How to Invest in Rental Property


If you’re wondering how to invest in rental property, finding the right property is just the tip of the iceberg. You’ll need to consider things like tax liabilities, your responsibilities as a landlord and get to grips with the basics of a buy to let mortgage.

Property is still one of the most popular types of investments, and there are plenty of great reasons to become a landlord. We take a look at some of the things you’ll need to consider before getting started with any rental property project. If you’d like more practical tips on how to get into property investment, take a look at this article.

Why Invest in Rental Property?

Rental property is considered one of the safest types of investment. Having such an investment property you stand to gain income from monthly rent in addition to capital gains as its value appreciates over time.

2021 saw record rental prices in the UK, with average monthly rent reaching £1,053 per calendar month. There are plenty of up and coming areas in the UK where property can still be had for relatively cheap too, meaning you can benefit from strong rental yields for the right area and right property.

What you Need to Know about Rental Property Tax

If you are letting a property, you’ll be liable to pay tax on any income from rent. The first £1,000 of your income from property rental is tax-free. On a residential property you pay tax on any profit made from renting out the property after deductions from allowable expenses such as legal fees, accountant fees, utility bills, letting agent fees and council tax, amongst other expenses.

What Landlord Responsibilities do I Need to be Aware of?

As the landlord of a property you are responsible for a number of things in regards to the rental property and its tenants. These include:

– ensuring the property is safe and free of any health hazards, for example by ensuring proper maintenance of gas and electrical certificates and fitting and testing smoke alarms and carbon monoxide alarms.

– You’ll need to ensure the tenant deposit is kept in a government-approved scheme and provide an Energy Performance Certificate for the property.

How do Buy-to-Let Mortgages Work?

If you’re not buying the property outright, you’ll need to secure a buy-to-let mortgage to purchase the property. Typically a lender will request that you have enough to cover a downpayment, which is usually 25% of the property value as deposit, sometimes 30% depending on your financial situation or the property.

This is where it’s important to calculate the rental yields of any investment property. You’ll want to ensure what you’re bringing in monthly in rent is enough to cover expenses like the mortgage repayments, maintenance fees and other costs associated with the property to make sure your investment stays in the black.

When it comes to considering how to invest in investment property, as long as you get to grips with the basics the process can be quite straightforward. It’s essential to fully understand your liabilities and responsibilities as a landlord, both from a tax perspective and the standards you need to uphold for tenants.

With UK property prices at their highest levels, many people are renting longer as they save up for a mortgage deposit, making it a great time to invest in rental property in the right area, with the right type of property.


  • When is rental property considered a business?

If being a landlord is your main job, you rent out more than one property or you’re buying new properties to rent out, what you do is considered running a business. Want to learn how to build a property portfolio? Click here.

  • How to Choose a Rental Investment Property?

The right rental property for you will depend on your financial goals and situation. Residential property is the most common type of property to rent out and normally in strong demand from tenants. You should look for properties that are in areas of growing populations with relatively cheap property to get the highest rental yields possible. Student property is another avenue for investors, and as properties are usually rented out by the room, rental income can be much higher. Another savvy investment may be in an off-plan property – those still in the construction stage. Although you might not make rental income right away, these properties can often be had for under market value (often under by 20 – 50%). Check out our full guide here!


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