Buy to let property investment UK for the beginners


Though cyclical in terms of pricing, the UK property market has proved to be a very successful investment over the long-term. Property investment UK may fluctuate due to the periodical ups and downs seen in market, but it is usually a stable investment given the fact that the UK, especially London, is a hotspot for property investment. The capital receives the major share of property investment UK.

Property investment UK draws investors as benefits out of some of the other investment and savings options have shrunk over the past few years. For example, diminishing bank savings rates and the uncertainty of the stock market are some of the factors which have led investors to look elsewhere, resulting in a massive property investment UK expansion in buy to let. Fully-managed BTL tenancies is another reason for rise in buy to let property investment UK. The buy to let investor is not required to manage the tenancies actively as they are managed by professionals who look after the management of the property and tenants on a daily basis.

What is buy to let?

Buy to let typically involves purchasing a property with the exclusive purpose of letting. Investors buy a property with the expectation of capital growth over the long term, while enjoying rental income benefits during the tenancy period.

The rental income from tenants is significant as it covers the mortgage costs and other expenses related to letting. Some of the other expenses relating to tenancy include letting fees, maintenance costs, service charges and insurance. The investor or the buy to let landlord should expect a decent income out of the property after deducting the above-mentioned tenancy-related costs.

These factors have contributed to the rise of the buy to let sector as an attractive opportunity for property investment UK. Apart from the advantages of a stable inflow of income over the long term, a better option to bank savings and the stock market, property investment UK also acts as a hedge against inflation.

Therefore, it is no surprise that buy to let is one of the most popular options for property investment UK and the demand for buy to let properties continues to rise.

What to consider before investing in buy to let (BTL)?

Investors should consider property investment UK as a long term option as appreciation in the value of property is directly proportional to the duration of time for which the property is held by the investor. More time duration between the time when the investor buys a property and the time when the investor sells it, may extend the profit margin. However, there are a number of other factors as well, which contribute to the success of property investment UK.

This involves the awareness of one’s purpose for investment, location, the type of property, the targeted tenant group, the time duration for holding the property, credit score, income, and exit policy.

The investor should be aware of the purpose of investment and invest in the right property type. For example, whether it should be a small or large property, a cheap or luxury one, a quiet living space or a living space near the commercial hubs, two bedroom flat or four bedroom house, a property close to schools or one close to transport links or a specialised accommodation – the choice for all of which depend on the purpose of investment along with other factors.

Choosing the right location as well as the right property is crucial in determining the outcome of property investment UK. The selection of the location is critical for determining the end-result of investment as some may be buyers’ markets while some of the others may be better suited to sellers. The choice of the location should be according to the target tenant group such as students, professionals, households or business travellers. A place with high concentration of the target tenant population should be ideal for investment. Therefore, detailed market research is a prerequisite for the purpose of booking the target profit levels.

The type of property also varies and includes apartments, condominiums, studios, house etc.

As property investment UK can be done across various subsectors of the property market, such as the student living space, the professionals’ segment, households, vacation tenants, business travellers or other groups of people, it is necessary to base the selection of tenant groups according to personal circumstances as no two investor have the same set of situations.

The investor should consider the financial status and apply for the appropriate mortgage.

The purpose of property investment UK will determine the exit policy. By being aware of the purpose of property investment UK, the investor will be aware of when to exit the investment, and how.

Tenancy agreements

The legal agreement with tenant/s is the most important part of tenancy. This document is crucial when letting the property to tenant/s. Tenancy agreements are necessary to keep the legal position clear. It describes the responsibilities and guidelines on the part of the tenant as well as the landlord. The legal documents form the basis, should any disputes arise between the landlord and the tenant.


The taxation aspect of tenancy must be considered when buying a property for letting purposes. In case a mortgage should be secured, then the lender may like to ensure that the would-be landlord will pay the taxes on renal income. It is to make sure that the landlord pays the taxes in case tenants fail to pay the rents on time. Income tax will be payable on the rents after deducting allowable expenses. Allowable expenses include repairs, agent’s letting fees, an allowance for furnishings and a proportion of the mortgage interest.

Capital Gains Tax (CGT)

Capital Gains Tax or CGT will be payable on the sale of the property. The tax will be charged on gross sale price after deducting the original cost of the property, certain legal costs and any capital improvements made to the property. CGT is usually charged at 10 per cent within the basic rate and 20 per cent for higher rates.