Is investing in rental properties still a good idea?

Bricks and mortar have always appealed to investors. A property is a tangible, physical entity. What’s more, following a general downturn in the market, house prices are beginning to rise. According to the latest UK House Price Index, as of April 2019 the average house price in the UK is £228,903 – an increase of 0.7% compared to the previous month, and 1.4% compared to the previous year. Rents have gone up too – from an average of £981 in December 2018, compared to £907 in the same month the year before. So, with all this in mind, is investing in rental properties still a good idea?

How does investing in rental properties work?

Investing in rental properties can be done in two ways: by using your own money or by taking out a buy-to-let mortgage.

Profit comes from both or one of the below:

  • Rental yield – rental income minus the costs of maintenance and repairs)
  • Capital yield – the profit you earn if your house sells for more than you originally paid for it.

Of course, if you take out any sort of loan there are risks. If you can’t make repayments (for instance, if your tenants leave or do not pay rent on time), then you could find yourself having to make up the difference.

What is the cost of a buy-to-let investment?

If you are a landlord, there are certain obligations you will need to observe to ensure your rental property meets all legal requirements and tenants’ expectations. Running and maintenance costs will therefore have to be planned into your outgoings and budgeted for.

It’s also worth remembering that up until recently, landlords could deduct mortgage interest and other allowable charges from their tax liability. However, changes introduced from April 2017 mean that the picture is more complex. Therefore, it’s always worth consulting an accountant, to double check what the tax implications might be based on your individual circumstances.

There are also other costs that come with purchasing a home to rent out. If you’re buying a property in England, you may have to pay Stamp Duty Land Tax, along with solicitors’ and survey fees.

Plus, if you sell a second property for a profit, you will have to pay Capital Gains Tax.

How to mitigate the risk of buy-to-let

Taking out landlords’ and buildings insurance (you’ll need the latter if you have a buy-to-let mortgage) can help to protect your investment and provide peace of mind.

Meanwhile, working with a reputable agent can also help to mitigate the risk of turning over your property to an unsuitable tenant. Choose Redrose for:

  • Advice about achieving the right rental income for your property
  • A ready database of tenants
  • Detailed photographic inventories at the start of every tenancy to minimise potential dispute
  • ‘Let only’ or fully managed options, competitively priced

If you would like to book a free rental valuation and chat to us about how we can work on your behalf to make the most of your property investment, complete our enquiry form or call the Lettings Team on 01257 547062.


Book a valuation to see how much your property is worth.

Please enable JavaScript in your browser to complete this form.

Apply for free Mortgage Advice

Apply for free mortgage advice by completing the form below.

Please enable JavaScript in your browser to complete this form.

Contact Us

Complete the form below to get in touch with our team.

Please enable JavaScript in your browser to complete this form.

Sign up to Our Newsletter

Join our mailing list to receive our latest property news
Please enable JavaScript in your browser to complete this form.