If you’re considering buying a property to rent out, Wesleyan Financial Services can help find the right buy-to-let mortgage for you. Get advice on making your property purchase a success today.
The first step to becoming a landlord is purchasing a property to let. From new builds to houses at auction, your choice will impact how much it costs to set up your rental property.
Alternatively, you might be looking to rent out a property you already own. For instance, if you’ve moved in with a partner and want to rent out your old home, or you’ve inherited a property that has a residential mortgage.
For new property purchases, you’ll need to apply for a buy-to-let mortgage. If you’re wanting to let out your old property, you’ll need to change your residential mortgage to a buy-to-let mortgage.
You’ll need to get your mortgage lender’s permission to do this. If they decline or don’t offer buy-to-let mortgages, you’ll likely need to remortgage with a new provider.
Please note that most buy-to-let mortgages are not regulated by the Financial Conduct Authority (FCA).
If a loved one has passed down a property to you that you want to use as a buy-to-let, this can be a little trickier to set up. A buy-to-let property differs from a residential home in that it’s been purchased solely with the intent to rent out to tenants.
If the property has a mortgage outstanding, you’ll need to get a new contract drawn up in your name. For buy-to-let mortgages, this means submitting a new mortgage application.
To make the most of your buy-to-let investment, you’ll need to work out your rental yield. Your rental yield is the annual return you’ll get from renting your property.
To work out your potential rental yield, divide your annual rental income by the price you paid for your property, then multiply this by 100 to get a percentage. Generally speaking, a good rental yield is around 5-6%, but it’ll depend on your own goals.
Aside from the obvious cost of putting down a deposit for your property, there are a few more initial costs that you’ll need to set money aside for. As with any property you’ll need to pay stamp duty and other fees. Bear in mind that if you choose to expand your property portfolio with a second or third property, you’ll need to pay a higher rate on stamp duty.
Here are some other costs to consider:
Before you put your property on the rental market, you may need to get it up to renting standard. This could be as small as adding a lick of paint or carrying out a full renovation.
If you have invested in a property that needs some TLC, you may want to protect your project with renovation insurance. You can get cover for the building works, the materials used on site and potential liability exposures.
You’ll also need to decide if you want to offer your property furnished or unfurnished. Depending on the size of the property and the quality of the furniture you choose, furnishing your property can cost you anything from hundreds to thousands of pounds.
Buying furniture is an investment, as you can usually charge more in rent and it’ll appeal to tenants who don’t want to purchase their own furniture. However, you are leaving your furniture in the hands of your tenants, so it could get damaged or broken. If this is a concern, you can protect your contents with landlord insurance.
If you do choose to leave your property unfurnished, bear in mind that most renters expect white goods like a fridge, freezer, oven and washing machine.
Don’t forget about your property’s energy rating. Currently your rental property must have an Energy Performance Certificate (EPC) rating of at least an E, but this may rise to C from 31st December 2025.
Getting your property up to standard can be costly and time consuming, especially if your energy rating is on the lower end. The government estimates that the average landlord will have to spend around £4,700 to reach an EPC rating of C.
You can improve your score by adding double glazing to windows and doors (around £360 per window), insulating your loft and walls (£1,000+), and replacing the boiler for one more energy efficient (£1,500+).
There are many ongoing costs that you’ll need to factor into your budgeting, in addition to keeping up with mortgage repayments.
It’s likely that your rental income will help pay part or all of your monthly repayments, but that will only be the case when you have tenants. Rental voids are common, especially if you’re going to specialise in short-term lets - so try to factor these into your financial plans.
As well as regular bills for the property, you’ll also need to consider the tax on your rental income.
You’ll only get taxed on the profit you make, and the rate you pay will depend on your income tax band. Your rental income might push you into another tax band, especially if you’re already close to the threshold, so bear that in mind when you’re calculating your tax.
If you earn more than £2,500 in rental income, you’ll need to include this on a yearly self-assessment to HMRC. Any additional income under £2,500 will need to be included on a P180 form.
There are some costs you can’t predict, such as unforeseen repairs. For example, boiler breakdowns and replacing old furniture. It’s always a good idea to have a pot of money set aside for property maintenance. How much you set aside will depend on the type of rental property you own, but you can use your home as a guideline.
You should also factor in unpaid rent when circumstances make your property unfit to live in or your tenants go through financial difficulties. Missing rent isn’t always easy to get back, unless you have adequate landlord insurance that covers loss of rent.
You may choose to use a letting agency to advertise or manage your property. The cost of using an agency will depend on how much you want them to do, but they’ll usually take a percentage of your monthly rental income.
When you’ve chosen your tenants, there’s one job you must do before you hand over the keys. All landlords must make sure their tenants have the legal right to live in the UK. This is known as a ‘Right to Rent check’. This requires you to make copies of their passport and any other immigration documents. You can also pay a letting agent to handle this for you.
You must provide an energy performance certificate (EPC) when you let your property. If you don’t, you could face a fine. Remember, from December 2025, your rental property might need to have a minimum EPC rating of C.
Now we’ve covered the main things you should consider before becoming a first-time landlord, you might want to delve deeper with our handy calculators.
If you’re interested in seeing how much you could borrow for your rental property, you can use our mortgage affordability calculator.
Or if you’re further along in your planning, our stamp duty calculator can give you an indication of how much you might need to pay.