Is buy to let a good investment?

With rental incomes steadily increasing over recent years letting out a property can be a good way to bring in a regular income. If you can find the right property and the right mortgage it is possible to make a rental yield of around 5 – 10 per cent depending on where you’re based.

Although buy to let can be a good investment there are also risks to consider too so it’s really important to make sure you’ve got your sums right and thought about everything renting out a property entails before committing to a mortgage and becoming a landlord.

Finding the right buy to let mortgage

Getting the right mortgage is vital to ensuring you will make a good return on your investment. Buy-to-let mortgages tend to be more expensive than residential loans because they pose a bigger risk to the lender. But there are still competitive rates out there, you can see the best buy to let mortgage rates currently on the market in our rates table.

Buy to let mortgages will usually require a higher deposit too, typically a minimum of 25% although if you have a deposit of 40% or more you’re likely to get better deals.

Another thing to consider is that most buy-to-let deals are interest-only mortgages so once the term is up you would need to sell the property to clear the loan or pay it off another way. Selling may suit you fine if you never intend to live in the house but if you don’t want to sell you will need to have a different repayment plan in place.

Rental income from your buy to let

Lenders will look at the potential rental income from the property to decide how much to lend to you. Getting an idea of how much rental income you are likely to get from a property is quite simple. You can look at local property listings and speak to letting agents to find out how much similar properties are on the market for.

Once you have an idea of what your rental income will be our buy to let calculator can help you to figure out how much you may be able to borrow. One of our advisers will also be able to talk you through your options.

To ensure you can start to make a profit you should be looking to make a rental income of at least 125% of your mortgage repayments and the other costs of renting out a property. So you should factor in the costs of getting the property ready to let out as well as ongoing costs such as maintenance, insurance and letting agent fees if you choose to use one. You should also factor in periods when the property is empty such as between tenancies as this will make a dent in your income.

Speak to an impartial mortgage adviser

To talk through your buy to let options, speak to a Which? mortgage adviser by calling us on 0117 981 7787 – or request a call back. Our advisers look at every mortgage from every available lender and because they’re paid a salary –not a sales commission – you can have confidence that you’ll receive truly impartial advice.