Property Investment Basics

Understand where the return comes from

Returns come from rental income, any growth in the property’s value, or both. Gross yield is the annual rent as a percentage of the purchase price; net yield deducts running costs and gives a truer picture.

Count every cost

Budget for periods without a tenant, maintenance, insurance, letting or management fees, service charges on leasehold property and tax. Purchase costs for additional properties, including Stamp Duty Land Tax or its equivalents in Scotland and Wales, are higher than for a main home.

• Mortgage interest and fees
• Repairs, safety checks and certificates
• Agent fees and insurance
• Tax on rental income and on any gain when you sell

Finance

Buy-to-let mortgages are assessed mainly on the expected rent relative to the mortgage payment, and typically need a larger deposit than a residential mortgage. A broker experienced in buy-to-let can explain the options for individuals and for limited companies.

Know your responsibilities

Landlords have legal duties covering deposits, gas and electrical safety, energy performance and the condition of the property, and the rules differ between England, Wales, Scotland and Northern Ireland. Check current requirements on GOV.UK or with a qualified adviser before you buy.