BTL: Buy-to-Let

With buy-to-let (BTL) you buy a property and rent it to a single household on a residential tenancy. You earn monthly rent and, over time, hope to benefit from the property rising in value. It is usually lower yielding than HMOs or serviced accommodation but simpler and steadier to run.

Gross yield is the annual rent divided by the purchase price. For example, a £180,000 property let at £950 a month earns £11,400 a year, a gross yield of about 6.3%.

Net yield is what's left after costs: letting or management fees, insurance, maintenance, safety certificates, empty periods between tenants, service charge and ground rent for leasehold flats, and mortgage interest. Always judge a deal on the net figure.

• •Lenders typically want a deposit of at least 25% of the purchase price.
• •Lenders stress-test the rent: it usually has to cover the mortgage interest by a set margin, often around 125% for limited companies and basic-rate taxpayers and higher for higher-rate taxpayers, calculated at a stressed interest rate. This can cap how much you can borrow.
• •A broker can compare personal and limited company mortgage options for your situation.

• •Section 24: landlords who own property in their own name can no longer deduct mortgage interest from rental income. Instead they get a tax credit at the basic rate (20%), which hits higher-rate taxpayers hardest.
• •Many investors buy through a limited company (often called an SPV), where mortgage interest is still an allowable cost. Companies pay corporation tax, and taking money out has its own tax, so it isn't right for everyone. Get advice from a property accountant.
• •Stamp duty: buying an additional home in England means higher rates of stamp duty land tax. Since 31 October 2024 that has been a 5% surcharge on top of the standard rates. Scotland and Wales have their own taxes and surcharges. Check the current rates before you offer.

• •Gas safety check every year by a Gas Safe registered engineer
• •Electrical installation condition report (EICR) at least every five years
• •An energy performance certificate (EPC) rated at least E
• •Smoke alarms on every storey, and carbon monoxide alarms in rooms with a fixed combustion appliance
• •Tenancy deposits protected in a government-approved scheme within 30 days
• •Right to Rent immigration checks before the tenancy starts
• •A licence if the council runs selective licensing in the area
• •Tenancy law is changing under the Renters' Rights Act 2025, which moves tenancies onto a periodic basis and ends section 21 'no-fault' evictions. Check which changes are in force when you let.

• •Judging a deal on gross yield when net yield is what you keep.
• •Interest rate rises at the end of a fixed rate, and stress tests that limit refinancing.
• •Leasehold flats with high or rising service charges and ground rent.
• •Areas with selective licensing or weak rental demand.