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

First things first, what is buy-to-let? Put simply, buy-to-let, often also known as invest-to-let, is a term that refers to purchasing a property to let out to a tenant to make rental income.

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

What is Buy-to-Let Property?

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

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

What Does Buy-to-Rent Mean?

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

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

What are Rental Yields?

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

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

Can You Live in Your Buy-to-Let Property?

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

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

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

Learn more about the question ‘Can I live in my buy-to-let property?’ with our helpful guide filled with information.

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

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

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

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

The Benefits of Buy-to-Let

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

• The UK property market is performing highly, with 17.9% expected growth for UK house prices by 2028 per Savills.
• Rental costs are rising due to the demand for rental properties. Rental prices rose by 9.9% annually from April 2023, according to Homelet.
• Buy-to-let property investment is considered lower risk than other investment strategies due to the property market’s proven resilience.
• Owning a buy-to-let investment property gives investors returns from both rental income and capital growth.

The Risks of Buy-to-Let

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

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

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

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

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

If you’re still wondering, ‘Is buy-to-let a good investment in 2024?’, take a look at our handy blog post filled with more information.

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

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

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

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

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

Investors buying a buy-to-let property will need to think about different buy-to-let costs involved with a property investment purchase, and one of those costs is stamp duty tax on property.

Those buying a second property will pay an additional 3% surcharge on stamp duty purchases, regardless of the property value.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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