• >
  • Guides>
  • Should you invest in a buy-to-let property?

Should you invest in a buy-to-let property?

Investing in a buy to let property can be a profitable way to use your money, but there are downsides you need to consider. Here are the pros and cons of buying a property to rent out.

Share this guide

Pros of investing in a buy-to-let

Long term investment and growth

Although house prices have fluctuated in recent years, property is still a relatively safe long term investment.

Property prices will go up and down, but over the long term they should increase. This means you could make a healthy profit when you come to sell the property.

Generate an income and meet mortgage repayments

Renting out your property to tenants who will pay your mortgage for you and also provide some extra income is the key to a successful buy to let investment.

If you take advantage of a low buy to let mortgage rate you could increase your profit further, because it will mean your monthly payments will be lower so your profit margin will be bigger.

You can offset costs against tax

Each tax year you will need to fill in a Self-Assessment Tax Return for HMRC and pay a tax bill, but you can offset some of the cost against tax, including:

  • Interest on your buy to let mortgage repayments

  • Fees paid to letting agents

  • Council tax and bills (if you pay them for the property)

  • Cost of advertising your rental property

  • Paying for repairs

You can also get tax relief to cover renovations to furnishings, carpets and sofas as well as maintenance repairs (but not on home improvements like an extension).

Did you know?

From April 2016, you will only be able to claim for renovation costs as and when they occur.

Cons of investing in a buy-to-let

The costs of an empty property

There is no guarantee that your property will be occupied all the time, and when it is empty you will need to make the mortgage payments from your own pocket.

Increased Stamp Duty Land Tax (SDLT)

From 1st April 2016 you will need to pay 3% more Stamp Duty Land Tax (SDLT) when you purchase a buy to let property:

Updated 22 April 2020
BandUsual SDLT rateBuy to let SDLT rate

The additional rates will only apply if you own more than one residential property (including your own home) at the end of the day of the house purchase.

For example, if you buy a residential buy to let property for £220,000 from April 1st 2016 you will pay:

  • 3% on the first £125,000 = £3,750

  • 5% on the remaining £95,000 = £4,750

  • Total SDLT due: £3,750 + £4,750 = £8,500

If you were to buy the same property before 1st April 2016, the SDLT would have been: 0% on the first £125,000 and 2% on the remaining £95,000 = £1,900.

In this example the increase in SDLT means you will need to pay £6,600 more to purchase a buy to let property.

You are responsible for maintaining the property

This means you will need to be on hand 24/7 in case your tenants have a problem. If the boiler or washing machine breaks it will be your job to get it sorted, and these things can be very costly to repair or replace.

You will need to find tenants

If you are able to find tenants quickly and easily it will save you money and potential headaches. However, you will need to:

  • Advertise your property

  • Check references when you find potential tenants

  • Arrange the deposit and ensure it is held in an appropriate scheme

Alternatively you can get an agency to manage your property for you. They can:

  • Find your tenants

  • Fully vet them

  • Sort out the paperwork

They can also take care of issues during the tenancy, although all of this will come at a cost, which could reduce your profits.

For more potential pitfalls of investing in a buy to let property, read these 10 profit draining landlord cost you might not have considered.

Renting your property out can be stressful, especially if you encounter unexpected expenses. Compare landlord insurance to get the protection you need for less.