What is Buy-to-Let Property?
Buy-to-Let (BTL) is buying an additional property to your main residence with the intention of renting it out. A Buy-to-Let property is typically chosen because of the passive rental income it can deliver, as well as the natural price growth it can experience.
As an asset, a BTL property in the UK is best suited as a medium to long-term investment strategy, where long-term rental returns can be reinvested, allowing the investor to scale effectively.
Buy-to-Let properties are usually regarded as a relatively stable, reliable investment opportunity, making them ideal within a more diverse portfolio of assets.
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Inside this guide you’ll find:
- Why become a landlord and how can you get started?
- Financing your investment and costs you can expect
- What are the responsibilities of being a landlord?
- How can you find your ideal tenant?
How Does Buy-to-Let Property Investment Work?
To purchase a Buy-to-Let Property, investors will either pay with cash or take out a Buy-to-Let mortgage alongside a cash deposit.
Once the property has been purchased, the investor will look to find a tenant to live there, who then pays rent each month. This is delivered straight to the investor and is known as rental income.
During the lifespan of the investment, there’s also the potential for the property to rise in value. This is known as capital growth and is the second source of profit BTL property is usually chosen for.
The lifeblood of any Buy-to-Let investment is the tenant. As many investors choose to use the rental income they receive to pay off the mortgage on the property, any time you don’t have a tenant you run the risk of having to pay the mortgage repayments out of your own pocket. This is known as a void period.
As with any property purchase, there are costs associated with a Buy-to-Let investment including maintenance and running costs, as well as different taxes that need to be considered at each stage.
The Grand Exchange
Final Off-Plan Units Remaining
- Off-Plan Apartments – Estimated completion 2023
- At the centre of a £770 million Large-scale regeneration project changing the landscape of Bracknell
- Exclusive never seen before resident-only amenities
- 17.5% price growth expected by 2025 (JLL)
- Top location for London leavers – forecasting yields above 5%
Where Are the Best Places to Invest in BTL Property?
The most important part of investing in a property is the location you choose.
Location can impact the price you initially pay, the amount of price growth you see, the rental income you can charge and the number of tenants looking for a place to live.
The factors that make a good Buy-to-Let investment location include rental demand, tenant profiles, average rental yields, surrounding redevelopment and nearby amenities such as transport links.
Traditionally, Buy-to-Let properties in London were the most popular choice but recently we’ve seen regional cities such as Birmingham become more popular with both domestic and international Buy-to-Let investors.
Best BTL Locations for Rental Yields
You may have heard the term ‘rental yields’ when talking about your property investment.
A rental yield is a great way of measuring the success of your Buy-to-Let investment and is worked out by taking your annual rental income – minus any associated expenses – and averaging that against the overall property value.
As rental yields are so important for investment, they’re a great way of finding a potentially successful investment location.
Should You Invest in Short Term Lets?
As tenant demands have shifted within the Buy-to-Let market, one of the most surprising changes for landlords has been the move to short-term letting.
Often described as ‘short stay’ or ‘short rental’ properties, this is an alternative investment strategy that requires more hands-on management but can deliver high potential yields.
With many people now looking back to city centres – whether that’s for long-term living or to enjoy themselves now restrictions are being lifted, a short-term let can provide plenty of opportunity to diversify while tackling an entirely new market.
If you’re thinking about pivoting to short-term letting or you’ve never invested and feel like this is a good place to start, learn more about this exciting new trend today.