What to look for in a buy-to-let property
Key takeaways
Buy-to-let properties are purchased to let to tenants, with landlords aiming to benefit from both rental income and capital gains
You can’t normally let a property if you have a residential mortgage – you need a buy-to-let mortgage
Buy-to-let mortgages usually require a bigger deposit and have higher interest rates.
The interest cover ratio (ICR) refers to the minimum ratio between the expected rental income of the property and the landlord’s mortgage payments
Landlord insurance can protect your investment against various risks including damage and unpaid rent
What is buy-to-let?
Buy-to-let (BTL) is a type of property investment strategy where an individual or business buys a property with the intention of letting it to tenants, rather than living in it themselves.
According to the English Private Landlord Survey 2024, the number of households in the private rented sector increased by 52% between 2008/09 and 2023/24, rising from 3.1 million to 4.7 million households. 19% of households now privately rent.
The goal for landlords from a buy-to-let investment is usually to generate rental income from a property while also hoping that its value will appreciate over time, providing the potential for capital gains when the property is eventually sold.
When choosing a property to buy, landlords should focus on what will make the property attractive to tenants, rather than thinking whether they would like to live there themselves.
What is a buy-to-let property?
A buy-to-let property is a residential property purchased to let out rather than live in, usually by an investor or landlord. The goal is to generate rental income or benefit from property appreciation over time - or both of these.
As well as paying the mortgage, buy-to-let landlords also need to find and manage tenants. Landlords will need to keep up with rental rules and regulations.
What are buy-to-let mortgages?
You can’t usually let a property on a normal residential mortgage – so unless you are a cash investor, you’ll need a buy-to-let mortgage.
Like regular mortgages, a buy-to-let mortgage involves borrowing money from a lender to purchase a property. The key difference is that the rental income is intended to cover the mortgage payments and provide a return on investment.
This means the rental income you can get from the property is more important than your personal income when it comes to being approved for a mortgage.
Buy-to-let mortgages usually require higher deposits than residential mortgages (typically at least 25%), and will charge a higher rate of interest too. There may be bigger arrangement fees too. Some lenders won’t offer a buy-to-let mortgage to a first-time buyer - you might need to be an owner-occupier first.
The interest cover ratio (ICR) on a buy-to-let deal measures a landlord's ability to cover mortgage interest payments with rental income, typically expressed as a percentage. Lenders usually require a ICR of 125% or more.
When working out you finances, you’ll also need to factor in maintenance, renovations, periods when the property might be vacant, agency fees, legal costs, and landlord insurance.
When purchasing a rental property or second home, you’ll need to pay the stamp duty surcharge.
Like residential mortgages, you can choose between repayment mortgages (where you pay off both principal and interest) or interest-only mortgages (where you only pay the interest, and the principal is paid off at the end of the term). Many landlords opt for interest-only and repay the mortgage balance when they sell the property.
It can be useful to use a mortgage brokers to find the best buy-to-let mortgage and/or when you remortgage.
How to evaluate a potential buy-to-let property?
Choosing the right buy-to-let (BTL) property is crucial for a good return on investment.
Here are some important factors to consider when selecting a property:
Location
Rental market - Choose areas with high rental demand, such as those close to universities, transport hubs, parks, school or city centres.
Growth potential - Look for locations where property prices are likely to appreciate over time, such as those undergoing regeneration or with infrastructure development plans.
Rental yield - Look for areas where rental yields (annual rental income divided by the property value) are high, as this will maximise your returns.
Transport
Public transport - For most tenants, being near public transport links will be essential.
Parking - Tenants with cars will usually prefer a designated parking space or free and available street parking.
EV charging - Many new build estates come with charging points for electric vehicles.
Bike storage - A secure bike shed or access to a bike hangar will attract tenants who cycle for commuting or leisure.
Type of property
Flats vs houses - Flats can be easier to manage but you’ll need to factor service charges into your calculations. Houses often provide more space, potentially attracting families or long-term tenants.
Small vs larger properties - Studios or one-bedroom flats may have lower purchase costs and attract young professionals or couples. Larger properties will cost more, but can usually be let to families on a long-term basis.
New vs old - New builds theoretically come with less maintenance issues and are more energy efficient, but older properties tend to be bigger.
House in multiple occupation (HMO) - A HMO is a property that is rented out by the room to multiple tenants who share common areas, such as kitchens, bathrooms, and living rooms. HMOs are common in areas with high student populations, young professionals, or people on lower incomes who prefer shared accommodation. You normally need a license from the local council for a HMO.
Property condition
Renovation needs - A property in need of doing up can be a good investment if you can improve its value through repairs or upgrades. However, you’ll need to factor in renovation costs and time.
Maintenance - Consider how much maintenance the property will require. Older properties might need more upkeep and could come with hidden issues.
Fixtures and fittings - Rental properties will need a working kitchen and bathroom, with all the necessary appliances.
Safety - Landlords need to follow both fire safety and gas safety rules. This means having smoke detectors and carbon monoxide detectors fitted and ensuring that all gas appliances and flues are safe and have been checked by a Gas Safe registered engineer each year.
Eco-friendly features - Energy efficient homes can be a significant draw, potentially attracting a growing demographic of environmentally-conscious tenants.
Rental yield vs. capital growth
Rental yield - Look at how much rent you can charge compared to the property price. A higher rental yield means you're earning more income relative to the cost of the property.
Capital growth - This refers to the potential increase in the property's value over the long term.
Tenants
Letting agents - Using estate agents or a letting agent to find tenants and manage your property can make life easier – but letting agent fees will eat into your profits.
Target market - Consider the types of tenants you want to attract. Students, single people and young professionals typically live in HMOs. Couples usually prefer one-bed flats, while families may prefer larger homes in quieter, suburban locations.
Employment opportunities - Areas with strong job markets or industries are more likely to attract long-term tenants.
Legal considerations
Tenancy contracts - Most rental properties are let on an Assured Shorthold Tenancy (AST), so make sure you understand what this involves.
Regulations - Read up on local housing laws and regulations, including safety standards, tenant rights, the Renters’ Rights Act, and any rent controls or restrictions on Airbnb-style lets.
Licensing - Some local authorities require landlords to register or obtain licenses for rental properties. HMOs will usually need to be licensed.
Market research
Rental comparisons - Research the rental prices in the area and ensure that your property will be competitive in terms of price, size, and features.
Property values - Look at the historical price trends of properties in the area to gauge potential for future capital growth.
What are the risks of buy-to-let?
Buy-to-let comes with a number of potential risks. Some of these can be mitigated by having the right landlord insurance in place.
Void periods - Vacancies or void periods when the property is not rented out can reduce your income - you’ll still need to meet your mortgage repayments when your property is empty.
Tenant issues - Consider the risk of problem tenants who may cause damage or fail to pay rent. Screening tenants thoroughly is essential.
The economy - Property values and achievable rents in the property market can fluctuate based on the economy, mortgage rates, and other factors.
What are common mistakes landlords make when choosing property?
A common mistake landlords make is ignoring rental demand or what potential tenants want in a property. Buying in an area with low tenant interest can lead to long void periods and reduced rental income.
Another frequent error made by property investors is underestimating costs. Many overlook stamp duty, legal fees, mortgage expenses, and ongoing maintenance, which can significantly reduce profits. Focusing solely on capital growth, rather than rental yield, can also hurt cash flow.
Finally, landlords sometimes neglect property condition and regulations. Older or poorly maintained properties may require expensive repairs, and failing to comply with tenancy laws, EPC ratings, or reforms like the Renters’ Rights Act 2025 can result in fines or legal issues.
How is the UK buy-to-let market changing?
The UK buy-to-let market has seen some major changes over the past few years. Landlords now face reduced income tax relief on mortgage interest and higher Capital Gains Tax, squeezing net rental returns.
Upfront costs are rising too: the buy-to-let stamp duty surcharge in England and Northern Ireland increased from 3% to 5% in 2024.
Regulation is also tightening under the Renters’ Rights Act 2025, which abolishes no-fault evictions, introduces stronger tenant protections, and imposes new compliance and registration obligations for landlords. Together, these changes are reshaping the buy-to-let market, making it costlier to enter and more heavily regulated.
What should you prioritise with a buy-to-let property?
As a buy-to-let landlord, legal compliance is very important — you should ensure safety certificates, tenancy agreements, and Renters’ Rights Act rules are met to avoid fines or disputes.
Financial management is crucial too. You’ll need to monitor mortgages, taxes, and maintenance costs to protect cash flow and maximise your returns.
Finally, focus on your tenants — keep your tenants happy by maintaining properties to a high standard and dealing with any issues promptly.
Is buy-to-let worth it?
Thousands of landlords have made a lot of money from buy-to-let over the past few decades. But the current BTL tax regime and strengthened protections for tenants means it has become more difficult to run a lucrative buy-to-let business. Property investment requires a strategic approach and is very different to buying a home to live in.
Think about your long-term strategy
Are you looking for short-term cash flow through rental income, or are you aiming for long-term capital appreciation? Some properties may offer a balance of both, while others might be better for one rather than the other.
Think about your exit strategy too –are you planning to sell the property, use it to fund your retirement, or live in it yourself one day?
What are my responsibilities as a landlord?
As a landlord, you have various legal responsibilities and obligations to ensure your tenants' safety, well-being, and fair treatment.
Energy performance certificate (EPC)
You must provide a valid energy performance certificate (EPC) to tenants before they move in. The property must have an energy efficiency rating of E or above. There are proposals to increase the minimum rating to 'C' for all tenancies by 2030.
Property maintenance
Landlords are responsible for property maintenance. This can take up quite a lot of time and money. For example, according to the Government’s Private Landlord Survey, around a quarter of landlords reported they identified damp or mould in at least one of their properties in the past year.
Safeguard deposits
If you take a deposit from your tenants, you must protect it using a government-approved tenancy deposit protection (TDP) scheme.
Electrical installation condition report (EICR)
Since 2020, landlords must have an electrical installation condition report (EICR) carried out by a qualified electrician at least every five years.
Fire safety regulations
Landlords must comply with fire safety regulations, including providing working smoke alarms on every floor and a carbon monoxide detector in rooms with solid fuel appliances.
Gas safety checks
If your property has gas appliances, you must arrange for an annual Gas Safe-registered engineer to conduct a gas safety check.
Tenants rights
Tenants have the right to live in the property peacefully and without disturbance. You cannot enter the property without giving the tenant at least 24 hours’ written notice (except in an emergency).
Tenants’ rights are being strengthened by the Renters’ Rights Bill which has now become law is scheduled to come into effect sometime in 2025 or 2026.
How can I best protect my investment?
Landlord insurance or rental guarantee insurance can protect you against various costs. These might include:
Damage to the property
Cover for unoccupied properties
Rent guarantee if tenants fail to pay rent
Legal expenses for disputes with tenants
What is landlord insurance?
Being a landlord can be rewarding financially, but only if the numbers add up. Landlords can protect themselves against some unexpected costs by having the right insurance in place.
Landlord insurance can protect you against unwanted costs, such as accidental or malicious damage, cover for an unoccupied property, or rent guarantee if your tenants fail to keep up with payments.
Use MoneySuperMarket to compare landlord insurance deals. We can help you find the right cover at a reasonable price, not just the cheapest policy available.
Frequently asked questions
What is a good yield for a buy-to-let property in the UK in 2025?
According to UK Finance, the average gross buy-to-let rental yield for the UK in Q2 2025 was 7.26%, compared with 6.9% in the same quarter in the previous year.
In 2025, a good gross rental yield for UK buy-to-let properties is typically around 6–8%, though it varies by region and property type. London and premium areas often have lower yields (~4–5%) but more potential for capital growth, while regional markets and HMOs can exceed 8%.
When assessing yield, consider net yield after costs (maintenance, taxes, voids) and factor in higher upfront costs like the buy-to-let stamp duty surcharge. Aim for properties where rental income comfortably covers expenses and leaves a buffer for returns.
Should I buy in a student-town or family area?
Student towns offer higher yields and strong demand but come with high turnover, more wear and tear, and potential management challenges.
Family areas provide stable, long-term tenants, lower turnover, and easier management, though yields may be slightly lower.
Choose students for higher returns if you can manage frequent tenancy changes, or families for stability and lower risk.
Is it better to buy new build or older property for buy-to-let?
New builds offer low maintenance, modern features, and energy efficiency but usually lower yields.
Older properties can deliver higher rental yields and value-add opportunities but require more maintenance and carry higher costs.
How many years should I hold a buy-to-let property?
There’s no fixed rule, but most buy-to-let investors hold a property for 5 to 10 years or longer.
Shorter term (under 5 years): Can be riskier due to transaction costs (stamp duty, legal fees, agent fees) eating into returns.
Medium term (5–10 years): Often balances rental income, capital growth, and tax planning.
Long term (10+ years): Maximises potential capital appreciation and can help smooth market fluctuations, but ties up capital.
Your holding period should align with your financial goals, market conditions, and tax strategy.
What is the Renters’ Rights Bill?
The Renters’ Rights Act 2025 strengthens tenant protections in the UK. It abolishes no-fault evictions, introduces periodic tenancies by default, limits upfront rent payments, gives tenants the right to challenge rent increases, and imposes new landlord registration and compliance requirements. The aim is to make renting more secure and fair while increasing accountability for landlords.
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Emma Lunn
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Emma has written about personal finance for almost 20 years, with a career spanning several recessions and their inevitable consequences. Emma’s main focus is helping people learn to manage their...
