Is it still a worthwhile investment being a landlord?
Buy-to-let can still be a profitable long-term investment. Whether you own one rental property or a larger portfolio, property remains one of the few asset classes that can generate regular rental income while increasing in value over time.
Like any investment, though, success depends on careful planning. While rental income can provide monthly profits, you'll need enough capital to cover the initial purchase and ongoing costs. Here's what you need to consider before investing.
Buy in an area with strong tenant demand
A successful rental property needs to stay occupied and generate enough rent to cover your costs. That means investing in locations where demand is expected to remain strong.
Different areas attract different types of tenants, from students and young professionals to families, so it's important to understand the local market before you buy.
A qualified estate and letting agent can provide valuable insight into rental demand, pricing and future trends. If you'd like to learn more about your local market, get in touch with your nearest branch.
Understand your costs
Before investing, work out both your upfront and ongoing expenses to understand how much rental income you'll need to generate.
Upfront costs include your deposit, legal and mortgage fees, survey costs, stamp duty (charged at a 5% higher rate across all bands in England for additional properties), refurbishment, furnishing and compliance work.
Ongoing costs include landlord insurance, accountancy, letting and property management fees, maintenance, repairs, redecoration and allowing around 3% for potential void periods.
A deposit of around 25% to 30% should generally allow you to secure a property where the rental income covers your mortgage, running costs and tax, while still leaving a profit.
Consider using a buy-to-let mortgage
Even if you could buy outright, using a mortgage may deliver a better overall return.
Although mortgage payments reduce monthly rental profits, you still benefit from any increase in the property's value. Borrowing also allows you to spread your investment across multiple properties.
For example, rather than buying one £270,000 property outright, you could use the same capital as a 30% deposit on three properties of the same value. While maintenance costs may increase, you could generate similar rental income while benefiting from three times the capital growth.
As buy-to-let mortgages have different lending criteria from residential mortgages, it's worth speaking to a qualified broker. Many buy-to-let products are only available through brokers.
Get professional tax and legal advice
Property taxation can be complex, so it's worth seeking advice from a tax specialist or wealth adviser before investing.
They can help you decide the most tax-efficient way to buy, finance and own your property, as well as advise on how rental income could affect your wider tax position. For example, earning more than £60,000 may reduce your Child Benefit entitlement, while earnings above £80,000 could remove it altogether.*
It's also important to plan ahead. Discuss your long-term exit strategy with your legal and tax advisers, whether you intend to sell your property or pass it on in the future.
Many landlords are now also affected by Making Tax Digital. Those with turnover above £50,000 must keep digital records and submit quarterly returns using compatible software. From April next year, the threshold falls to £30,000, so it's worth becoming familiar with the system now.
*Child Benefit thresholds correct at the time of writing.
How it the market performing?
Rental market
According to Zoopla's June Rental Market Report, average UK rents increased by 2.1% over the past year, although around three-quarters of rental markets are seeing stronger growth. The national average has been held back by weaker performance in a handful of higher-value locations.
Among England's major cities, the strongest annual rental growth was recorded in:
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Newcastle: +3.9%
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Liverpool: +3.6%
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Leeds: +3.0%
Some more affordable areas are seeing even stronger growth, with rents increasing by 9.1% in Carlisle and 6.5% in Halifax over the past year.
Rental growth continues to be driven by a shortage of available homes, with every region still having 20% to 30% fewer rental properties than before the pandemic. Despite slower wage growth, this lack of supply is expected to keep rents rising, with Zoopla forecasting UK rental growth of between 2% and 3% during 2026.
House prices
Alongside rental income, capital growth remains one of the key benefits of investing in property.
Zoopla's latest figures show average UK house prices increased by 1.5% over the past year, including 0.6% in the last quarter, suggesting the market is continuing to stabilise.
The strongest regional growth has been in northern England, with prices rising 3.4% in the North East and 3.6% in the North West.
With inflation averaging 3.3% over the past 12 months but currently sitting at 2.8% and continuing to fall, landlords in many parts of the UK should continue to see positive overall returns through a combination of rental income and capital growth.
If you'd like to discuss the investment potential in your local area, contact your nearest Leaders branch and speak to one of our buy-to-let experts.
Want to know more about the lettings services LRG can offer you? Follow the link below to submit an enquiry and quote that you’re an NRLA member to find out more about the exclusive discount* we can provide. We can also help you decide which service is best for you if you’re still unsure.
