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With rising house prices and rental costs causing many people to feel the pinch, the option of investing in buy-to-let property has become increasingly popular for entrepreneurial landlords.

With rising house prices and rental costs many people and families are feeling the pinch, but the option of investing in buy-to-let remains a popular choice for entrepreneurial landlords to take back control of their property options.

So to help inform you, we’ve created this buy-to-let guide full of useful information to support new and existing landlords to navigate the legislative waters. Continue reading to discover more about buy-to-let mortgages, the market and the property picture of different UK regions.

What is buy-to-let?

Despite being a frequently used term, many people are still unsure of what a buy-to-let is in practice.

In simple terms, a buy-to-let landlord buys a property to rent it to tenants rather than live in it as their home. This is seen as an investment in the property market, one that is viewed as a relatively safe bet although there are hurdles to jump.

The process requires a specific buy-to-let mortgage rather than a standard mortgage and the owner (or owners) will run the rental property as a business with all the associated red tape such as income tax which will need to be paid on the revenue received from letting out the house or apartment.

However, reasonable expenses such as insurance, works and maintenance as well as utility bills and letting agent management fees, can be deducted from a landlord’s tax bill when it’s time to file their annual self-assessment.

With no guarantees that this move will be a wise investment, buy-to-let landlords have many (if not more) of the same expenses as a residential homeowner who lives in their own property. These include increased stamp duty should you decide to rent out a property you already have purchased, the initial deposit, renovations to bring the property up to the decent home standard and a mortgage (including fees).

Yet, there are still advantages to be gained from buy-to-let mortgages.

The benefits of buy-to-let

Aside from the tax advantages, landlords should stand to make a profit provided they charge a higher rental figure per month than the total sum of their costs, letting agent management expenses, maintenance and the property’s mortgage payments

As the long-established property experts Ellis & Co. note: “Property can be a great way to make your money work harder for you”. The trusted estate agents cite three main benefits.

  • The first is around the value of the buy-to-let property over several decades. Its value may rise or fall but should in principle provide the owner with a profit when they eventually sell it.
  • The second benefit, although it might appear quite obvious, is the ability a buy-to-let property gives you to generate an income. Provide a decent home and you’ll find tenants who will look after your investment for the long term.
  • Finally, the current high demand for rental properties means that there should be no shortage of potential tenants to rent the property to. Socio-economic factors for this increased need include the struggle for many people to save an adequate deposit for their first property.

With so many seeking flexibility in terms of where they live for employment or travel, there is never a shortage of prospective tenants.

How much money can you make from buy-to-let?

According to Money To The Masses, the income you can expect from your buy-to-let investment will vary depending on the type of property, as well as the area in which you buy your property. These two factors mean that in-depth research is always necessary before making an offer on a property you are looking to let out.

Their website details a case study of an example property’s annual rental yield but landlords can find out this figure for any property with an easy calculation. Simply divide the annual rental income (after deducting the annual costs) by the purchase price of the property (including any sum of the monthly mortgage repayments plus related costs) and times it by 100, giving you the annual rental yield percentage.

(Annual rent – rental costs) ÷ (Purchase price + related costs) x 100 = Annual rental yield %

Those who make a decent return with their buy-to-let property can also expect gains from capital growth. While house prices continue to increase, as they have done over the last decade, the property given in the case study would’ve increased over the next few years to £202,500, generating an annual capital growth of 3.5%.

It’s worth remembering, however, that considerable time, effort and exemplary property management skills are needed to make a success of letting out buy-to-let properties.

Indeed, our Inventory Base team reported in 2019 how new tax regulations and the stamp duty crackdown were discouraging buy-to-let landlords. This caused the number of new buy-to-let mortgages to decrease by 5.6% between December 2017 and December 2018.

Simon Heawood the CEO of was quoted as saying: “There is no surprise that some private landlords are debating whether to abandon the sector altogether, as the costs are starting to outweigh the benefits”.

What does the future hold for buy-to-let?

There are different views on the allure of buy-to-let properties. We previously reported that around two-thirds of buy-to-let investors were confident about the future of the sector, with findings from Shawbrook Bank revealing that 65% of investors were confident about their portfolio.

On the other hand, landlord profits are at the lowest level in 16 years according to the National Residential Landlords Association (NRLA). What’s more, the BoE has warned monthly repayments on buy-to-let mortgages may only increase over the next two years, suggesting “things are only going to get worse”.

Other pressures including the Renters Reform Bill and mandatory upgrading of their property’s EPC rating to a minimum of C could prompt more landlords to exit the market.

Let’s not forget, this isn’t the first time the buy-to-let market’s future has looked unsteady. Yet, the recent increases in the Bank of England’s interest rate means buy-to-let landlords on variable mortgages have higher outgoings than in previous years.

Experts predict that house prices are expected to suffer because of this and that falling prices could mean security on the loan is reduced, increasing the risk of defaulting on mortgage repayments, and ultimately repossessions.

This means your research has to be meticulous with sound advice and guidance sought before you venture further down this particular road.

Best buy-to-let locations

The average rental yield can vary from region to region, as this table of figures for November 2022 from Statistica shows:

Region Average Rental Yield
Outer London 5.00%
Central London 5.10%
South East 5.40%
South West 5.80%
West Midlands 6.30%
East Midlands 6.00%
North East 6.30%
North West 6.10%
Yorkshire and the Humber 6.30%
Wales 5.80%

With average house prices in England proving to be at their lowest in Yorkshire and the Humber (at £208,863) and London having the highest average at £527,979, according to the recent Office for National Statistics’ House Price Index, there’s a correlation with the most attractive and least attractive rental yields across England.

However, hope is not lost for London investors. Just Landlords placed the Capital second in their lender’s top 10 buy-to-let locations despite it having the two lowest average rental yields. It cites London’s “high rents and occupancy offsetting slightly lower yields”. Similarly, they suggest looking to the East of England given the presence of seven such cities in their top 20 list.

The North West area had been seen as the most investment-worthy region. It has high rental prices and demand, partially from its student populations as we’ve previously highlighted back in 2019. The figures from late 2022 suggest that this region is still an appealing location for buy-to-let property.

How does a buy-to-let mortgage work?

Buy-to-let mortgages are usually granted on an interest-only basis. This benefits the buy-to-let landlord because they’ll pay a lower monthly repayment if the loan is granted.

For example, gives a clear example of an interest-only plan in practice. It notes that on a 25-year, £200,000 loan with an interest rate of 3%, the interest-only payments would only be £500. This is compared to £950 with a repayment mortgage.

This saving of £450 each month is a strong draw for individuals looking to become landlords and boost their income in a sustainable way.

For buy-to-let, lenders will generally require a larger deposit, often at least 25% but this should not deter prospective buy-to-let landlords from exploring this option. As is sometimes the case, the bigger the deposit the better the deal, but you can still find an option that works for your budget.

It’s worth noting also that lower monthly repayments mean that landlords can weather the storm of rising interest rates. Some lenders will however seek proof that the buy-to-let landlord has arranged an equity ISA or similar repayment strategy, before lending the amount required. This is one possible way of repaying an interest-only mortgage, reflecting the risk involved.

Protecting your buy-to-let investment

When it comes to the significant outlay attached to buy-to-let investments, it’s always important to protect your asset as best you can. This includes regular maintenance checks, move-in and move-out reports and interim inspections.

We’ve designed pre-made templates ready for buy-to-let landlords and letting agents manage their properties. See how it could help you manage your buy-to-let by booking a demo.