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Where can I invest in a buy-to-let property in the UK?

As most people know, investing in real estate can be a major wealth creator.

Many people simply buy their own homes and watch its capital value increase over time. Others, once they have bought their own home, decide to buy another property to enjoy the benefit of rental income and, hopefully, increases in capital value.

“Buy-to-let” refers to the purchase of such a property specifically to let (rent). These properties are usually residential but the term also encompasses student accommodation and hotel room type investments.

As most buy-to-let investors don’t have enough capital to acquire buy-to-let properties outright they will invariably seek a “buy-to-let mortgage”. Such mortgages are available to people who buy property as an investment, rather than as a place to live. The interest rate on the loan will usually be higher and other terms more restrictive. Indeed, many mainstream lenders will not allow an investor to finance a buy-to-let purchase with a standard residential mortgage.

Obviously, for a buy-to-let property to be viable, the rental payments need to be higher than the monthly mortgage (loan) repayments and cover maintenance costs and agent’s fees etc.

What are buy-to-let investors looking for in the UK?

Buy-to-let investors are, typically, seeking the following:

  • properties which are already tenanted with an established rental income stream, or new properties close to being completed and ready to let;

  • locations, usually in major cities, close to good transport networks and requisite amenities, and where there is strong demand for rental properties;

  • attractive rental yields (sometimes with a rental assurance/guarantee) of typically between 6-8%;

  • potential for capital growth over a 3-5 year time horizon;

  • recognised shortage of rental accommodation;

  • reasonably priced entry points; for many northern properties these can range from GBP75,000-160,000.

Where are the current “hot spots” for buy-to-let property?

As you may expect, buy-to-let properties are always popular in the major northern cities (often called “powerhouse cities”) where there relatively large populations, a high percentage of which may be young urban professionals or millennials, living there for business purposes; or retirees who may have sold their own properties but still wish to live in an urban environment. The London commuter belt towns are, of course, also popular buy-to-let locations.

There is a wide variety of property on offer and these can range from refurbished terraced houses in older established areas of cities to brand new off-plan flats in up and coming areas.

Investment returns are measured by reference to the annual rental return compared with the purchase price and will vary according to the location but also the type and age of property being purchased. Accordingly, such returns may be expressed in a rental range, ie from “xx” to “yy” %.

Another key factor in determining price is whether the seller is offering a “rental assurance” guarantee for 1 or 2 years or even longer. This means that the rental is guaranteed to be paid by the seller even if the tenant moves out during the assurance period but, clearly, this has to be verified as being enforceable.

Finally, some sellers forecast annual growth percentages in the capital values of such buy-to-let properties and market their properties with emphasis on such figures.

Let’s look at some examples of favoured cities and also the typical rental yield and initial entry price points. Of course, these may vary depending on the actual project and availability and are provided for indication only:

Liverpool:

rental yield 6-7%

entry price from GBP 75,000


Sheffield:

rental yield 6-7%

entry price from GBP 130,000


Blackburn:

rental yield 5-6%

entry price from GBP 85,000


Newcastle:

rental yield 5.5- 6.5%

entry price from GBP 135,000


Leeds:

rental yield 6.5-7.5%

entry price from GBP 130,000


Birmingham:

rental yield 5-6%

entry price from GBP 155,000


Other favoured locations for buy to let properties include Wigan, Manchester, Hull, Cardiff, Cambridge, Brighton, Glasgow and, of course, towns easily accessible to London such as Epping, Horley, Guildford, Henley-On-Thames or Hitchin.

Acquiring a buy to let property remains a very attractive investment option for savvy property investors who understand the dynamics of the rental market and appreciate that demand is always likely to surpass supply in this sector.

Nowadays there are a variety of options for the discerning investor, including full management of the property, so that once an acquisition is made there are no day-to-day concerns about the income stream.

About Us

CapEx Properties is an independently owned property search/buying agency, assisting international clients with the acquisition of UK and select EU property.

Contact Details


CapEx Investment Properties Limited trading as Capex Properties is a company registered in England and Wales. Registration number 13324508.
Registered address: Kemp House, 160 City Road, London, EC1V 2NX, United Kingdom