A guide to buying a rental property

Whether you’re buying your first rental property or adding another to your portfolio, it’s a decision that takes careful consideration and research. Below is a helpful guide to get you started.

Before you start viewing properties, it can help to think about your letting strategy, the types of tenants you want, where you’ll buy, and whether a new or older property fits your investment goals.

The suitable property size largely depends on the type of tenant you intend to let to. Students, young professionals, couples and families all have their own considerations to bear in mind.

• Larger properties with multiple bedrooms can often work well for student house shares, where you let individual rooms to separate tenants.
• Be aware that renting to three or more tenants who share facilities may mean your property is classed as a House in Multiple Occupation (HMO), which can require a licence and comes with extra legal obligations.
• Properties with five or more tenants require a mandatory HMO licence, and some councils operate additional licensing schemes for smaller HMOs.

• One-bedroom flats are often a good fit for single professionals looking for an affordable rental option.
• Two-bedroom flats can appeal to couples or those wanting a little extra space and can attract tenants who are slightly further along in their careers and may be looking for a longer-term let.
• These tenants often take good care of a property, which can help reduce maintenance issues.

• Houses with two or more bedrooms or larger flats tend to suit families better, giving enough space for parents and children.
• A garden is often high on a family’s list of priorities, so properties with outdoor space can be more attractive.
• Families may also be looking for longer-term stability, which can help reduce void periods.

Once you’ve settled on the type of tenant you want to attract, location becomes much easier to think about. Different demographics tend to prioritise different things when it comes to where they live.

• Student demand tends to concentrate in specific areas near universities and colleges, so it’s usually straightforward to identify where competition for student lets is highest.
• Properties close to campus, transport links, and town centre amenities tend to perform well.

• This demographic often prioritises good transport links and an easy commute to city centre offices.
• Being close to restaurants, bars, gyms, and other amenities can also be a major draw.
• Areas that are slightly outside the city centre but well connected can offer a good balance of affordability and convenience.

• Families often prefer quieter towns or suburbs away from the busiest parts of the city, where there’s more space and less traffic.
• Closeness to well-regarded schools is a significant factor for many families, as are local Ofsted ratings in the area.
• Local crime rates, green spaces, and community facilities can all influence demand.

Whatever your target demographic, it can be worth researching local rental demand and average rents before you commit to a purchase. This can help you assess whether a property is likely to let quickly and at a rate that works financially.

Both new builds and older properties can make suitable rental investments. The right choice depends on your budget, how much time and effort you’re willing to spend on maintenance, and the type of tenants you’re hoping to attract.

• Modern layouts and finishes tend to appeal to a wide range of tenants, particularly young professionals and couples looking for a move-in ready home.
• There’s usually little or no maintenance needed on day one, which can be reassuring for first-time landlords.
• Buying from a developer means there’s no chain, which can make the purchase process more straightforward.
• New builds often come with a developer warranty, offering some protection against structural issues in the early years.
• Energy efficiency ratings tend to be higher on new builds, which can be an attractive point for tenants mindful of energy bills.

• Older properties are often more spacious, both inside and in the garden, which can appeal to families in particular.
• The completion process can be faster for an existing property, since you’re not waiting for construction to finish.
• Character features like period details can be a real draw for certain types of tenant.
• They may require more upfront investment to modernise or repair, but buying at a lower price could still make the numbers work depending on the area.
• It’s also worth factoring in ongoing maintenance costs. Older properties can need more frequent repairs, so getting a thorough survey before you buy is a worthwhile consideration.

Alongside choosing the type of property you want to invest in, consider what condition it needs to be in for you to manage it properly.

Some landlords prefer buying a property that needs work and renovating it to their own specification, while others would rather purchase something ready to let from day one.

There’s no right or wrong approach, but when buying your first buy-to-let property, it’s important to be realistic about how much time, budget, and experience you have at your disposal.

• New builds: These should be ready to let as soon as you receive the keys, with no work required.
• Move-in ready older properties: Some older properties are in excellent condition and can be let with minimal investment beyond decoration.
• Properties needing renovation: These can be purchased at a lower price but require careful budgeting. Renovation costs can escalate quickly, so it’s important to factor these in before making an offer.

There are several additional costs involved in buying and running a rental property worth factoring into your calculations.

Upfront costs:

• Stamp Duty Land Tax, including the additional 5% surcharge on second homes and buy-to-let properties
• Solicitor and conveyancing fee
• Survey costs
• Mortgage arrangement fees
• Renovation, decoration, and furnishing costs

Ongoing costs:

• Mortgage repayments or interest payments
• Landlord insurance, including buildings cover and, where relevant, rent guarantee insurance
• Letting agent fees, if you use one to find tenants or manage the property
• Routine maintenance and repairs
• Gas safety checks, electrical inspections, and other legally required certificates
• Void periods, during which the property is empty and you’re still covering your mortgage and other outgoings
• Accountancy fees, if you use an accountant to manage your tax returns

Getting a clear picture of all your likely outgoings can help you work out whether a property might generate a profit.

Understanding your predicted rental income before you buy is an important part of the process. It helps you calculate your rental yield, assess your return on investment, and decide whether a property is worth purchasing.

You can use property portals like Rightmove or Zoopla to search for similar properties in the area and see what they’re currently renting for.

Rental yield is a percentage that shows you the annual return on your investment relative to the property’s value.

• Gross yield is calculated by dividing your annual rental income (monthly rent x 12) by the property value, then multiplying by 100.
• Net yield (a more realistic measure) takes into account your annual costs before dividing by the property value and multiplying by 100.

For example, if a property is worth £200,000 and you expect to earn £10,000 in rent per year after costs, your yield would be 5%. A gross yield of around 5% or more is often considered reasonable, though this varies by location and property type.

It’s also worth thinking about capital growth – this means whether the property is likely to increase in value over time. In some areas, lower yields are offset by strong long-term price growth.

Unless you’re buying the property outright with cash, you’ll likely need a buy-to-let mortgage. Using a standard residential mortgage to let out a property could put you in breach of its terms, so it’s important to get the right type of finance.

But how does a buy-to-let mortgage differ from a residential mortgage? We go through the reasons below:

• Deposit: Residential mortgages can require a deposit as low as 5%, whereas buy-to-let mortgages typically require at least 25%, with larger deposits often unlocking better rates.
• Interest rates and fees: These tend to be higher on buy-to-let mortgages than on residential ones
• Interest-only structure: Many buy-to-let mortgages are interest-only, meaning you repay the loan at the end of the term, often through selling the property.
• Affordability criteria: Lenders usually base borrowing on expected rental income. Most require the monthly rent to cover around 125% to 145% of the mortgage repayments, with many lenders now leaning towards 140% to 145%, often calculated using a higher stress test interest rate.

Buying the property is just the beginning. Before you can welcome tenants, there are several steps to work through:

• Decoration: Neutral colours and simple finishes tend to appeal to the widest range of tenants.
• Furnishing: If offering a furnished let, prioritise durability and quality
• Safety checks: You’ll need a gas safety certificate, an EICR, and working smoke and carbon monoxide alarms.
• Energy performance certificate (EPC): Your property should have a valid EPC with a minimum E rating. While this is the current requirement, there’s a proposed target for rental properties to reach EPC C by 2030, so it’s worth factoring this into your decision.
• Legal requirements: This includes deposit protection, right to rent checks, and providing the correct documentation.
• Repairs: Resolve any maintenance issues before marketing the property.

For a full breakdown of what to do before you let, take a look at our landlord checklist for renting a house.

Becoming a landlord comes with a set of legal obligations. Here’s an overview of the key ones:

• Tenancy agreements: Not legally required but strongly recommended to set clear expectations for both parties. Take a look at our guide on what to include in a tenancy agreement.
• Right to rent checks: Required in England before a tenancy starts. Rules differ in Scotland, Wales, and Northern Ireland.
• Deposit protection: Deposits should be placed in a government-approved scheme within 30 days.
• Energy performance certificate (EPC): A copy should be provided to tenants at the start of the tenancy.
• Gas safety: Annual checks by a Gas Safe registered engineer are required.
• An EICR is required at least every five years.
• Smoke and carbon monoxide alarms: Smoke alarms are required on every floor, and carbon monoxide alarms are required in rooms with fixed combustion appliances, such as gas boilers or log burners.
• Landlord insurance: Not mandatory, but often advisable. Many insurers require a written tenancy agreement before providing cover.

It’s also worth being aware of the Renters’ Rights Act, which is due to come into force on 1 May 2026. This brings significant changes for landlords in England, including:

• The abolition of Assured Shorthold Tenancies (ASTs) and fixed-term tenancies
• All tenancies becoming periodic (rolling monthly) assured tenancies with no fixed end date
• The removal of Section 21 “no-fault” eviction notices, meaning landlords will need to rely on specific legal grounds under Section 8 to regain possession
• New rules around rent increases, giving tenants greater rights to challenge them

If you’re buying a rental property now or in the near future, it’s worth familiarising yourself with these changes, as they affect how tenancies are structured and how possession can be sought.

Choosing a trusted insurance provider can help to give you peace of mind as a landlord. Here’s why many landlords choose Just Landlords:

• Over 25 years of experience providing landlord insurances
• An in-house customer service and claims team based in Nottingham
• Friendly support available by phone, LiveChat, or email

*Correct as at March 2026.

Find out more about the 40 covers included on our dedicated landlord insurance page.

Below are some frequently asked questions about buying a rental property.

Please note that these frequently asked questions are not a substitute for the policy wording. For full terms and conditions, please see the policy documentation.

A buy-to-let mortgage is a specialist loan designed for purchasing residential property that you intend to rent out. It differs from a standard residential mortgage in several ways, including higher deposit requirements, higher interest rates, and affordability criteria based on expected rental income rather than personal salary alone.

You’ll usually need a minimum deposit of 25%, and lenders will want to see that your expected rental income covers at least 125% of your monthly mortgage repayments.

Most buy-to-let mortgages are taken out on an interest-only basis. This means you only pay the interest each month rather than repaying the original loan. The capital is then repaid at the end of the mortgage term, typically by selling the property and using the proceeds to clear the balance. Some landlords choose to switch to a repayment mortgage instead, which gradually reduces the loan over time.

Rental yield gives you a sense of the annual return on your investment as a percentage of the property’s value. To calculate it, take your estimated annual rental income (monthly rent multiplied by 12), subtract your annual costs, divide by the property value, and multiply by 100.

You can use property portals like Zoopla or Rightmove to check what similar properties in your target area are currently renting for, which can help you estimate your likely income before you buy.

There are three main taxes to be aware of when buying and owning a rental property:

• Income tax:You’ll need to declare your rental income on a self-assessment tax return and pay tax on any profit after allowable expenses.
• Capital Gains Tax (CGT): )If you sell the property for more than you paid for it, you may be liable for CGT on the gain.
• Stamp Duty Land Tax (SDLT): You’ll pay SDLT when you purchase the property. Buy-to-let purchases currently attract an additional 5% surcharge on top of standard rates.

Tax rules can be complex and change over time, so it’s worth speaking to a qualified accountant or tax adviser to understand your individual position.

The amount you can borrow is typically based on the expected rental income of the property rather than your personal earnings. Most lenders require the monthly rent to cover at least 125% of your mortgage repayments, though some set this higher.

Your credit history, the size of your deposit, and the lender’s own criteria can also affect the maximum loan available. A specialist mortgage broker can help you compare products and work out what you’re likely to be able to borrow.

Most buy-to-let mortgages require a minimum deposit of around 25% of the property’s value. However, putting down a larger deposit, typically 40% or more, could give you access to lower interest rates, which can reduce your monthly costs and improve your overall return on investment.

A larger deposit can also make it easier to meet a lender’s rental income requirements.

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication.

You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Just Landlords accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.