Thinking of becoming a buy-to-let landlord? Read our top 5 tips

Thinking of becoming a buy-to-let landlord? Read our top 5 tips

author: Linzi Nuttall

By Linzi Nuttall

If you’re considering investing in property and becoming a buy-to-let landlord, this guide should be right up your street.


According to the Royal Institution of Chartered Surveyors, the UK is currently experiencing a buy-to-let boom, so you won’t be alone, should you choose to take the plunge.

They have revealed to the Daily Mail that the number of homes for sale nationally has dropped to the lowest level since records began in 1978 – because buy-to-let investors are taking an increasing percentage off the market. Estate agent branches only had, on average, 52 properties for sale in May, a drop of 13% from the same period last year.

How to invest wisely

Buy-to-let mortgage rates are currently at record lows, which could be one reason why you’re thinking of investing. Ultimately, the larger your deposit, the better mortgage deal you’ll be able to get, however, you need to consider what will happen when interest rates rise – which they will surely do at some point. You need to be confident that you’ll still be able to cover the mortgage, as well as still getting a return. If you’re on a fixed rate you need to think about whether you’d be able to afford to remortgage once your fixed rate ends.

Buy-to-let is an investment, so does it have risks. Because of this we can’t advise you whether you should or shouldn’t take a step on the landlord ladder, this is a decision you need to make for yourself. You need to weigh up the pros and cons – for example, if property prices fall, you could end up losing thousands of pounds if you needed to sell urgently –  so this is something you need to consider.  Also think about how you would cope if you were left without a tenant for a period of time – would you be able to pay the mortgage and what would the impact be on the rest of your personal finances?

Ocean’s buy-to-let top tips

1. Spend time researching the market

Choosing the right property in the right location is important. You might get more for your money in one area, but if the transport links are not that good, and the schools nearby are patchy, you might struggle to rent it out or sell it on in the future. You could look at buying in an up-and-coming area because property prices are likely to go up. 

You need to pay close attention to not only the sales market in your desired location but also the rental market. You don’t want to pay over the odds for your property and you need a clear idea of how much you’ll be able to charge in rent. Perhaps you might want to consider a property you can do up and add value to?

2. Do your sums

Lenders offering buy-to-let mortgages generally want the property’s rent to cover 125% of the mortgage repayments and a deposit of 25% +. When you’re looking at the different deals available you’ll probably find the best deals have large arrangement fees, so this is something you’ll need to figure into your calculations. Why not visit an independent mortgage broker to help you find the best deal?

You’ll also need to consider management fees, which are typically 15% of your rental income, unless you’re planning on managing the property yourself. Maintenance costs and insurance all need paying for, and you’ll have to pay tax too. Most buy-to-let landlords choose interest-only mortgages, which means that the amount borrowed doesn’t go down over time, however, they can offset the mortgage payments against their tax bill so its tax efficient. This means that you’d pay less tax than if you owned the property outright and didn’t have a mortgage.

It’s vital that you don’t overstretch yourself in order to purchase a property. This could lead to problems further down the line, as you would have to cover the mortgage payments and council tax payments if you were without tenants for a few months. 

3. Consider the yield

If you want to compare the value of two properties to see which would be the better investment, you need to figure out what their yields would be. The yield is the annual rent you would receive as a percentage of the purchase price. For example, a property with annual rent of £6,600, which cost  £90,000 to buy, has a yield of 7.3%. The higher the yield, the better.

Here are the Top 10 buy-to-let hot spots by rental yields, according to HSBC:

Rank

Location 

Housing privately rented (%) 

Average house price 

Average monthly rent 

Gross rental yield (%) 

Southampton

23.42 

£143,011 

£1,040 

8.73 

Manchester 

26.85 

£104,244 

£693 

7.98 

Nottingham 

21.64 

£86,000 

£550 

7.67 

Blackpool 

24.16 

£77,899 

£495 

7.63 

Kingston upon Hull 

19.02 

£68,243 

£425 

7.47 

Coventry 

19.02 

£110,029 

£650 

7.09 

Oxford 

26.11 

£254,514 

£1,489 

7.02 

Portsmouth 

22.28 

£146,709 

£795 

6.50 

Liverpool 

21.75 

£91,175 

£494 

6.50 

10 

Cambridge 

23.91 

£185,414 

£1,001 

6.48 

In the same report they highlighted the worst 10 buy-to-let areas by rental yield.

Location 

Housing privately rented (%) 

Average house price 


Average monthly rent 

Gross rental yield (%) 

Kensington and Chelsea 

33.97 

£1,236,605 

£2,968 

2.88 

Thanet 

21.96 

£189,362 

£524 

3.32 

Hastings 

27.19 

£184,787 

£520 

3.38 

Haringey 

30.33 

£425,541 

£1,200 

3.38 

Westminster 

37.56 

£890,272 

£2,578 

3.47 

Hammersmith and Fulham 

30.05 

£685,797 

£2,004 

3.51 

Richmond upon Thames 

20.55 

£540,379 

£1,699 

3.77 

Camden 

30.46 

£715,831 

£2,383 

3.99 

Ipswich 

18.75 

£158,925 

£546 

4.12 

Lincoln 

19.36 

£124,789 

£433 

4.16 

4. Negotiate, negotiate, negotiate!

If you don’t need to sell a property in order to raise the money for your deposit, you should be chain-free. This should make negotiating much easier, especially if the seller is keen to sell their property quickly. During the negotiating process it’s important to remember that you are buying the property for business reasons, so every thousand pounds extra you pay will be eating into your potential profit. Be prepared to walk away if you can’t get it for the right price.

5. Find the right tenant 

You need to think about the type of tenant you want for the property and try to imagine what they would want for their new home. Be aware that if you furnish the property and something breaks you will be expected to fix it or replace it, whereas if you rent it unfurnished you wouldn’t have this problem.

You’ll find that most tenants have their own furniture and don’t mind being given a blank canvas. Tenants who are given the freedom to redecorate a property are often more likely to stay longer as 

Disclaimer: All information and links are correct at the time of publishing.

author: Linzi Nuttall

By Linzi Nuttall

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Thinking of becoming a buy-to-let landlord? Read our top 5 tips Thinking of becoming a buy-to-let landlord? Read our top 5 tips