Read this before investing in a rental property

Investing in a rental property can be a financially sensible move, but there are some things to be aware of...

But before you start looking at potential places to buy, finding the right mortgage is crucial and can determine whether you can make a good profit.

In a property market that shows no sign of slowing down and with interest rates at an all-time low, buying a flat or house to let could be a sound investment. Not only should your mortgage payments be covered by your tenants, but the value of your property should increase over time.

However, due to the high buy-to-let and second home stamp duty rates, changes in income tax on rent paid and potential upcoming changes in capital gains tax, there are some important financial considerations to make before deciding to become a landlord.

Firstly, do your research. Where is the best place to invest? You may be an expert in your local area, but perhaps there’s more profit to be made further afield. Look at our latest ‘UK's TOP hidden gems for investors’ blog post.

It’s sometimes best to try and imagine what would appeal to a renter – students often put value-for-money and practicality first, while families might prioritize proximity to good schools and outside spaces, and young professionals look for style and a variety of amenities close by.

The terms for buy-to-let mortgages differ from a mortgage that you would take out to buy your own home. Charges are higher and they usually require a minimum deposit of 15% of the property value. Lenders calculate how much they are prepared to lend based on the rental income the property will generate. Generally, this is about 125% of the monthly mortgage interest payment. However, buy-to-let mortgage availability has increased substantially since May 2021, with investors benefitting from the highest level of products since before the pandemic started. This means you can choose from a wide range of products that might be ideal for you. Speak to a Countrywide Mortgage & Protection Consultant to help you find the best deal, comparing 100s of buy-to-let mortgages from a panel of high street and specialist lenders.

Once you’re a landlord, you should consider how hands-on you want to be. Some landlords are happy to carry out maintenance, collect rent and deal with tenants and their issues directly. But if you’re less practical or don’t live near the property, it might be easier to choose a full property management service so it is managed by a dedicated professional team. We have a range of management services available, that can provide as much or as little support as you need.

Five key things to consider:

  1. Do your sums. Find out what the average rental yield is. Is this the best investment for your money? You will also need a sizeable deposit – a minimum of 15% is possible, but some deals require 40% or more.
  2. Think about your property. A growing family may want plenty of living space and a garden, while a young professional might be more impressed with a stylish, modern property in a serviced block. Location is also key – think of amenities, local schools and transport links. What kind of property will get the best price in your area?
  3. Be compliant and clued up. Stay on top of any changes in tax laws and lettings regulations that might affect you. Lettings legislation is constantly changing and important to stay on top of.
  4. Get a good deal. Do your own research on buy-to-let mortgage rates and deals before you go and see a broker.
  5. Consider your involvement. Do you want to manage the property yourself or appoint a lettings agent with management services? Think about what the most practical, time-efficient, and stress-free option would be.

Explore brilliant buy-to-let mortgage options

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A fee will be payable for arranging your mortgage. Your Consultant will confirm the amount before you choose to proceed.

Countrywide Mortgage Services and Countrywide Insurance Services are trading names of Countrywide Principal Services Ltd which is authorised and regulated by the Financial Conduct Authority (Firm Registration Number 301684). Registered Office: Countrywide House, 6 Caldecotte Lake Business Park, Caldecotte Lake Drive, Milton Keynes, MK7 8JT. Registered in England no. 01707341.