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Is Buy to Let Worth It? Is it Still a Good Investment?

Are you wondering – Is buy to let worth it? There are plenty of positives to consider: ongoing monthly rental income, capital gains when you come to sell, and a relatively safe and reliable place to invest your money compared to other investment avenues.

Although buy-to-let investors have been affected by recent tax changes, buy-to-rent continues to be a widespread investment strategy. The UK housing market provides numerous opportunities to those who know its regions and the top strategies to maximize profits. Furthermore, the housing market remains robust, and there will always be a steady stream of individuals in need of rental homes.

To determine whether buy-to-let is a worthwhile investment strategy for you, this article evaluates the pros and cons and the essential factors that investors must consider.

 Why Invest in Buy-to-Let?

When posed with the question of whether buy-to-let is still a profitable investment, examining prior and current trends can yield insight into the future of the market. Reflecting on the past twenty years, England’s private rental sector experienced substantial growth, with figures more than doubling.

However, the market has recently experienced a slight decrease, with around 4.4 million households privately renting in 2020, a minor decline from 4.5 million in the previous year. This slowdown is also observed with the number of buy-to-let mortgages obtained, particularly in recent months due to high interest rates. Although these trends have been seen nationwide, London and Yorkshire witnessed an increase in the proportion of houses in the private rental sector since 2019. Despite the slowdown, it is still apparent why buy-to-let property continues to be a favored investment strategy. In the 1980s, the average property price was roughly £23,000 and now sits at £294,000. Although it is improbable that such immense growth will repeat, ongoing demand for rental property persists.

Many cities in the north of England are currently experiencing strong house price growth due to incoming investment and regeneration, making buy-to-let opportunities in Northern cities quite attractive to investors. At the same time, the high property prices mean that the rental market among young professionals – those not yet in a position to buy their own property – is particularly thriving, giving landlords a reliable and ongoing rental demographic.

Is Investing in Buy-to-Let Property Still Worth It?

Is Investing in Buy-to-Let Property Still Worth It?

Before deciding if a UK buy-to-let property is a good investment, it’s important to assess your investment goals. Buying a property to rent out can be a significant financial commitment, and it’s essential to consider your objectives before moving forward. For instance, are you looking for a stable monthly rental income, capital appreciation, or both?

It’s worth noting that investing in buy-to-let property may not be suitable for everyone. You’ll need to have a substantial deposit saved up, typically around 25% of the property price, which can be a challenge with today’s high house prices. It’s crucial to ensure that investing in property aligns with your risk tolerance, financial goals, and investment strategy.

It’s also important to compare the advantages and drawbacks of property investment compared to other avenues like cash ISA accounts or investing in the stock market. For example, unlike with stocks, property is not an asset you can quickly get your money out of. At the same time, the amount of money you have to invest may change your strategy and thinking. You can read more about investment strategies and potential returns in our guides: How to Get the Best Return on a £50,000 Investment and The Best Way to Invest 100k.

What are the Benefits of Investing in a Buy-to-Let Property?

When it comes to investment strategy, there are many benefits of buy-to-let:

 Ongoing Monthly Income

One of the key benefits of investing in a buy-to-let property is the opportunity to generate a regular monthly income from rental payments. This can be especially attractive for those who are looking to supplement their existing income or build a passive income stream.

If you’re able to find the right property with decent rental yields, it’s possible for the rental income to cover not only the mortgage payments but also repairs and maintenance costs. This means that the property can essentially pay for itself, with the added benefit of generating a profit for the investor.

The rental yield of a property can vary depending on a number of factors, including the property type, location and market conditions. While the average rental yield in the UK is around 5%, there are certain areas where rental yields can be as high as 8-10%. It’s important for investors to do their research and carefully consider these factors before making a decision about which property to invest in.

 Capital Growth

Investing in buy-to-let properties can be a smart financial decision as it allows you to generate not only ongoing monthly income but also a lump sum profit when you sell the property. One of the advantages of investing in property is that, over time, the value of the property may increase, providing you with capital growth.

This can be a significant advantage for buy-to-let investors, as it means that not only can you generate income through renting the property, but you can also potentially sell it for a higher price than what you initially paid for it.

Safe Long-Term Investment

Property investment is often considered a good option for those who are looking for a long-term investment with the potential to generate a profit. While the property market can be subject to fluctuations, the value of property tends to increase over time, making it a relatively safe investment option compared to others.

When investing in property, it’s important to remember that it can take time to see a return on your investment. However, you can  offset this by the fact that you are generating ongoing rental income from tenants. As well as the potential for a lump sum profit when you come to sell the property.

Overall, property investment can offer a safe and reliable way to generate a profit over the long-term. While there are risks involved, such as fluctuations in the property market or periods of low occupancy, investing in property can be a solid strategy for those looking for a reliable investment option.

What are the Drawbacks of Investing in a Buy-to-Let Property?

What are the Drawbacks of Investing in a Buy-to-Let Property?

A key hurdle landlords face today is a more challenging tax environment than in previous years, with the need to factor in the costs of stamp duty, insurance, wear and tear and other costs to ensure their property remains profitable.

Stamp Duty

Since 2016 there has been an additional 3% stamp duty tax to pay for anyone buying a second property (find out more information about buying a second home, or some of the ways to avoid stamp duty on a second home in these articles. ) Previously, landlords benefited from being allowed to offset 10% of their annual rental income against tax for wear and tear of their property and mortgage interest relief meant that landlords could offset mortgage interest costs against income tax bills on rent. Today, with the additional stamp duty and removal of mortgage interest relief, profits on an investment property are being squeezed.

Capital Gains Tax

When it comes to selling, capital gains tax on residential property is higher than other investments. Capital gains tax on a residential property is 28% for upper taxpayer brackets and 18% for basic tax rate payers, in contrast, on other assets, it’s 18% and 10%, respectively, which can eat into the potential profits a property offers. For property investors growing a portfolio, one way to mitigate the impact of these tax changes is to invest through a limited company, which still gives you access to mortgage interest relief to reduce your tax bill. This setup is more beneficial to higher rate taxpayers and those with multiple properties.

Time and Risk

When embarking on a buy-to-let investment, potential landlords need to be aware of the time they will need to put in in terms of researching the market, buying rental property and managing the property including dealing with tenants and handling repairs. The buying process can at times be lengthy, and if you manage a property yourself without a property management company there may be a lot of work to undertake. Similarly, property markets fluctuate and if the market drops, your property prices fall, reducing your capital. You’ll also need to consider factors like void periods inbetween tenancies and rental arrears which can increase the risk.

Repairs and General Costs

As a landlord, it is essential to adhere to a range of legal obligations and regulations to ensure the safety and wellbeing of your tenants. One of the primary obligations is obtaining an energy performance certificate (EPC), which is a legal requirement for all rental properties in the UK. An EPC rates a property’s energy efficiency from A to G and outlines measures that you can take to improve energy efficiency.

In addition to these legal requirements, landlords must also maintain their property to a reasonable standard, promptly address any repairs or maintenance issues, and ensure that the property is secure and adequately insured.

Is Buying-to-Let Still a Good Investment?

 While there are some drawbacks and many responsibilities that come with being a landlord, there are ways to help make your investment as profitable as possible from the offset, which makes buy-to-let still a good investment.

One thing to consider is the rental income and property type. Landlords may have a property that is single let – one that they rent out to one person or family. However, a HMO – House of Multiple Occupation – is a property that you rent out to more than one tenant, each with their own contract, such as in a shared student accommodation.

While single let is more straightforward to manage, a HMO will generally bring in higher monthly rent. The monthly income tax on HMO rental income will be higher, but generally landlords will make more money. However if the market changes or the property isn’t purchased in the right area, HMOs can be harder to fill. It’s important that landlords weigh up the pros and cons and decide which type of property is right for them.

Another thing to consider is making sure that the property offers a good rental yield. Rental yield is the percentage of return you make back on the purchase price of a property each month. While the capital gains from selling a property creates a nice return, the ongoing rental income is part of the major appeal of purchasing a buy-to-let property. A good rental yield in the UK is around 5% – 7% gross. Make sure you take off ongoing expenses such as tax and maintenance costs to get a clear picture of the rental yield you can expect. To get the best rental yields, landlords should try to find the sweet spot of low property prices while getting a high rental income from tenants.

Can You Get Rich from Buy-to-Let?

Can You Get Rich from Buy-to-Let?

The changes to tax regulations have certainly had an impact on the buy-to-let market, but that doesn’t mean that investing in rental properties is no longer a viable option. While the stamp duty surcharge and changes to mortgage relief have made it more expensive to invest in property, the market is still attractive to investors.

Despite the challenges posed by tax changes and regulations, there are still opportunities for savvy investors to make a profit in the buy-to-let market. With the right knowledge of the market and an understanding of up-and-coming areas that offer value, low property prices and high rental yields, investors can still generate income from rental properties.

In particular, cities in the north of England are proving to be a lucrative area for buy-to-let investors, with low property prices and high rental demand creating favourable conditions for profit. With the right approach, investors can still benefit from the advantages of a buy-to-let investment strategy.


So is buy-to-let still a worth investment? We think yes, and for investors willing to take the time to explore the market, build the right investment strategy and avoid common pitfalls, investing in buy-to-let can still be lucrative. To find out more about investing in a buy-to-let property or about the markets that will offer the most opportunity in the coming years, get in touch with our team.