What is UK buy-to-Let Investment?
UK buy-to-let investment refers to the purchase of a property with the intention of renting it out to the tenants, rather than living in the property as an owner-occupier and is one of the leading investment classes available thanks to the impressive performance of the market in recent times. A buy-to-let property can either be a residential property, a student property, a commercial property or even more niche assets like a holiday lodge or supported living accommodation.
UK Buy-to-Let Investment Market Overview
Over the last few years, the buy-to-let market has operated as one of the most stable and prosperous markets available to investors despite many unprecedented challenges. Annual house price growth in the UK has stood at around 10% for the last two years – reaching 10.8% in 2021 and 9.8% in 2022 according to the UK House Prices Index for December 2022.
This growth was aided by government incentives such as the stamp duty holiday and the introduction of 5% mortgages, with both incentives resulting in a huge increase in activity in the market. However, even following the end of the stamp duty holiday, the UK property market has continued to flourish and looks set to continue in a similar vein.
The UK buy-to-let investment market’s impressive performance is showing no signs of slowing any time soon according to JLL. In their UK Residential Forecasts 2023 – 2027, they predict that house prices are set to increase by an average of 1.7% per annum, culminating in an 8.9% increase in the aforementioned time period. In the same report, JLL also predicts that rents in the UK are set to increase by 4% in 2023, followed by a cumulative growth of 15.9% over the next 5 years.
UK Buy-to-Let Statistics
Annual house price growth in England has hit over 10% for the last two years in the UK (HM Land Registry, 2023)
Private rental prices paid by tenants in the UK rose by 4.2% in the 12 months to December 2022 (ONS, 2023)
House prices in the UK are forecast to increase by an impressive 8.9% in the 2023-2027 period. (JLL, 2022)
Rental values in the UK are forecast to increase by an impressive 15.9% in the 2023-2027 period. (JLL, 2022)
Why Invest in UK Buy-to-Let?
Benefits of buy-to-let:
UK property has always been one of the most popular asset classes when it comes to investing as it is a tangible product that the investor can have full control over. Property is also usually likely to experience steady growth in value over time.
In addition, the demand for rental accommodation in the UK is extremely high and continuing to rise, with an increasing number of people choosing to rent for longer periods of their lives – making buy-to-let an incredibly lucrative option.
What risks are associated with investing in property?
Like all investment ventures, UK buy-to-let investment has a few risks that you will need to consider when investing. First and foremost, the housing market is not protected against external negative factors. For example, if there was a financial crash, it could have an impact on the property market, resulting in a drop in the value of your property. The good news is that the property market has been one of the most stable markets in recent times compared to other stock markets and remains relatively steady throughout any uncertainty.
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How Does Buy-to-Let Work?
The concept of buy-to-let investment is relatively straightforward. An investor will purchase a property with the intention of renting it out, thus making them the landlord.
Once the purchase of the property has been completed it will be rented out to a tenant for a pre-agreed monthly cost to live in the property. Both the landlord and the tenant will need to sign a tenancy agreement which will constitute a contract between both parties.
Although the tenant will be the legal occupant of the property and will be responsible for the rent and monthly bills, the landlord is ultimately the owner of the property and is therefore responsible for the maintenance and legal requirements. As the property’s owner, the landlord will reap the financial benefits.
How Do I Get Started with Buy-to-Let?
When getting started with UK buy-to-let investment, the first step you must take is deciding if this is the correct investment for you and if it aligns with your investment goals. If this is the case, there are a number of factors to take into account before purchasing a property. What is your budget? Where do you want to invest? What kind of property? The list goes on and it can seem like a daunting mountain to climb.
The good news is that you don’t have to decide all of these things alone. If you’re looking to invest in buy-to-let property, find yourself a reputable company with a proven track record in the industry that will help find the best investment for you. Here at Knight Knox, we have almost 20 years of experience in the UK buy-to-let market, with our specialist team on hand to talk through all of your investment requirements to find the best-suited option for you. Get in touch today here!
How much do I need for UK buy-to-let investment?
The answer to this question depends on a multitude of factors. How much is the property you are looking at? Are you purchasing the property using a mortgage or cash? Where is the property located? All of these factors will affect the starting amount you need to invest in property. To get a general idea, the best thing to do would be to get in touch with a property consultant who will be able to find an investment suited to your needs.
Best Areas for UK Buy-to-Let Investment
Manchester is the second largest city in the UK and one of the most popular locations for people to live and invest in. The last few years have seen a shift of investments away from London and other areas surrounding the capital in favour of investing up North, and Manchester is at the centre of it. The increase in the number of young professionals heading to the area has resulted in a massive boost to the city’s property market. Find out more about Manchester property investment here.
Liverpool is one of the most culturally renowned cities in the UK and has seen an exponential increase in its population as a result of the lifestyle in the city. Ever since its European Capital of Culture Crown in 2008, Liverpool has undergone numerous regeneration schemes that have completely transformed the city into one of the most vibrant and exciting areas to work, live and invest – massively enhancing the property market there in the process. Find out more about Liverpool property investment here.
Sheffield is one of the most up-and-coming cities in the country, with its well-documented economy paving the way for the city to become one of the most popular locations for living and investing. The city is currently in the midst of a 10-year strategic economic plan that is expected to increase its gross value added (GVA), bringing a further 6,000 new businesses and introducing 17,000 new jobs into the area. The increase in available jobs in the area has assisted the growth of the property market. Find out more about Sheffield property investment here.
UK Buy-to-Let Investment Properties for Sale
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VisionPrices from:£86,995Property typeStudentLocationHuddersfield
Vision offers 8% assured NET returns for 3 yearsView Property
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Rookery Manor LodgesPrices from:£187,000Property typeHoliday LetLocationWeston-super-Mare
Rookery Manor Lodges offers 10% assured NET returns for 5 yearsView Property
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Crawford HousePrices from:£174,915Property typeResidentialLocationLiverpool
Crawford House will consist of luxury apartments in the affluent Mossley Hill area.View Property
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St Mary’sPrices from:£199,950Property typeSupported LivingLocationBarnsley
St Mary's offers a 25-year lease with 9.1% yields and annual inflation-linked rent increasesView Property
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Chapel StreetPrices from:£152,942Property typeSupported LivingLocationBradford
Chapel Street offers a 25-year lease with 8.5% yields and annual CPI increasesView Property
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Alexandra TowerPrices from:£213,500Property typeResidentialLocationLiverpool
Alexandra Tower offers luxury Liverpool living with waterfront viewsView Property
Can you get a buy-to-let mortgage?
Whilst it is possible to get a mortgage for a buy-to-let property, regulations for buy-to-let investors are extremely strict, and lenders have very stringent criteria for buy-to-let mortgages – including the price of the investment property and the expected rental yield. You will also need to own your own home before investing in buy-to-let (this can be outright or with an outstanding mortgage), therefore making you ineligible if you are a first-time buyer. So, whilst yes, you can get a buy-to-let mortgage, cash purchases are much more streamlined and hassle-free.
What’s different about a buy-to-let mortgage?
Buy-to-let mortgages differ from standard mortgages in a number of ways thanks to the intricacies involved in investing in buy-to-let property. For example, both the fees and interest rates for buy-to-let mortgages tend to be higher than standard mortgages as well as the minimum deposit. Most buy-to-let mortgages are also interest-only, meaning that you pay the interest every month but not the capital amount and then, at the end of the agreed mortgage term, you repay the original loan in its entirety.
How much deposit do you need for a buy-to-let mortgage?
Traditionally, the minimum deposit required for a buy-to-let mortgage is between 20-25% of the property’s total value, however, this can be as high as 35-40% in some cases. This larger deposit is required as it protects the lender in the event that you default on your payments as a result of any problems with collecting rent.
Managing your Buy-to-Let Investment
Buying a property is just the beginning of the property investment journey. Following your purchase, you are now a landlord and are responsible for managing the property and ensuring it is fit to live in for your tenants.
Many investors are looking for a more hands-off approach, and if this is the case for you, it could be worth considering a lettings agent. Lettings agents will take care of everything, including advertising your property, finding tenants, dealing with maintenance issues and solving disputes.
What Taxes Will I Pay on My Buy-to-Let Property?
When purchasing a buy-to-let property, you will be required to pay Stamp Duty Land Tax depending on the property price. Find an overview of the rates below, and to learn more about Stamp Duty Land Tax, visit the gov.uk website here.
Property Price | Stamp duty rate
Up to £125,000 | 3%
£125,001 – £250,000 | 5%
£250,001 – £925,000 | 8%
£925,001 – £1,500,000 | 13%
£1,500,001+ | 15%
Property investors also must pay Capital Gains Tax if they sell their investment property, which is a tax on the profit when you sell an asset that has increased in value. To find out how much Capital Gains Tax you must pay, visit the gov.uk website here.
Buy-To-Let Frequently Asked Questions:
Is buy-to-let in the UK a good investment?
Despite the unexpected challenges faced during the course of the last few years, the UK property market continues to perform admirably as house prices grow and rents soar. With more people struggling to get onto the property ladder and both house prices and rental yields on the up, buy-to-let offers an extremely rewarding venture for investors looking to invest in UK housing.
Can you make money from buy-to-let in the UK?
Yes, you can make money from UK buy-to-let investment. This can be done through two main methods, rental income and capital appreciation. Rental income refers to the payments you will receive from the tenant renting the apartment, whilst capital appreciation is defined as a rise in
an investment’s market price, which in the buy-to-let market means an increase in the property’s worth. House prices have increased massively in recent times, whilst rents are continuing to soar to new heights. With this in mind, the scope for making money from buy-to-let property in the UK is extremely high.
What is a good ROI for buy-to-let UK?
Determining a good ROI for UK buy-to-let investment comes down to two factors, rental yields and capital growth. With the average rental yield in the UK currently standing at around 4.75%, a rental yield of around 4-7% is considered a strong rental return. Capital growth is a little harder to quantify as the property market is constantly in flux. Any increase in property prices will result in a return on your investment, however, you ideally want your property to increase in line with or above the national and regional averages for your specific property type for a good ROI. The beauty of UK buy-to-let investment is that these two factors can generate an ROI simultaneously, resulting in extremely strong income.
Should I invest in off-plan property?
Off-plan property investment can be an extremely profitable venture for investors. Off-plan properties are often cheaper compared to completed properties, whilst also offering more potential for substantial capital gains. In addition to this, off-plan properties tend to achieve higher tenant demand and rent once they are completed due to them being newly built.
What type of property should I buy?
The type of property you should invest in depends entirely on your personal situation and investment goals. If you are looking for a long-term, consistent income stream at a cheaper price, student properties are an excellent option. If you are looking for greater capital gains then you should look towards residential properties in booming cities. Ultimately, it comes down to your own personal goals, which is why it is recommended to talk through all of these factors with a property consultant to find the right investment for you.
What are my responsibilities as a landlord?
A landlord is responsible for ensuring that the property is fit to live in, including; Any repairs needed to the structure and exterior of the property, heating and hot water systems, basins, sinks, baths and other sanitaryware; The safety of gas and electrical appliances; The fire safety of furniture and furnishings provided under the tenancy; Any repairs or work needed and water heating equipment. To find out more about being a landlord, take a look at our landlord guide here!
Why Choose Knight Knox for UK Buy-to-Let Investment?
Established in 2004, Knight Knox has been at the forefront of UK property investment for almost 20 years, and our experience speaks for itself.
Specialising in the sale of off-plan buy-to-let properties for the private investor market, we make investing in property simple and are able to provide our clients with a personal service, offering advice and guidance from their very first enquiry to the completion of their investment, in order to ensure they make the best possible choice for them individually.
Our track record speaks for itself. Since 2004, we have launched over 120 development to the buy-to-let market with a total value surpassing £1.2bn and completed over 100 developments, with plenty more to come.
Whether you are a first-time investor or looking to build on an established portfolio, we are certain to have the perfect property for you!