How to Buy-to-Let: A Picnic Guide For First-Time Landlords

Becoming a landlord for the first time can feel like navigating through a maze. From figuring out if buy-to-let is right for you, to picking the perfect location and understanding all the legal bits, there’s a lot to consider.

This guide breaks everything down for you. No jargon, no fluff, just everything you need to know to confidently start your property investment journey. Whether you’re a first-time landlord or adding to a growing portfolio, it pays to know what you’re getting into.

First Things First - Do Your Research!

Before diving into the property listings, it’s essential to get your head around the basics. Understanding who you want to rent to, where demand is highest, and what kind of return you can expect will lay the foundations for making a smarter investment.

Who’s Your Ideal Tenant?

Not all tenants are created equal, and who you want to rent to will be a crucial factor in your strategy - what property you buy, the location and even how you market the rental. 

Students, professionals, families, retirees… each group has different needs, expectations, and rental potential.

• Students: Often want low-cost, shared accommodation near universities.

• Young professionals: Typically go for modern, city centre flats with easy access to public transport.

• Families: More likely to need space, gardens, and good schools in suburban areas. 

• Retirees: Usually want low-maintenance, single-level homes in quieter locations close to healthcare and local amenities.
  

By deciding who you're targeting early, you’ll narrow your search to properties and locations that suit them best.

Where Should You Buy?

Location matters—a lot. It affects rental income, tenant demand, and the long-term value of your investment. You’ll want somewhere with consistent demand and decent growth potential. Think about:

• Transport links

• Employment hotspots and universities

• Local amenities (shops, parks, hospitals)

• Nearby school OFSTED ratings
  

Spend time on the ground. Explore the area. Talk to letting agents. Look at other rentals nearby—what do they charge? How quickly do they get snapped up?

Why the Location Could Make or Break Your Investment

If your property’s in a strong location, you’ll attract better tenants, reduce the risk of it sitting empty, and usually command a higher rent. It also makes it easier to sell when the time comes. On the flip side, a property in the wrong area could become a money pit, with high turnover, maintenance headaches, and low returns.

Can You Afford It and Will It Pay Off?

• Buy-to-let isn’t just about buying a property. There are upfront and ongoing costs you need to factor in:

• Deposit (typically at least 15%-25% of the property price)

• Mortgage fees (anywhere from £0 to £2,000)

• Legal and surveyor fees (typically between £800 to £1,500)

• Stamp Duty (with a 3% surcharge for second homes)

• Maintenance and repairs

• Letting agent fees (full property management services could range from 8% to 15% of the monthly rental premium)
  

Add it all up. Then figure out what monthly rent you’d need to cover those costs and leave you with a profit. You also need to factor in that, for a buy-to-let mortgage, lenders require the rent to cover at least 125% of the mortgage repayment (some may want 145%).

Calculating Rental Yield

Rental yield helps you work out if a property is a good investment. Here’s the formula: 

Rental Yield = (Annual Rent / Property Price) × 100

So, for instance, suppose you buy a property for £200,000 and rent it out for £1,000 a month. That’s £12,000 a year. Your yield would be: (£12,000 / £200,000) × 100 = 6%. 

A yield of between 5% and 8% is considered pretty good in most parts of the UK.

Choosing Your Rental Property

Once you’ve done your research, it’s time to decide what type of rental property is right for you. Your choice here impacts how much you earn, how hands-on you’ll need to be, and what kind of financing you’ll need.

Buy-to-Let

This is the classic route. You buy a home, rent it to one household, and collect monthly rent. It’s simple, predictable, and a great way to get started. Most lenders are comfortable with buy-to-let, and tenants usually stay longer than short-term lets.

HMO (House in Multiple Occupation)

HMOs involve renting rooms individually to tenants who share communal areas. They tend to bring in higher rental income, but they’re more work to manage. You’ll need a licence, meet strict safety standards, and potentially deal with more tenant turnover.

They’re often popular with students or young professionals sharing costs.

Want to find out more about your borrowing options for an HMO? Read our HMO Mortgage guide and speak to one of our Mortgage Experts to get started.  

Holiday Let

Holiday lets offer high nightly rates and flexible use. You might earn more in a good month than you would with a traditional rental, but there’s a catch: bookings fluctuate with the seasons. You’ll also need to manage cleaning, key handovers, and marketing or pay someone else to do it.

Looking to buy a holiday let and need a mortgage? Take a look at our guide to holiday-let mortgages and find out how we can help guide you through the process.

New Build vs Older Homes

New builds can be easier to rent—they’re modern, energy-efficient, and need less maintenance early on. But they often come with a premium price tag.

Older homes might be cheaper and offer better value, especially if you’re handy with DIY or planning a refurb. Just be prepared for higher running costs and the need to bring the place up to modern safety standards.

Getting a Buy-to-Let Mortgage

Unless you’ve got the cash to buy outright, you’ll need a buy-to-let mortgage. These work slightly differently from regular residential home loans and are specifically designed for purchasing rental properties. 

How It Works

Lenders assess buy-to-let mortgages mainly based on the rental income the property will generate, rather than your employment earnings. They’ll usually want:

• A minimum deposit of between 15% to 25%

• Rental income that covers 125–145% of the mortgage payment

• A good credit score

• Evidence of employment income - usually at least £25,000 per annum
  

The Step-by-Step Process

Speak to a mortgage broker, preferably one who fully understands buy-to-let (like us!). They can guide you through all the lenders’ requirements and help you secure the most competitive rates.

1. Get a Mortgage in Principle (AIP). This will give you an indication of how much you can borrow and show sellers that you’re a serious buyer.

2. Make an offer. Once accepted, apply for your mortgage.

3. Valuation and checks. The lender will assess the property and its rental value.

4. Final offer. If everything looks good, you’ll receive a formal mortgage offer.

5. Legal work and completion. Your solicitor handles all the contracts and conveyancing. Once completed, you can collect the keys to your rental property.
   

The process should take 6–12 weeks from start to finish. Delays can happen, especially if the property has legal quirks or there’s a long chain.

Interest-Only vs Capital Repayment

Most landlords go for interest-only mortgages. That means lower monthly payments, leaving more cash in your pocket. But the debt stays the same until you sell or pay it off.

With capital repayment, you pay off a bit of the loan each month. It costs more up front, but you’ll own more of the property as time passes.

If you’re still unsure how to repay your mortgage, read our guide - Interest-only Mortgage or Repayment: Which to Choose?

Should You Use a Letting Agent?

Letting agents can take much of the stress of being a landlord off your plate, but they come at a cost. Here’s the good and the bad. 

Why They’re Great

• Find and assess tenants quickly

• Handle contracts, deposit protection, and compliance (gas safety laws, etc.)

• Manage maintenance and repairs

• Chase late rent and deal with any issues
  

What to Think About

• Management fees (usually 8–15% of your monthly rent for a full rental management service)

• Less control over how your property is handled
  

If you’re new to renting or not local to the property, using an agent can be a smart move. Just make sure you’re clear on their fees and services.

Protecting Your Investment

Standard home insurance won’t provide you with enough if you’re renting out the property. Landlord insurance is specifically designed to cover the risks that come with letting and give you (and your tenants) complete peace of mind.

Here’s what to consider:

• Buildings insurance: Covers the bricks and mortar against events like fire, storm, and flood damage.

• Contents insurance: Protects any furnishings or appliances you provide.

• Loss of rent cover: Helps if the property becomes uninhabitable and you lose income.

• Landlord liability: Covers you if a tenant gets injured and takes legal action.
  

Many lenders make insurance a condition of the mortgage, so it’s definitely something you’ll need to have in place before you can complete your purchase. 

Rental Properties and Tax

Nobody loves talking about tax, but it can't be ignored and it's important to understand what tax liabilities could be incurred before you make the leap into the rental property world. Here’s what you need to know.

• Income Tax: You must report your rental income through a Self-Assessment tax return each year. Mortgage interest is now longer allowed to be fully deducted, but a 20% basic-rate tax credit is still available. The good news? You can deduct a range of costs including letting agent and property management fees, ground rent and landlord insurance.

• Capital Gains Tax (CGT): If you sell your rental property for more than you paid, you could be liable for CGT. You get an annual tax-free allowance, which will reduce the amount you owe, and you may be able to deduct certain costs like legal fees or major property improvements.

• Stamp Duty: Buying a rental property means paying an extra 3% stamp duty on top of standard residential rates. Any stamp duty payment must be made within 14 days of completion, so factor it into your budget from the start.

• Inheritance Tax (IHT): Rental properties form part of your estate when you die. Planning ahead can help reduce any possible IHT liability, so it's recommended you speak with a tax adviser if your estate is likely to exceed the threshold.

Landlord Duties

Being a landlord isn’t just about collecting rent. You’ve got legal responsibilities that start as soon as a tenant moves in. These include:

• Tenancy Agreement: It's recommended to use an Assured Shorthold Tenancy (AST) unless you have a reason not to. It sets out the rent, length of tenancy, and responsibilities on both sides.

• Maintenance and Repairs: You’re responsible for keeping the property safe and in good repair. That includes all the heating and hot water systems, gas and electrical safety checks and all the structural maintenance required on the property (failing to fix things can lead to potential legal trouble and unhappy tenants).

• Deposit Protection: By law, deposits must be placed in a government-approved scheme such as the Deposit Protection Service (DPS) within 30 days. You must also provide tenants with ‘Prescribed Information’ confirming how their deposit is protected.

• EPC Rating: Every rental property needs an Energy Performance Certificate (EPC). It must be rated E or above to be legally rented out. If it doesn’t meet the standard, you’ll need to make improvements before listing it.