers if the house/property is in multiple occupations (HMO).


      As a landlord, you will also need to conduct repairs on the property. There are certain items in a household that you will be responsible for repairing.

      These include:

      • The property’s structure and exterior
      • Pipes and drains
      • Basins, sinks, baths
      • Heating and hot water
      • Gas appliances
      • Flues and ventilation
      • Electrical wiring
      • Any damage you cause by attempting repairs.

      Some repairs, such as repairing common areas like staircases in a block of flats, will depend on the tenancy agreement.

      As part of this tenancy agreement, you may agree for your tenants to carry out their own repairs when needed, but it needs to be noted you cannot force a tenant to do repairs that fall under your responsibility.

      The responsibilities don’t all fall on you, however. Let’s say your tenant’s bath overflows and leaks into another flat and causes damage.

      In that case, the tenant will be responsible for paying repairs.

      Rent Increases and Arrears

      As a landlord, you will want to maximise your rental income.

      With rent averages increasing month by month and UK rent already 9.3% higher than a year prior, according to Homelet, you may want to constantly improve your rent.

      However, how much you charge to your tenants can be a tricky subject, and there’s legislation in place to ensure you cannot change rent prices on a whim.

      First and foremost, rent increases are part of your tenancy agreement, which should include how and when you can review the rent.

      For those on a periodic tenancy (one that rolls on a month-by-month or even a week-by-week basis), you can only increase rent once a year.

      On the other hand, for a fixed-term tenancy (one that runs for a given period), you can only increase rent upon agreement with your tenant. If there is no agreement, you can only increase the rent after the term ends.

      Generally, for any tenancy, you must get permission from your tenants to increase rent. The rent increase needs to be “fair” and “realistic,” in line with average local rents according to

      So, how do you actually go about increasing rent?

      Well, firstly, you must give your tenants a minimum of a month’s notice if the tenant pays rent weekly or monthly.

      Conversely, if the tenant has a yearly tenancy, you need to give a minimum of six months notice.

      There are a few methods for a landlord to propose a rent increase.

      These are:

      • Renew the tenancy agreement at the end of the fixed term with an increased rental figure.
      • Agree to the rent increase with your tenant and take a written record of the agreement that both of you must sign.
      • Use a “Landlord’s notice proposing a new rent” form. This increases the rent upon the end of the fixed term.


      Whether being a landlord is your primary job or a side option for extra money, missing out on rental income can be a headache.

      No landlord enjoys missing out on their income when their tenant is unable to pay, and you can evict your tenants if they fall behind on their rent.

      The rules have slightly changed due to coronavirus, but a landlord can still evict.

      However, you must now give your tenants a minimum of six months’ notice if you plan on evicting them. Notably, if they owe you six months’ rent, you do not have to give this time.

      For a full breakdown of the rules and advice from the government during the pandemic, be sure to read official publications.

      Tenant Rights and Responsibilities

      The final thing to know if you want to be a good landlord is understanding the rights of tenants and their responsibilities to you and your property.

      According to the government, a tenant’s rights are:

      • To live in a property that is safe and in a good state.
      • Have their deposits returned upon the end of the tenancy.
      • Can challenge any high charges considered excessive.
      • Know who their landlord is.
      • Live in their home undisturbed.
      • Be protected from evictions and rent that are considered “unfair.”
      • Be able to see an Energy Performance Certificate for the property.

      But tenants also have responsibilities for their homes.

      Not only do they need to allow you access to the property (although you need to give 24 hours notice and visit at a reasonable time), but they also have a host of responsibilities to your property.

      These include:

      • Taking good care of the property.
      • Paying the agreed rent.
      • Paying any other associated charges agreed with the landlord, such as utility bills.
      • Paying for any repairs and damage caused by themselves, friends, or family.

      With all these factors and laws in mind, you may not feel like being a landlord is for you.

      But don’t let this put you off buying an investment property and investing in rental properties.

      The reality is you do not need to become a landlord. Instead, you can use the services of a property management company.

      Property Market bus

      7) Use a Property Management Company

      When buying a first rental property, there’s a common misconception that everyone involved with investing in rental properties is a landlord.

      In actuality, not everyone investing in rental properties is a buy-to-let landlord. Many investors choose to make a hands-off investment rather than take on a more hands-on landlord role.

      If you decide you’d rather be a hands-off investor instead of taking on landlord duties, you should look into hiring a property management company to manage the property on your behalf.

      Property management companies, also known as rental management companies, manage everything from finding tenants for your property to chasing up rental payments or dealing with any issues your tenants may experience.

      For investors interested in buying an income property to make some extra money alongside their day-to-day career, using a property management company is a perfect solution.

      Typically, property management companies take around 10% of your monthly rental income as a fee. While this isn’t ideal, it does ensure a completely hands-off investment.

      This is vital if you have a full-time job or live away from your property.

      At RWinvest, we collaborate with several excellent property management companies that will be recommended to our investors, all of which have excellent reputation and plenty of industry experience.

      In fact, some properties, particularly student properties, come with their own property management company, so you don’t even need the headache of trying to find one yourself.

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        8) Do the Maths

        As already established, the price of purchasing a property is just one small part of the entire investment process.

        This is important to know, as you’re going to encounter several different fees along the way.

        One of the first things you should do before you buy a rental property is to do the maths for your real estate investment, working out all the costs involved while also thinking about the rental income you will receive.

        The additional expenses you need to think about are buy-to-let mortgage repayments (something we will discuss in greater detail later), taxes such as stamp duty tax, and property management fees, if applicable.

        If you’re looking at investing in rental properties, doing the maths is vital for success.

        Stamp Duty Tax

        Stamp duty can be a demanding fee, and many first-time investors have never heard about it before.

        If you read section two’s definitions, you will already know what stamp duty tax is.

        Stamp duty is a tax paid by those purchasing property in England. The tax rate depends on how expensive the property is and the type of purchase being made.

        If you’re a first-time buyer, you will only pay stamp duty on properties that surpass a certain threshold.

        If you’re hoping to buy a property in 2024, you can check out the latest tax rates for those buying a second property in the UK.

        Note that stamp duty is only applicable in England and Northern Ireland, with different rates present for those buying a second home in Scotland and Wales.

        A bag of coins

        Other Fees

        Aside from stamp duty, there’s plenty of fees you should consider when buying an investment property.

        We will talk about why you should get insurance later on, but if you do get insurance, you need to factor in the costs for this, too.

        You should also consider if you’re buying a leasehold property, as well as how much you might be paying in ground rent for the maintenance of the building’s grounds and communal areas.

        Overall, you can expect the following costs.

        • Solicitor Fees – typically between £850 to £1,500, including 20% VAT.
        • Survey Fees – snagging surveys, for instance, can cost between £300 to £600
        • Insurance – Landlord insurance costs £170 on average, according to Nimblefins.
        • Stamp Duty
        • Property Management costs – typically 10 to 15% of your rental income.

        Once you have a good idea of all of the costs and potential earnings that will come from owning a rental property, you can set yourself a budget for your venture.

        If you’re planning on using a buy-to-let mortgage, make sure you create a budget that factors in at least 25% of the property price for a deposit, along with extra cash for the other costs involved.

        It’s a good idea to keep some cash saved away for emergencies, such as repairs that could be needed on your property either before or during the tenancy.

        How Much Can I Borrow to Buy a Rental Property?

        The amount of money you can borrow when buying a rental property with the help of a buy-to-let mortgage depends on the amount of rental income you expect to generate.
        As a rule of thumb, the rental income you earn should be 25 to 30% higher than your mortgage payment.

        Should I Pay off My Mortgage or Buy Rental Property?

        Whether you should buy a rental property instead of paying off an existing mortgage depends on your personal circumstances.

        If you have a stable income through your regular work, business ventures, or other assets, and you’re able to continue paying off your mortgage, using any extra money you have to buy a rental property could be a good idea for you.

        However, if you’re at risk of losing your income streams, you may be more suited to paying off your existing mortgage before embarking on a buy-to-let investment, as this will give you greater peace of mind and security before buying property to rent out.

        How Many Rental Properties Can I Buy?

        You can own as many rental properties as you like, as long as you have sufficient funds to purchase them.

        Investors with a larger budget will often purchase multiple lower-cost properties rather than one higher-priced investment.

        This way, you’re able to diversify your portfolio and spread your risk across different areas or property types while maximising your earning potential.

        A good example of how to buy rental property with a larger budget is purchasing rental properties in an affordable city like Liverpool.

        By investing in Liverpool with a larger budget, you could buy multiple properties for the price of just one in London, where buy-to-let investments can cost over £1 million in certain areas.


        9) Market research: Find the Right Location

        Hopefully, you now feel more prepared and equipped to deal with buying an investment property.

        Now, it’s time to start looking at potential properties you may want.

        You might already have a particular property in mind, but have you considered its location?

        Location is vital to consider when buying investment property. It can dictate the rent you will earn, how affordable the properties are, future growth rates, and demand.

        Ideally, you will want to target cities or towns that offer high growth rates, affordable prices, high rent, and high rental demand.

        High Capital Growth Rates

        Perhaps the most crucial aspect if you are planning for retirement is high capital growth rates.

        Capital growth is vital for an investor, as it represents the increase in the value of your property over time.

        Recently, property experts Savills released their latest property price predictions for UK regions. The results may surprise you.

        Currently, the North West region is expected to see some of the highest levels of growth by 2028, with a 20.2% house price increase.

        At the bottom of the table is London, with just a negative -1.2 price growth in the next four years.

        These areas are integral to consider, as they are typically valued as some of the best places to buy property UK. Be sure to target regions with high growth potential in both property prices and rent to make the best investment possible.

        It’s a good idea to invest in the areas with the highest capital growth rates, as it shows a place that is on the rise and has a bright future ahead of it.

        But it’s not the only aspect of capital growth you need to consider; you should also look at the area’s capital growth history.

        Past capital growth rates are a good signifier of an area’s potential as they can show a consistent rise in house prices, which is good news for your pockets.

        Using tools like the UK House Price Index, you can see past house prices by month for each region, borough, or city and compare it to current house prices to see growth levels.

        The UK House Price Index does a lot of the work for you and gives you percentages for how prices changed year-on-year or month-by-month.

        If you have a location in mind, it’s a good idea to look on the website to see if a city offers the price growth potential you’re looking for.

        To do some of the hard work for you, though, we have compiled a list of house price changes over the past 20 years in the UK’s major cities and destinations.

        So, what does all this data mean for you?

        It seems like London is one of the worst locations for capital growth at the moment. Not only is there minimal growth set for the next four years, but there’s been consistent negative growth over the last five years.

        In fact, in 2020 alone, prices dropped by 15.54% in just 12 months.

        On the flip side, if you’re looking at buying an investment property and want the highest capital growth potential, the most obvious options are Manchester, Liverpool, Sheffield, and Leeds.

        Manchester, in particular, has seen some staggering growth over the years and has outperformed every city over a five, 10, and 20-year period.

        Plus, with anticipated growth of 11.7% in the North West region, you can’t go far wrong with buying an investment property in Manchester.

        Liverpool has also performed incredibly well. While its historic growth hasn’t broken records, it has been consistently increasing over the years.

        In 2020, the Liverpool housing market exploded, rising by a staggering 17.59% between February 2020 and February 2021.

        This has continued well into 2023/24, with official Land Registry data showing Liverpool houses increased by around 7.19% since 2022.

        The North West is likely the best location for investment for the foreseeable future.


        Another crucial factor to a location and buying an investment property is affordability.

        While affordability alone isn’t a deciding factor, if you’re able to find a city that offers reasonable growth rates and is also affordable, then you’re onto a winning location.

        To find current average house prices, you can go to the UK House Price Index or use the latest data from property portals Zoopla or Rightmove to find the average house prices on their books.

        Property prices can differ heavily between property types, so we have compiled a list of property price data for popular property types by city.

        If you’re a first-time investor, then chances are you won’t be able to afford these staggering prices in the capital.

        Again, the best cities seem to be Manchester and Liverpool. While Manchester’s prices are higher than some other cities, the level of capital growth in the city makes the price tag worth the entry price.

        Of course, these are just averages, and you can get significantly lower prices than this.

        For instance, one of our Liverpool properties at RWinvest, the revolutionary The Prestige, starts at just £144,950.

        Meanwhile, our luxury Manchester development, Merchant’s Wharf, starts at just £149,950.


        Naturally, average rent in a location is vital for prospective investors and landlords thinking of buying homes to rent.

        This is because the average rent in an area dictates how much you will charge for your property.

        If you are just about rental income, there are some obvious cities that offer the highest monthly earnings.

        Using Zoopla data, you can find the average rent by city.

        Currently, London offers some of the highest rent, with the current average in the city sitting at £4,578 PCM.

        That means every year, you will earn £54,936 on a single property.

        Of course, the caveat is that it will require a fortune to tap into this market.

        On the flip side, locations like Liverpool are more affordable but offer smaller rent in comparison.

        Currently, the average Liverpool property commands monthly rental fees of £1,196 PCM or £14,352 per year.

        While on the surface, this looks bad in comparison, it can be misleading.

        This is because you could buy multiple properties in Liverpool for the price of just one in London.

        In fact, you can buy six properties in Liverpool with change left over for just one in London.

        This means the actual yearly income in the Merseyside city would be around £86,112, completely overshadowing the capital.

        This highlights that you can’t take rental income at face value, with other factors coming into play.

        Likewise, you should also consider rental growth.

        Using the Homelet Rental Index, you can find current rent and rental growth rates by region.

        As a whole, UK rent has increased by 9.9% from last year.

        Looking at particular regions, these numbers change dramatically.

        Homelet has recorded an 11% drop in rent prices in the London region since last year.

        On the other hand, the North West has increased by 9.1%, while Yorkshire and The Humber have increased by 8.5%.

        It’s important to note, though, that many savvy and experienced investors don’t value monthly rent too highly.

        When buying your first rental property, it’s a common mistake to put all your eggs in the rental income basket.

        Instead, you should focus heavily on rental yields, a measurement we will discuss in detail in a later section.

        Rental Demand

        Finally, when evaluating a location, it is vital to consider rental demand and the type of tenant you will expect to see.

        Now, rental demand is a complex factor to measure directly, but prominent signifiers are how fast properties sell, the number of property enquiries, population growth, and the increase in house prices and rent.

        These measurements are likely to increase the demand for property there is.

        Take Manchester, for instance.

        A report by Zoopla in 2020 found that the ratio between the available supply for property and the demand for it is currently 1:5.

        This means that for every single property, five buyers are interested.

        That’s a massive demand for property and highlights that you will have minimal void periods if you were to rent in the area.

        Moreover, it’s essential to consider the local population.

        Not only will this signify what type of tenant you are likely to see, but it will also show if the city is on the rise with growth levels.

        Using Manchester as an example again, you can evaluate a city’s investment potential based on the population.

        According to reports, Manchester has seen a 27.8% population increase since 1991. Meanwhile, the Greater Manchester population increased by 7.7% between 2006 and 2016 – double the UK average growth rate.

        This is significant as it shows more and more people are choosing to live in the city.

        And perhaps even more significant for investors, a bulk of this population are young people.

        According to data from the local government, around 37% of the city population are aged between 18 and 34.

        Manchester also has a considerable student population, making it one of the biggest student cities in all of Europe.

        Over 100,000 students live in the Manchester region across five universities. Of these students, around 51% choose to stay after the graduate – the second-highest graduate retention rate in the country.

        So why is this important?

        Well, young people are more likely to rent as they are typically unable to afford to buy their own properties.

        This age group is typically referred to as Generation Rent and should be your target tenant when investing in property.

        Not only does this highlight that there’s plenty of rental demand, but it also informs you on what type of property you should buy (something we will address further on in this guide).

        Overall, if you’re looking at buying your first rental property, be sure to consider all these factors mentioned for a successful investment.

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        10) Consider Rental Yields

        Rental yields are paramount when it comes to an investment as they signify the return on your investment.

        Return on investment shows how long it will be before you start making a profit on your initial cash injection.

        The higher the yield, the better the investment opportunity.

        Rental yield is displayed as a percentage and is calculated by dividing your yearly rental income by the original purchase price and multiplying by 100.

        Let’s use statistics for the average UK property as an example.

        According to the UK House Price Index, the current average UK property is valued at £285,009.

        Meanwhile, the average rent in the UK is £1,199 PCM, according to the Homelet Rental Index.

        Using these figures, the average rental yield in the UK is about 5.05%.

        That means every year, you will see a 5.05% return on your original investment.

        Typically, rental yields between 5 and 6% are considered ideal, meaning the average UK property just meets the requirements.

        Not to fear, though, as depending on location, you can see much higher yields.

        Using a combination of UK House Price Index data from the Land Registry and Zoopla data, you can see that the best UK cities for rental yields in 2024 are Liverpool, Manchester, Glasgow and Nottingham, which show average rental returns of over 7.37%

        Now, yields aren’t the be-all-end-all when buying a house to rent, but it is critical to consider alongside the other factors mentioned in prior sections.

        Like rent, these rental yields are also average, and you can find them higher.

        Take our properties in RWinvest, for instance. You can find Liverpool properties with rental returns of up to 8%, while you can find Manchester properties with 7% returns.

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        11) Consider the Liveability of an Area

        When looking at houses to rent, it’s important to put yourself in your tenants’ shoes. Would they want to live here?

        Considering the liveability of an area is vital, and you need to understand precisely what the local neighbourhood offers.

        For young families, the quality and availability of local schools are paramount, so you should aim to buy a property with these local facilities if you are targeting this tenant group.

        Likewise, you need to consider factors like local crime rates, job opportunities, health care, transport, education like universities, and nearby amenities like restaurants and bars.

        These are all of critical importance to an individual’s life.

        A good rule of thumb is if you don’t want to live there, then the chances are your prospective tenants won’t either.

        To understand what cities offer, it’s good to read local reports to understand exactly what an area is like.

        Here at RWinvest, we have several key guides on various areas so you can learn what investing in the area entails.

        You can find guides to Liverpool property investmentManchester property investment, and more on our website.

        It’s also a good idea to look at local media reports.

        Recently, Liverpool and Manchester were voted in the top 10 global locations for business start-ups.

        Manchester has also been deemed the best place to live in the UK by the Global Liveability Survey, which ranks 140 cities on factors like education, culture, and health care.

        There’s plenty of information out there to help you decide which city is the dream location for rental property investment.

        Types of Property to Consider

        To summarise so far, we’ve looked at your personal goals, what it means to be a landlord, how to evaluate an area and the type of costs you’re going to encounter when buying a house to rent.

        Now it’s time to actually look at properties to buy.

        Figuring out how to buy property can be hard, and finding a house to rent can be even harder.

        This is because so many buy to let investment strategies are out there, each having considerable differences and its own pros and cons.

        To help clear the fog, here are six top-rated buy to let investment strategies to consider on your investment journey.

        The bread and butter of the investment world, if you’re asking about investing in rental property for beginners, this is likely the most straightforward answer.

        Residential buy to let is when you purchase a residential property like a home or flat and rent it to a tenant of any age.

        This means you can rent to both young people and retirees, but not necessarily to students, which is typically classed as student buy to let.

        Younger people are certainly the more likely renter, but there’s a surprising number of retirees and over 60s choosing to rent.

        A report from The Guardian in 2020 found there are over 400,000 over–60s currently living in private rented accommodation, an increase of 60% since 2007.

        In fact, research has predicted about a third of over 60s will be renting privately by 2040.

        So, what are the pros and cons of residential property?

        Residential buy to let shares a lot of the characteristics of buy to let in general.


        • Can earn regular monthly income through rent.
        • Can earn a huge pay-out later down the line thanks to capital appreciation.
        • Don’t need to be picky with tenants, with young people and retirees available.
        • Easy to understand and get started with.
        • Can have a completely hands-off investment with a property management company.
        • Less risky with high demand for rental property and strong growth rates.


        • A long-term strategy so won’t see instant returns.
        • Chances of void periods if the property is left vacant.

        Similar to residential property, student buy to let is the idea of purchasing a property and renting to students.

        The UK student market is thriving at the moment, with a record number of international students attending UK universities.

        And with predictions for 500,000 more students by 2030, the market is only going to get better.

        There are plenty of student cities to choose from, and you can invest in both purpose-built student accommodation and HMOs (which will be mentioned later).

        The key to student buy to let is understanding student populations and investing in cities with excellent universities, a strong job market, and top nightlife opportunities.

        A good indicator of this is researching the graduate retention rate of cities, with the likes of Liverpool, London, and Manchester, having some of the highest.

        Whatever city you choose, student buy to let can be a wise choice due to its affordability and high rental yields.

        As purpose-built student accommodation apartments are usually smaller and more compact, prices are traditionally far cheaper than normal apartments, giving an even bigger scope for a successful investment.

        You can buy some top student property with RWinvest, like ELEMENT – The Quarter phase 4, for just £99,950.


        • Low property prices and huge returns potential.
        • Can earn regular monthly income from rent.
        • Capital growth potential, though not as much as residential buy to let.
        • Huge rental demand.
        • Often sold with the services of a property management company so hands-off.


        • Limited to only one tenant group.

        When many start their investment journey and want to know how to buy property, many opt for HMOs.

        A house of multiple occupancy is a residential build that features more than one tenant. It is an increasingly popular investment type in cities like Liverpool.

        Often, these buildings are split into different rooms, with each room rented out within the property.

        HMO’s tend to feature student tenants, with these shared student houses typical for university students in their second, third, and final years of study.

        It’s important to note that there is a tonne of legislation surrounding HMOs, particularly surrounding safety, so it’s essential to get to grips with the law before investing.

        Similarly, there are talks of local councils banning or limiting the creation of HMOs, with many locals unhappy with the practice.

        This is worth keeping in mind if you do opt for this buy to let investment strategy.

        If you’re asking how to buy property, it isn’t recommended you opt for this method, particularly with difficulty involved with the legislation.


        • Can generate income from multiple tenants.
        • Less chance of void periods as if one tenant can’t pay, other tenants can.


        • Complex tax rules and legislation so not ideal for beginners.
        • If you need finance options like a buy to let mortgage, you may struggle to get one for HMOs.
        • A wider trend of people wanting more luxury accommodation may make HMOs obsolete.
        • Council initiatives prohibiting the creation of HMOs, so might not be a strong future.

        If you’re asking how to buy property, this method will likely not meet your expectations.

        A more obscure investment strategy, hotel buy to lets can be incredibly profitable but come with some high risks.

        The way it works is that an investor can purchase a room within a hotel build, with the investor taking a cut of the cash of any guests that stay in the room.

        This is far removed from more traditional buy to let strategies, as you don’t have a tenant.

        Instead, you will be relying on those travelling for holidays or business purposes.

        Hotel lets are also very hands-off, with no need to oversee tenant acquisition.

        There are some serious drawbacks, though.


        • Potential for large returns in busy hotels.
        • Completely hands-off strategy with no tenant demands to deal with.


        • A hotel could go bust and make you lose your investment.
        • The hotel may not be popular, so long void periods.
        • Have no control over business decisions and cannot control reputation, so bad reviews may drastically impact the potential for earnings.

        If you want to know more about investing in rental property for beginners, holiday buy to let’s are an excellent choice.

        Here, investors can purchase a property to rent on a short-term basis to holiday–goers.

        Typically, you can advertise these properties on websites like Airbnb, which is becoming a trendy platform for those letting out properties to tourists.

        You can get some excellent returns by letting out holiday homes, but you’re going to encounter one big problem: the seasons.

        The holiday business operates on a season-by-season basis, with you likely to get very little interest in your property in mid-winter compared to the summer, depending on location.

        It will also heavily depend on what area you invest in. You will ideally aim for popular tourist spots, but that may get expensive.

        If you already live in a popular tourist area, and your house is large, you could always rent a room in your property through Airbnb.

        While you may not get the most income from it, there are many tax advantages for going down this route.

        For instance, the government has a Rent a Room scheme, which means you can earn up to £7,500 tax-free if you let out furnished accommodation within your home.

        Overall, this is a decent answer if you’re looking for investing in rental property for beginners, but there are better options out there.

        By buying renting property such as traditional residential and student buy to let, there is more scope for high returns and stability.


        • Allow potential for decent rental income if the property is quality, and the area is popular.
        • Tax advantages for renting out a room.


        • If you need to buy a property, securing a buy to let mortgage can be difficult.
        • Will need to maintain the property and organise cleaning after every guest.
        • High chance of long void periods if the area sees seasonal tourist demand.

        Overall, there are plenty of investment strategies out there for you to consider when buying renting property.

        If you want to find more about the latest property investment strategies, check out our detailed top 10 guide.

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        13) Think About Regeneration

        While the present is always essential when considering buying investment property, you must also understand the future of a location.

        Regeneration is a huge part of this future and helps make a city far more attractive to its residents.

        This is good news for investors as regeneration will often lead to increasing populations, rising house prices, and hiking rent prices.

        A lot of cities have been completely transformed over the last few decades because of UK regeneration.

        Cities like Liverpool, Manchester, and even smaller towns like Slough are set to see some mega regeneration efforts in the coming years.

        These cities are definitely worth considering if you’re thinking of buying renting property.


        If you’re thinking of investing in property in an area that has already been transformed by regeneration and continues to do so, then Liverpool should be at the top of your list.

        Liverpool has been heavily transformed since the 1980s and has changed from a struggling economic area to one of the most prominent UK powers.

        Major billion-pound projects like Liverpool ONE put the city on the map by introducing a world-class shopping centre.

        Fast forward to 2024, and there are some seriously impressive upcoming projects already being built or in the pipeline.

        This includes the £5.5bn Liverpool Waters project, which is set to introduce five new neighbourhoods to the city centre.

        Likewise, the £2bn Knowledge Quarter is continuing to be developed, an area that is already home to thriving science-based businesses and the city’s major universities.

        A big reason behind Liverpool’s strong growth levels and high rental yields are regeneration efforts like this, making it an ideal location for future growth.

        When looking at investing in property, Liverpool is one of the best locations to consider for the future.


        Just like Liverpool, Manchester has also been completely changed over the decades.

        Manchester’s business backbone was rejuvenated thanks to the £1.5bn Spinningfields project.

        Located in the heart of Manchester, the project added a new area to the city, which is now home to 150 financial and commercial organisations.

        Due to its scope, Spinningfields has been dubbed the North’s Canary Wharf, a massive testament to Manchester’s prominence in the business world.

        This business growth was also supported by MediaCityUK, a project that has cost over £1bn.

        MediaCityUK has attracted several world-class media organisations like the BBC and ITV. They have moved their major operations from London to the North.

        Hiking prices in the south have led to many people and businesses fleeing up North. This has been mirrored in the Manchester economy, which is now the second-largest regional economy in the UK and has grown twice as fast as London’s since 2014.

        While past regeneration has been impressive, a lot is going on in 2024 and beyond, too.

        You can expect a whopping multi-billion pound project over the next decade, with the likes of NOMA, the Northern Gateway Redevelopment, ID Manchester, and more coming to the city.

        All these projects have worked in tandem to ensure that Manchester is a top location for investing in property.


        While the last two entries are already established property hotspots, one area you may not have thought about investing in property is Slough.

        The town outside London is actually one of the best up-and-coming investment areas in the UK, but has been ridiculed over the years thanks to the comedic efforts of Ricky Gervais’ in The Office.

        If you want to get ahead of the curve, Slough is in line for tremendous growth over the coming years.

        Slough is a commuter town, meaning thousands travel from there to work in London, which is easy to do thanks to the excellent transport options on offer.

        In fact, Slough was voted as the second-best location in all of Europe for connectivity. This is about to get bolstered through the introduction of new Crossrail routes.

        The £14.8bn Crossrail is a new railway system making it easier to travel to significant locations in London.

        New links are being brought to the area, one of which is in Slough. The new links caused local house prices to increase by 66% essentially overnight.

        If you want to find houses to rent with excellent growth potential, Slough is a great up-and-coming property investment hotspot to consider.

        The town is one well worth keeping an eye on, and if you want to learn more about the region, be sure to check out Slough property investment on our website.

        Overall, regeneration is vital for an area’s success, and you should consider any upcoming regeneration efforts before looking at houses to rent.

        If you want more information about regeneration in other cities like Leeds, Birmingham, Sheffield, London, and more, read our UK regeneration areas guide.


        14) Off-plan or Already Built?

        Let’s be honest, we all want a good deal on our investments.

        Why spend over the odds when you can get a property for even cheaper than market value?

        It sounds fanciful, but there are ways to ensure you get high-quality properties for as cheap as possible, and that is by buying a house for rent off the plan.

        But what do we mean by buying off the plan, and is it worth it over buying more traditional investment properties?

        Off-plan property is a property that is available to buy despite not being finished yet. This means it can either be under construction still or is only in the planning stages.

        On the surface, investing in an asset that isn’t yet tangible is risky.

        While this can be the case if you don’t research properly, off-plan is one of the more ideal forms of property investment.

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        The Pros of Off-Plan

        Off-plan is a perfect option when finding houses to rent because it is cheaper than traditional property investment.

        As an incentive to buy into a project that hasn’t been completed, developers will offer cut-price deals to secure more funding.

        This means you can buy properties for thousands less than market value.

        For instance, one of our off-plan properties, Merchant’s Wharf in Manchester, can be bought for over 55% below market price.

        Also, because they’re cheaper, there is bigger scope for capital growth, so you can expect an even stronger percentage increase in capital over the years.

        Finally, to sweeten the deal even further, some companies will offer assured rental returns for a set number of years.

        This means for the first few years of buying real estate; you can feel completely safe knowing your investment is seeing consistently strong returns.


        • Stronger capital growth potential than already built properties.
        • Cheaper than market value, so significant chance of a great deal.
        • Assured rental returns for a set number of years.
        • Cherry-pick the best units.
        • New build properties so incredibly modern.
        • Some companies offer payment plans so you can pay in multiple steps.

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        The Cons of Off-Plan

        So, what are the downsides of finding houses to rent in this way, and should you choose off-plan?

        The main downside is the developer could go bust, or the property doesn’t look how it was advertised come completion.

        When buying traditional property, you know exactly what you’re getting as it is tangible. This means you can see what you’re buying into. You don’t get that surety with off-plan.

        However, this is actually a minimal risk if you do due diligence.

        Firstly, companies have started providing virtual reality tours of the properties, so investors can get a genuine feel for what a property will look like.

        Also, when investing off-plan, it is absolutely vital that you research the company.

        This means checking out online reviews and checking out the developer’s track record to see if they can deliver what they promise.

        If a company hides its reviews or doesn’t show a track record, this is a red flag that you shouldn’t be investing there.

        Here at RWinvest, we are incredibly proud of our reviews, with over 726 five-star reviews on Trustpilot.

        We’re also proud of our track record of delivering properties on time, on budget, and fully tenanted after completion, with our history available on our website.

        If you want to save as much money as possible and be able to cherry-pick the best units available, off-plan property is the way to go. Just be sure you can trust the company before investing; otherwise, you risk losing out.


        • May have to wait for over a year before the project is completed.
        • The finished project may not look like how you expect if you invest with an unreliable developer.
        • The project could get delayed, and the developer could go bust if you invest with an unreliable developer.
        • It can be challenging to secure a buy-to-let mortgage on an off-plan development.
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        How to Invest in Off-Plan?

        Let’s say you’ve decided to get the most affordable properties on the market and opt for the off-plan route. What next?

        Well, here is a step-by-step guide for investing in off-plan investment properties.

        Step 1- Do Your Research

        Like any property project, you need to first get to grips with the ins and outs of off-plan investment property and what it entails before investing.

        Step 2- Choose a Location

        As discussed, try and pick a location with high market growth potential and strong rental yields.

        Step 3- Select Residential or Student Property

        Each property type has its pros and cons, so choose carefully which type you wish to invest in.

        Step 4 – Explore Financial Options

        It can be challenging to secure a buy-to-let mortgage due to timing issues, but it is still possible. It will be easier to buy off-plan property if you have the full cash amount available. Remember, you can usually buy in steps, so you don’t need the total amount right away.

        Step 5 – Do Your Due Diligence

        Make sure you investigate the company you’re investing with and check out their reviews and track record.

        Step 6 – Choose a Property and Pay a Reservation Fee

        This is kind of like a deposit and ensures your property isn’t sold to anyone else.

        Step 7 – Solicitor Carries Out Legal Aspects

        You will need a conveyancer to deal with the legal aspects. You can get your own, but sometimes investment companies will give you a solicitor who is well-versed in investment properties.

        Step 8 – Pay Your Deposit and Exchange Contracts

        This is the exciting part as you near full ownership of the property.

        Step 9 – Complete Your Purchase Upon Completion of Property

        Pay off the rest of the price of the property when it reaches completion. Congratulations, the property is now yours.

        Step 10 – Think of an Exit Strategy

        You won’t want to sell for a long time, but it’s important to eventually think about your exit point. Be sure to take advantage of strong capital growth in the future and sell at the right time to maximise your profit. You also may want to connect with an experienced agent or company when looking to sell your property down the line. Property Solvers, for instance, are a company that specialises in this regard.

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        15) Avoid Fixer Upper

        If you want to know about investing in rental property for beginners, you should avoid a fixer-upper.

        When we say fixer-upper, we refer to investment properties that need a lot of work done before it’s suitable for renting or selling.

        Reviving a weather-worn property can be a considerable undertaking and requires a significant budget and knowledge to get it in top shape.

        While you will likely save a tonne of money when buying the property, the amount you could spend may eventually surpass the savings you made, with solo housing projects notorious for going over budget.

        Plus, if you choose to rent the property afterwards, you may not be seeing a significant return on your investment.

        If you have the expert knowledge required, then a fixer-upper is possible, but it is not recommended for beginners.

        When looking at investment properties, stick to more traditional methods for now while you are still learning the trade.

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        16) Choose an Investment Company

        If you feel auctions and finding properties yourselves is daunting, don’t worry; many beginners think like that.

        It can be intimidating choosing a property as a beginner because it can be difficult finding assets with the best investment potential.

        If you want to know how to buy investment property as easily as possible and avoid this hassle, one method is to use the services of a property investment company.

        These companies can help you invest in property and can easily guide you through the process of learning how to buy investment property.

        Companies like RWinvest will provide solicitors and identify properties with the best investment potential.

        Investment companies also work with developers to offer properties to customers at a cut price.

        Due to their expertise and industry knowledge, these companies will know what makes a good investment and will typically only offer properties with a high chance of success.

        Here at RWinvest, we are a property investment company specialising in residential and student property.

        We’ve been in operation for over 17 years and have helped a whopping 75,000 investors make the investment of their dreams.

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        Advantages of Using an Investment Company

        Time Saver

        Instead of crawling through property portals for hours trying to find the best unit available, investment companies have already identified the most worthwhile properties on offer so most of the work is done for you. Learning how to buy investment property has never been easier.

        Moreover, you can talk to a property specialist and discuss precisely what you want in your ideal property investment. Then, the specialist can guide you through your options and pick out the perfect property for you.

        Decades of Experience

        As a beginner, it’s going to be challenging to pick out the best units available.

        But thanks to the expertise of property investment companies, the property specialists have already done the hard work for you and have picked out properties in high-growth areas.

        For instance, RWinvest has properties from across the UK but focuses heavily on the North West due to the strong market potential in the area.

        Help You Choose Property Management Companies

        Finding the services of a property management company can be tricky, but luckily investment companies can put you into contact with them.

        You’ll find that on certain property developments, there will already be an in-house management company ready to take over the running of the property upon completion.

        Using the services of an investment company will ensure you can get a hands-off investment as efficiently as possible.

        Cheaper Prices, Payment Plans and Exclusive Deals

        Many property investment companies like us offer several off-plan property investment opportunities, which means you can get high-end properties for even cheaper than usual.

        Better yet, some companies will offer exclusive deals, including exclusive properties you won’t find anywhere else.

        For instance, here at RWinvest, we offer free furniture packs on select properties worth over £5,000.

        Moreover, to increase this affordability, investment companies can offer structured payment plans.

        Instead of paying the bulk fee upfront, you can now pay in increments making it far more accessible for beginner investors.

        If you want to know how to buy investment property cost-effectively, investment companies can be an excellent choice.

        Assured Rental Returns

        As an extra incentive for investing, some companies will offer assured rents for a specific time, typically for multiple years.

        This is great for beginner investors, as they won’t have to worry about rental returns for the near future.

        Here at RWinvest, we have properties with 8% assured returns, such as ELEMENT – The Quarter, which has just launched phase 4.

        Paperwork Handled

        One of the more challenging aspects of property investment is getting to grips with all the paperwork you need to do.

        Not only are there several pieces of documentation you need to handle, but you also need to find and hire a solicitor to help with the legal aspect.

        However, with an investment company, most of the paperwork is handled for you. Some companies also offer you the services of a solicitor already familiar with the property world.

        This makes the process even simpler and faster.

        Gain Valuable Experience

        Notably, for beginners, using an investment company can help teach you about the basic framework for any future investments.

        Through an investment company, you will learn all about the buying process while being guided by experts.

        After a successful venture, this process will help you feel more confident and could inspire you to invest further and expand your property portfolio.

        When it comes to learning how to invest in rental property, there are few more beginner-friendly ways than investing with an investment company.

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        Disadvantages of Using an Investment Company

        We’ve looked at all the top advantages of buying through an investment company, but what about the disadvantages.

        Well, if you’re asking how to invest in rental property through an investment company, there are some disadvantages you should consider.

        Miss Out on Hands-On Experience

        Many people enjoy the control of property investment and are excited about the personal journey of finding a new property venture from scratch.

        If this is you, you may not enjoy the hands-off experience of property investment companies, as the bulk of the journey is handled by other experts.

        If you’re a beginner, it’s highly recommended you use the services of an investment company to build up experience.

        Limited Investment Choices

        Many investment companies specialise in specific areas or property types. This means using their services will restrict you to precisely what is on offer from the company.

        For instance, if you’re looking for a big house or an HMO, using RWinvest isn’t recommended as we specialise in residential flats and apartments due to the more affordable prices and higher rates of return.

        Overall, property investment companies are perfect for beginners. If you want to learn more, check out our guide to property investment companies.

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        17) Buy Outright or Use a Buy to Let Mortgage?

        When it comes to property investment, one thing you’re going to have to ask yourself is if you should buy the property outright or finance it using a buy-to-let mortgage.

        Now, you will already know your financial situation to determine if it’s possible to buy it outright, and if you can’t then a buy-to-let mortgage is the obvious solution.

        However, you may encounter some problems with securing a mortgage, particularly with off-plan properties.

        Moreover, if you’ve never invested before, buy to let mortgages work differently from traditional residential mortgages and have a steeper learning curve.

        If you want to know how to invest in rental property and want to understand mortgages, keeping reading to learn more.

        How Do Buy-to-Let Mortgages Work?

        As the name might suggest, buy-to-let mortgages are specifically designed for those buying a property to rent to a tenant.

        You won’t be able to secure a normal residential mortgage if you don’t plan on living in the property.

        Buy-to-let mortgages also work very differently from normal mortgages when buying real estate.

        Firstly, BTL mortgages command higher deposits, typically around 20 to 25%, although this can rise to 40%.

        Secondly, these mortgages are interest-only. This means you will pay the loan’s interest every month without touching the value of the original loan.

        Upon ending the mortgage term, you will have to pay off the original loan in full. This is sometimes known as capital debt.

        To pay this debt off, you can either make additional payments to reduce the final cost during the term or sell the property at the end. Alternatively, you could also open another mortgage.

        The amount of money you can borrow on a buy-to-let mortgage when buying real estate depends on your rental income.

        Typically, most mortgage lenders will require your rental income to be about 25% or 30% higher than the cost of the monthly interest payments.

        In practical terms, if you have a monthly interest payment of £700, you will need to have a rental income of around £900 on your investment rental properties.

        Another thing to consider is the type of buy-to-let mortgage you opt for when buying real estate.

        There are two main types of BTL mortgages which are fixed-rate mortgages and variable-rate mortgages.

        For fixed-rate mortgages, the interest rate will stay the same for a set period of time, typically between two and 10 years.

        On the other hand, variable rates change periodically and are usually in relation to the base rate from the Bank of England.

        These rates can change heavily from 2% or even 5%.

        The current average interest rate is 3.10% for fixed-rate mortgages, with a 3.44% rate for variable rates.

        Can I Get a Buy-to-Let Mortgage?

        Buy-to-let mortgages for investment rental properties aren’t available to everyone, and you will need to fit certain criteria to be eligible.

        The criteria include earning over £25,000 a year, needing a good credit score, owning a home already, and being no older than 70 or 75 when the mortgage term ends.

        If you have enough money to do so, you may wish to pay for investment rental properties in cash, without the help of a buy to let mortgage.

        This can make the investment process a lot simpler, especially if you’re an overseas investor, as obtaining a mortgage may sometimes be tricky.

        Investors who pay the full amount for investment rental properties also don’t need to worry about mortgage repayments taking a chunk out of their rental income.

        If you’re thinking of buying rental property outright with cash, plan a budget that incorporates the property’s price along with any taxes and fees that will be required upon purchase.

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        18) Shop Around for the Best Mortgage 

        It’s easy to get carried away when getting excited about starting your property venture, but you need to think smartly and try and be as cost-effective as possible.

        This notion not only applies to selecting a property, but it also applies to the mortgage you decide to get (if you want one).

        You can get mortgages from both banks and building societies, but scepticism is key. Are they truly offering you the best rates possible?

        For this reason, be sure to shop about and research thoroughly what the best deals are.

        You can even opt for the services of an independent broker who will help guide you through your options to see what’s right for you.

        There’s no rush to get started in property, and you should take your time so you make the best decision possible.

        A huge bit of advice when asking how to buy an investment property is to try and save as much money as possible.

        When people ask how to buy an investment property affordably, they often think of saving money on the house itself.

        While this is obviously something you should do, it’s well worth trying to pick the best mortgage deal possible, as you will save plenty of money when buying a house to rent out later down the line.

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        19) Think About What Your Target Tenant Wants

        When looking for a rental property and asking how to buy an investment property, purchasing rental properties that meet your personal taste is not always a good way to go.

        This is one of the biggest investing mistakes to avoid when looking at buying homes to rent, with many investors buying a rental property with decor and designs that don’t appeal to the wider market.

        To succeed in buy-to-let investment, you always need to have tenants living in your property.

        Therefore, buying rental property that’s more likely to appeal to your target tenant is a good way to avoid your rental property going empty.

        The best way to find a property that your tenant will love is to try and get into their mindset.

        After all, an investor cannot live in their buy-to-let property themselves, so there’s no reason to think personally when it comes to finding a rental property.

        If you’re looking at buying homes to rent for students, think about the qualities that students want from their accommodation.

        This includes things like a location with shops and bars nearby and proximity to their university campus, along with qualities related to the interiors of the property, such as plenty of storage space and a built-in desk area.

        Covid-19 and the ensuing lockdowns have changed a lot about what tenants want.

        A study in 2020 by estate agents Benham and Reeves found marked changes in what tenants look for in a property.

        The previous rank came from 2019, and as you can see, fast broadband, outside space, and proximity to a park are vital.

        Broadband, in particular, is one of the biggest qualities looked for in rental property, so be sure to keep these aspects in mind when considering buying a property and looking at buying homes to rent.

        There are also ways you should consider decorating your property to increase tenant demand.

        When buying homes to rent, you may find that most rental properties have been decorated with a minimal colour scheme, featuring more simplistic furniture and fittings.

        While your personal taste may not align with the properties on the market, remember that what you find appealing may not match up with your tenant’s taste.

        Keeping your property as neutral and minimal as possible while also factoring in certain qualities that your target tenant favours is a good way to increase rental demand and generate regular income.

        Top Tip: If you’re purchasing an investment property sold by an investment company, it’s worth enquiring about any furniture packs that may be available.

        Here at RWinvest, many of our rental properties come with a choice of furniture pack, which can be purchased for an additional cost or can sometimes be free.

        Furniture packs feature stylish hand-picked pieces that match the style and feel of each space and could help you attract more tenant interest.

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          20) Keep Taxes and Tax Relief in Mind

          Taxes. Just the word can be nauseating to a person considering rental property investing.

          Nothing eats away at profits than taxes, and if you want to get into rental property investing, there’s a lot of taxes you’re going to need to consider.

          Thankfully, there’s also a lot of tax relief potential to make sure your profits don’t get completely gobbled up.

          With this in mind, let’s explore some of the taxes you can expect to pay when rental property investing and how you can reduce the rates.

          Income Tax

          Firstly, let’s talk about the prominent tax you can expect to see when buying a house to rent out; income tax.

          Income tax is the tax paid on the profit you earn from your rental properties. This profit is defined as the amount left over after calculating your rental income and subtracting any expenses or allowances.

          Those who earn up to £50,000 will pay a base tax rate of 20%. Those over the £50k mark will pay a higher tax rate of 40%, while those over £150,000 will pay a 45% rate.

          You also have a personal tax allowance every year, which is the amount you earn before paying tax. This is currently set at £12,500.

          Notably, this income tax covers all of your income. So, if you earn £30,000 a year from rental property and £30,000 a year from a full-time job, you will pay the higher tax rate as you have an annual income of £60,000.

          Thankfully, there is some tax relief on income tax.

          The official government website lists many costs you can deduct from your income which involves the day-to-day running of a rental property.

          Some examples include:

          • Letting agent fees
          • Utility bills
          • Maintenance and repairs
          • Council Tax

          Be sure to check out our full guide for buy-to-let tax on our website.

          Capital Gains Tax

          Another tax you need to consider when buying a house to rent out is Capital Gains tax.

          While this tax won’t be relevant at the start of your journey, it will be when you decide to sell your rental property investment.

          This is because capital gains tax is a tax paid on the profit you make when selling a property.

          There are three different tax rates for capital gains, with the basic rate sitting at 18% , and the higher and additional rates paying 28%.

          Like Income Tax, you get an annual capital gains tax allowance of £12,300, which you can combine with a partner for a total of £24,600.

          In terms of tax relief, you can mitigate the costs if there were losses made upon the sale of a property, solicitor fees involved when selling the property, estate agent fees, advertising expenditure, and stamp duty tax (which we spoke about earlier.

          Buy-to-Let Mortgages Tax Relief

          Finally, when buying a house to rent out, you need to know about buy-to-let mortgage tax relief.

          As we spoke about in the last section, there are some tax benefits to ease the burden of paying for a buy-to-let mortgage.

          Unfortunately, these tax advantages have changed a lot over the years, making many people no longer utilise buy-to-let mortgages.

          Since April 2020, the law changed, and you are now no longer able to deduct your mortgage expenses from rental income.

          Instead, you now receive a tax credit that’s based on 20% of your monthly interest payments.

          Notably, these taxes only target individual landlords, so many investors have decided to start a limited company when buying a house to rent out, something that we will discuss in the next section.

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          21) Consider Forming a Limited Company

          If you read the last section, you will know individual landlords have been struggling with tax relief recently when buying rental properties, thanks to a host of changes in 2020.

          To counteract this, many individuals have opened their own limited company when buying rental properties.

          With so many landlords going down this route, it would be remiss not to consider it. But what does it actually mean for you? Should you form a limited company when buying rental properties?

          Well, first and foremost, there are tax advantages to operating as a company.

          Limited companies aren’t affected by the changes made to mortgage interest tax relief because interest can be classed as a business expense and is fully deductible from your income.

          Speaking of income, one huge benefit of forming a limited company when buying to rent is corporation tax.

          Corporation tax is currently a flat rate of 19%. It means you can make significant tax savings if you earn over £50,000 or £150,000, with individual landlords subject to the 40% to 45% tax rates.

          This all sounds great on the surface, but actually getting income from the company can be complicated, as money can’t be taken directly out.

          Instead, you will have to take the money as a dividend or take the money as salary.

          Both cases can be complicated as the former is subject to tax rates of 7.5% for a basic rate and 38.1% for higher rates.

          Meanwhile, taking money as salary means you will need to operate PAYE and provide national insurance contributions, which can be even more expensive than taking the dividend route.

          The bottom line is tax can get complicated when buying to rent, and it’s best to talk to a trained specialist to understand your financial situation and decide what’s best for you.

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          22) Play the Long Game

          Owning a rental property can be highly profitable, but only if you’re prepared to play the long game.

          By this, we mean tying your investment up for a set period of time to generate the maximum amount of rental income and, ultimately, huge capital growth returns.

          Playing the long game also includes keeping hold of your rental property through times of uncertainty.

          It’s common for investors to panic during periods when the economy and property market seem unstable.

          A good example is the recession of 2007. During this time, many property investors sold their properties out of fear that they would lose money.

          In reality, investors who held onto their rental property investments during this time have now seen property prices grow higher than they were before the recession, benefitting from significant capital gain.

          The same logic can be applied to the UK property market in 2024.

          Due to economic uncertainty brought on by the Covid-19 pandemic and the economic trouble seen at the end of 2022, many property investors were feeling concerned about their venture.

          However, with lower-than-usual property prices currently available, savvy buyers can purchase a rental property for a discounted amount.

          It means that those buying to rent will now benefit from the increased rental demand that the market is currently seeing and experience significant future capital growth rates.

          Let’s use a practical example to show the benefits of playing the long game.

          In 2001, buying to rent a typical Manchester property would cost about £44,813, according to the UK House Price Index.

          Jump forward 20 years, and if you sold the same property in 2024, you could expect to sell the property for over 416% more.

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            23) Keep an Eye Out for Deals

            When it comes to buying rental property and buying an investment property to rent, the lower you can purchase your property, the higher your rental yield will be.

            That’s why purchasing a property for the lowest possible amount is always welcomed by those buying an income property.

            Aside from purchasing rental properties in more affordable areas and focusing on cheaper property types like studio flats or off-plan properties, a good way to secure the lowest prices is by taking advantage of deals and discounts.

            Many companies, particularly during the Covid-19 pandemic, started offering their rental properties at below-market rates and offering deals such as assured rental yields for a set length of time.

            A lot of the time, a company may not advertise available deals and may only disclose them once an investor has enquired about the property.

            A good tip for finding out about the latest deals before buying a rental property is to sign up to a property company’s mailing list, where you’ll be updated on new opportunities that hit the market.

            If this is something you’re interested in, use the sign-up form below to sign up to our mailing list and be the first to know about the best deals and discounts available with RWinvest.

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            24) Don’t Need to Be an Expert

            While it’s definitely crucial to have a good idea of the property market and the buy-to-let investment process before buying rental property, you shouldn’t feel discouraged if you’re not an expert on rental property investments.

            Many investors will not have in-depth knowledge about property investment but will know enough to identify strong opportunities.

            One of the best things about using a property company when buying property to rent out is the guidance you receive during the purchase process.

            Property consultants tend to have many years of experience and training in property investment and the housing market, providing clients with advice and answering any queries they might have.

            When buying rental property through an investment company, you’ll also usually be able to see the rental yields you can expect to receive, whether they’re assured or projected yields.

            This is the ideal way for buying an investment property to rent. If you’re asking, “are rental properties a good investment” they can be when done right like this.

            If purchasing a rental property privately, you may need to work out potential yields yourself.

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            25) Invest in Insurance

            Our final tip is designed for keeping your investment as safe as possible. To do this, it is highly recommended you get insurance on your rental properties investment.

            We’ve already touched on insurance expenses earlier in this guide, but it is such an important topic that it deserves a tip on its own.

            You may not realise, but there are specific insurances designed for landlords, some of which are considered compulsory by mortgage lenders.

            If you’re asking how to buy your first rental property, it’s vital you protect your asset with insurance.

            But what type of landlord insurance should you opt for, and what do they protect you from?

            Landlord Buildings Insurance

            One of the main types of landlord insurance, building insurance can help cover many risks to your property.

            These include:

            • Fire damage
            • Smoke damage
            • Floods
            • Theft or vandalism
            • Water leakage
            • Burst pipes

            Certain insurance providers will cover different things, so it is essential to research thoroughly.

            Contents Insurance

            Another insurance type is contents insurance, which can often be added to the overall buildings insurance depending on the insurer.

            This protects your belongings from any damage such as fire and theft.

            Examples of belongings include stuff like furniture, kitchen equipment, carpets, curtains, utensils, amongst others.

            Sometimes you can even extend the insurance to cover accidental damage.

            When buying a house and renting it out, you will want your property to be protected at all costs, which is why contents insurance is incredibly useful.

            Rent Guarantee Insurance

            Another type of insurance vital to consider is rent guarantee insurance.

            No one likes losing out on income, and if you encounter void periods or your tenant encounters financial problems, it can become a serious problem.

            Thankfully, there is insurance out there to protect you from this when buying a house and renting it out.

            This insurance can help you recover lost rent and legal disputes that may arise during the eviction process.

            Likewise, you may get rental payments while your insurer tries to recover the rent owed.

            Portfolio Insurance

            Finally, if you own more than five properties, a convenient and, more importantly, cost-effective way of covering all your buildings is through portfolio insurance.

            This means all your portfolio rental property investments can fit under one policy, which means less paperwork and potential discounts.

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            Start Renting Today

            We hope you enjoyed our ultimate guide to buying a rental property.

            Hopefully, you now feel prepared for property investment and understand how to buy your first rental property, and know more about buying a house and renting it out.

            If you feel equipped to start your property investment venture, there is no better company than us.

            With over 17 years of experience in the investment world, we have already helped 75,000 investors, and we can help you too.

            Our luxury properties start from just £74,950, with the potential to earn up to 8% assured yields.

            Chat with our property specialists today, who can help guide you through the process and answer any questions you may have about rental property investments.

            Join our family of investors today and invest with a company voted the North West’s best property business.

            Start renting now and make the investment of your dreams today.

            With all this in mind, take a look at some of our latest properties to see if any are right for you.

            Heap’s Mill

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            A historic rice mill in Liverpool’s city centre is the basis of this residential development complex – blending contemporary urban living with Liverpool’s industrial past.

            A central landmark linking the Baltic Triangle with Liverpool One and the Royal Albert Dock on the waterfront, this revolutionary project will introduce a range of apartment
            styles designed over five distinct blocks, as well as incorporating an upmarket four-star hotel.

            Boasting forward-thinking and displaying sustainable eco concepts, this is a £120 million regeneration scheme that offers an unbeatable investment opportunity in a highly connected location with extraordinary onsite facilities, including a spa, rooftop bar, and even a museum.

            Merchant’s Wharf

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            The height of luxury in Salford, our exciting new waterfront apartments are unmissable for any investor looking at Manchester.

            Just minutes away from Manchester city centre and developed by the award-winning Legacie Developments, Merchant’s Wharf comes with everything a modern tenant could want.

            From striking designs to glorious floor-to-ceiling windows, Merchant’s Wharf is a slice of elegance for an incredibly affordable price.

            Prices start at just £149,950, 55% below market value! You can also earn huge Manchester returns of 6.5%.

            Parliament Square

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            Another property in our stunning Liverpool portfolio is Parliament Square, located in the fantastic Baltic Triangle.

            The Baltic Triangle area of Liverpool is one of the most exciting in the North West, with tonnes of business start-ups attracting professionals from across the region.

            It was also voted one of the coolest places to live by The Times, and for a good reason.

            Parliament Square offers incredibly luxurious facilities such as a pool, spa, and even a gym, all at an affordable price starting from just £104,950.

            Act fast with limited units available. Earn up to 7% returns now.

            Snow Hill Wharf

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            Moving away from the North West, we have a stunning collection of canal-side apartments found in the beating heart of Birmingham.

            Just minutes away from two major train stations and Birmingham’s thriving business district, Snow Hill Wharf is the ideal location for young professionals.

            Birmingham is one of the youngest cities around, with 40% of the population under 25.

            This makes investment here a fantastic opportunity. When you factor in the stunning luxury of Snow Hill Wharf, it’s hard to resist the potential of Birmingham.

            Prices start from only £227,500, with strong 5% returns on offer.

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            Reece Pape

            Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.