Here, we address some of the most frequently asked questions when it comes to investing in a buy-to-let property. 

What type of mortgage do I need for a rental property?

If you’re purchasing a property with the intention of renting it out to tenants, you should apply for a buy-to-let mortgage. This type of mortgage is specifically designed to accommodate the unique financial considerations and risks associated with rental properties, with different criteria and interest rates.

Most buy-to-let mortgages are interest-only. With these mortgages, landlords pay only the interest on the loan each month, not the capital. This results in lower monthly payments, making it easier to manage cash flow. However, the capital borrowed must be repaid at the end of the mortgage term. 

Alternatively, repayment mortgages require you to make both interest and capital payments each month. This reduces the outstanding debt until the mortgage is fully repaid. 

What is the criteria for being a landlord?

To be eligible for a buy-to-let mortgage, you’ll need to meet certain criteria. Lenders assess your eligibility for a buy-to-let mortgage based on the potential rental income of the property, your financial stability, and your experience as a landlord.

Owning your own home is a prerequisite for the majority of lenders. They’ll also often require a separate income of around £25,000 from a source unrelated to letting, although this varies among lenders. Moreover, a substantial deposit, usually about 25% of the property's value, is typically required. 

How do I know I’m setting the rent at the right price?

Researching local market trends and comparing similar properties in the area you’re looking to buy in can provide you with a clear indication of what you should charge in terms of rent. Factoring in property size, location, amenities, and demand can also all contribute to the amount you should charge. It’s good practice to engage with local real estate professionals for industry insights, too. 

It’s important to avoid both overpricing your rent in order to attract tenants, and underpricing to maximise returns on profit. This will ensure you strike the right balance when setting your rental payments, ensuring a rental agreement that benefits you and your tenants.

Will I be taxed on my rental income?

In the UK, rental income is subject to taxation. You must declare your rental earnings as part of your overall income and pay Income Tax accordingly. You’ll pay tax on your net rental income, which means your total income minus any allowable expenses. The amount of tax owed depends on your overall income and tax rate. 

However, there are deductions available for allowable expenses, such as mortgage interest and property maintenance costs, which can reduce the taxable income. It's advisable to seek guidance from an accountant before purchasing your first buy-to-let property.

Can I rent my property to a family member?

Most lenders will place restrictions on letting to family members as a condition of your mortgage. You would normally need a specialist mortgage in order to rent to family, and would need to speak to a mortgage adviser about this for more information. Consulting an adviser is essential to understand the available options and the lender's conditions, as these mortgages often have unique terms and eligibility criteria. 

Additionally, legal and tax implications may apply when renting to family members, making it crucial to liaise with an accountant to ensure compliance with all relevant regulations and to make informed decisions.

Should I use a letting agent or rent my property privately?

The decision to use a letting agent or rent your property privately depends on your circumstances and preferences. Letting agents can offer convenience by handling tasks like tenant screening, rent collection, and property management.

Meanwhile, renting privately gives you more control and potentially higher returns. At the same time, it requires you to manage all aspects of the tenancy.

Can I use my rental income to purchase another property?

This is dependent on your individual circumstances, and whether you currently have a mortgage to pay on your existing buy-to-let property. We recommend that you speak to a mortgage adviser who will look at your individual circumstances and advise on what your options are.

What’s an EPC and why do I need it?

An Energy Performance Certificate (EPC) assesses the energy efficiency of your rental property on a scale from A (most efficient) to G (least efficient). It outlines current energy costs, potential savings, and recommendations for improvements. 

In the UK, it's a legal requirement to have a valid EPC rating of ‘E’ or above (going up to ‘C’ in 2025 and onwards) before marketing your property for rent. Potential tenants have the right to see the EPC, allowing them to gauge energy costs. It also helps you understand your property's environmental impact and can guide you in making cost-effective, energy-efficient upgrades.

What do I do if I want to buy more than one buy-to-let property?

Expanding your buy-to-let property portfolio involves careful planning and financial consideration. Start by assessing your budget and ensuring you have the necessary funds for multiple property purchases, including deposits and ongoing expenses. You’ll also need to research potential investment locations and property types if you’re keen to diversify your portfolio.

Consider working with a mortgage adviser to secure financing, as lenders may have different criteria for multiple property purchases. Additionally, be sure to seek professional advice on property management and tax implications, as this will vary depending on how many properties you own.

How many buy-to-let mortgages can I have?

The number of buy-to-let mortgages you can have largely depends on your financial situation and the individual policies set by the lender. Many lenders allow multiple buy-to-let mortgages, but they assess each application individually. They’ll consider factors like your income, credit history, and the potential rental income of the properties. 

Generally, experienced investors with strong financial profiles can secure several buy-to-let mortgages. However, lenders may have a cap on the total loan value or the number of mortgages they're willing to offer to one borrower. It's crucial to consult with a mortgage adviser to navigate these complexities and explore your options.

Should I take an inventory of my rental property?

A. Inventories are always worth doing, as it’s a good way to make a detailed list of all the contents and the condition of your property before the tenants move in. This gives you a good starting point when there is a debate over any damage that might have occurred during the tenancy period.

What is a House in Multiple Occupancy (HMO)?

A property is classed as a HMO if there are more than three tenants living there who aren’t members of the same family. Another indication is if there are shared facilities i.e. kitchen, bathroom, toilet etc.

Your choice of lenders may be limited if you’re renting out a HMO, but your mortgage adviser will be able to go through this with you. Councils can also have individual rules around HMO, so if this is something you’re considering, we recommend you speak to your local council.

What rules and regulations do I have to follow as a landlord?

As a landlord, it's essential to comply with various rules and regulations to ensure a compliant and safe rental agreement for your tenants. These may include:

  • Ensuring gas and electrical installations and appliances are inspected and certified regularly by registered professionals

  • Providing a valid EPC to tenants

  • Safeguarding tenant deposits in a government-approved scheme and providing prescribed information.

  • Verifying tenants' immigration status before renting to them.

  • Installing and maintaining detectors as required by law.

  • Keeping the property in good repair and addressing issues promptly.

To speak to a buy-to-let mortgage specialist, please don't hesitate to contact us today.

Important information

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.

Your property may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.