Buying property to rent, is it profitable?
The cost of living crisis, property price hikes, astronomical inflation rates. With the current
state of the economy, you might wonder if it’s worthwhile to start or continue investing in
buy-to-let properties in the UK. Unfortunately, the answer to that question isn’t very simple.
On the one hand, those who are struggling with their day-to-day to stay afloat during these
harsh times. On the other, if you truly have the excess funds to safely buy a property —
meaning without suffering too hard from the current state of mortgages — then buying a
property to rent is still an incredibly viable investment option. However, ultimately, the type of
investment you seek and your final purpose for making investments go a long way toward
In this article, we’ll be discussing whether buying property to rent is still a worthwhile
venture. Read on to learn more about all the advantages and disadvantages of buy-to-let
properties, our top five tips to buying a property to rent and some of the most common
mistakes you need to avoid when buying a property to rent.
Advantages of buying a property to rent
Understanding leasing, mortgage loans, tenant/landlord dynamics, and property
management is essential before investing in rental property. Like any investment, buying real
estate has the potential to yield profits and also presents unique problems. Here are some of
the main benefits of investing in rental properties as opposed to shares, stocks, or bonds:
If you have tenants living in your property, you will get regular monthly payments. It can be
applied toward mortgage payments, insurance premiums, and HOA dues, to name a few of
the property’s recurring costs. The amount of rent you collect each month will determine
how much money you make in the end.
As a landlord, you’ll still be able to collect rent even now, although the returns might not be as
lucrative as it used to be. Rental yield can reach as high as 8% in cities like Liverpool, Glasgow,
and Leicester in the UK, while in other places it hovers closer to 3%.
Your rental home is a valuable asset. As a result, you have a more diversified portfolio.
Because it is invested in a market that rises over time, you can expect to gain more financially
without taking on undue risk.
Build a secure portfolio by combining your rental property with other investments.
Performing market analysis is the most rewarding aspect of owning such properties. You’ll be
able to make well-informed choices predicated on your ideal place. Your investing portfolio as
a whole will be more stable if you use these.
Suppose you’ve decided to relocate, but the current real estate market is less than ideal.
Rather than take a loss on a sale, you can keep your property rented out until the market
recovers. By putting your property on the rental market, you can wait until you’re in a better
financial position to sell before you have to worry about losing money.
Unattended maintenance concerns and the ensuing damage from vandalism or squatters
are just a few of the dangers that can arise when a house sits empty. Peace of mind that the
house is being well-cared for and protected can come from renting it out.
Rental properties are also a good strategy to hedge against inflation, as rent can be easily
increased to keep pace with cost increases. This will allow you to save money in your pocket
while still having enough to replace broken appliances or pay for necessary repairs.
Disadvantages of buying a property to let
Unfortunately, like most things in life, investing in real estate isn’t without its disadvantages.
Here are three reasons why buy-to-let properties aren’t a good idea:
Managing a rental property portfolio can quickly turn into a full-time job. Landlords are
accountable for repairs and tenant issues when they have property rented out. Buy-to-let
homes, like any other investment, require time and effort. It is your responsibility to take care
of your tenants, whether you do so full- or part-time.
Find reliable tenants that will treat your property with respect. Specifically, you should verify
the credentials and references of any possible candidates. It’s important to keep an eye on
the state of your property because repair and maintenance costs can add up quickly. Or,
better yet, you can delegate your property management tasks to the professionals.
2. Property is illiquid
If you need cash quickly, you have liquid assets, which are assets that can be quickly sold for
cash. Money, money market instruments, and marketable securities are all examples of liquid
assets. For this reason, real estate is not considered a liquid asset. Even in the best of markets,
closing a deal might take several months. In addition, you may not get the greatest price if
you need to sell quickly because of an emergency or other unforeseen incident.
Much like any kind of investment, investing in a buy-to-let property carries serious risks. You
may end up with less-than-ideal tenants despite your best efforts to screen them out. Also,
areas evolve and what was once a fantastic spot for investment may no longer be so in the
future. Security deposits and further due diligence can definitely mitigate these risks, but
sometimes you’ll never know!
3 tips for buying a property to rent
In the grand scheme of things, the pros of owning a property to rent far outweigh its
disadvantages. But, like any type of investment, knowledge is key to building a successful
With that said, here are our top three tips for buying a property to rent:
1. Prioritise debt management
Although a seasoned investor can more effectively manage their debts, a new investor should
start off with as little debt as feasible. You might not be able to invest right now because of
other financial obligations, such as paying off medical bills or student debts or helping pay for
your children’s further education. In fact, if your debt to income ratio is too high, you may be
denied a loan altogether, effectively making the choice for you.
2. Do your research
Whether you’re a first-time property owner or a property pro, you need to do deep and
thorough research on any piece of property that you’re planning to own — especially if it’s
buy-to-let. So be sure to do your research, and then do some more! When living in more
costly cities like London, the thought of snatching up a cheap two-bedroom apartment in
Manchester may be very appealing. Be wary, though, because financial ruin awaits the
unwary traveller who is unfamiliar with the area. There may not be a lot of interest in renting
in the region, and if the limit on tenant letting fees has caused real estate brokers to leave the
market, it will be even more challenging to locate a tenant.
3. Ask yourself — is being a landlord for you?
Having the ability to find and keep reliable tenants is crucial and being a landlord isn’t an easy
feat. Join a landlord’s association or consult with other successful landlords for advice. Hiring
a property management company to handle tenant relations on your behalf can assist you
avoid making any blunders. However, if you decide that being a landlord isn’t for you, don’t
fret. You should consider hiring a reliable property management company to handle the
Mistakes to avoid when investing in a rental property
With our above tips in hand, you might be tempted to run off and start looking at your first or
next buy-to-let property. However, it’s also important to learn from the mistakes of others so
that you can ensure that you make the most out of your own property portfolio. So, keeping
that mindset in mind, here are some of the biggest mistakes to avoid when investing in
Not doing the calculations
Investors face additional expenses beyond mortgage payments, such as maintenance and
repair expenditures, strata fees, property taxes, and insurance premiums. As you might
imagine, these can all add up rather quickly! A excellent real estate investment strategy is to
establish a spending cap and save up a contingency fund in case of any unforeseen expenses
In addition, you should make sure your investment is sustainable. You should save up enough
money to make monthly loan payments and a sizable down payment on a home. To avoid
living in chronic financial stress, it’s recommended to have a savings buffer of two months’ to
four months’ worth of rental income.
Being in a hurry
Rushing through your research simply to close a deal is a big no-no in the world of property
investment. Before investing in property, it is essential to conduct extensive research on the
preferred places, learn the current property rates in those areas, know the land value, civic
amenities, local facilities, average rental income that can be earned, and analyse the property
market circumstances. There is a risk of being taken advantage of by brokers and agents if
you don’t know your way around the area.
Starting without a financial cushion
Real estate investment can seem like a sure thing, but you should think carefully before
making any hasty decisions. Never give in to impatience and buy a home that is obviously not
suitable for investment.
Keep enough money in the bank each month to pay the mortgage or rent, as well as some
emergency savings in case something goes wrong. If you don’t, you might always be
concerned about whether or not you can pay your bills and keep your investment afloat.
Doing it all on your own
Many buyers think they can close a real estate sale without aid. You may have closed multiple
deals before, but in a low market, it may be harder and you have no one to turn to for support.
Anyone looking to get into property investment should network with experts for the best
guidance. Include a smart real estate agent, a home inspector, a handyman, an attorney, and
an insurance agent. Professionals can identify property and neighbourhood issues for
investors. A lawyer can check the title and easements for any issues.
What to take into account when buying an apartment to rent?
Remember that research is essential when it comes to any type of investments — property
investing is no different. Before you start looking into rental properties to invest, ask yourself:
● Am I buying an older property or a new build?
● Is the property in good condition?
● Is this a good area to invest in property?
● What do tenants want in a property in this area?
● Cash or mortgage?
What is a good rental yield?
A property’s rental yield is the amount by which its monthly rent exceeds its purchase price,
expressed as a percentage. As a general guideline, a rental yield between 6% and 8% is
considered to be fair, though this range might be much wider or narrower depending on
where in the country you are.
Verdict — Is buying to rent profitable?
Overall, despite the reduced yields in recent years, buying a property to rent is still a profitable
venture. Successfully investing in rental properties often hinges on avoiding common pitfalls
and gaining as much knowledge as possible. Your long-term security and investment growth
could be jeopardised without proper due diligence! If you’re highly considering starting an
investment portfolio but still don’t know where to start, definitely get in touch with UK
property investment experts who will help you every step of the way.