Buy-to-Let

Beginner

Buy-to-let is the purchase of a residential property specifically to rent it out to tenants, often financed with a specialist buy-to-let mortgage.

Buy-to-let is a term used mainly in the United Kingdom, where it became popular from the late 1990s after specialist mortgages were introduced. Similar investment exists in other countries, often called rental or investment property.

Buy-to-let investors aim to earn rental income and benefit from rising property values. Buy-to-let mortgages usually require larger deposits than residential mortgages, often at least 25%, and lenders assess whether the expected rent comfortably covers the mortgage payments.

For example, an investor might buy a flat for 250,000 with a 75% buy-to-let mortgage, letting it to tenants for rent that covers the mortgage interest and running costs.

Buy-to-let carries risks and responsibilities, including periods without tenants, unpaid rent, repairs, interest rate rises and falling property prices. Landlords must meet legal obligations on safety, deposits and tenants’ rights. In the UK, tax changes have made buy-to-let less profitable for many individual landlords, including restrictions on deducting mortgage interest and higher stamp duty on additional properties, leading some to use limited companies instead.

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