Here’s what to consider when judging whether purchasing a buy-to-let property is still worth it.
Consider the location
What’s demand for rental properties like in a specific area? Look for places where you’ll likely attract a consistent pool of renters because of proximity to a university, major hospital or business park, for example. Likewise, seek out amenities like good transport links.
As part of this research, factor in upcoming plans for regeneration or infrastructure improvements. Are any new rail links in the works? How about companies setting up down the road? Equally, consider any plans that might shrink demand for your property; for example, a large new housing development may increase supply to the local market – and therefore add competition. Check the council website and talk to clued-up professionals.
Once you’re confident there’s rental demand, make sure the property suits your target renter. A city centre with a big tech company will attract young professionals who call for a different style of home than a university town full of students.
Calculate your margins with care
New regulations and tax changes mean profit margins are getting squeezed. That isn’t to say you can’t make a decent income – but you must take a clear-eyed look at the various factors affecting your finances.
First up, mortgage rates have been volatile this year. As Trinity Financial’s Aaron Strutt describes it, they’ve been on a merry-go-round for months and this summer they’re on the rise again. Check out his latest advice on finding a competitive deal.
Tax rates are changing. From April 2027, landlords will pay a higher rate on their income from rental properties. They will continue to pay other taxes, including Stamp Duty Land Tax (SDLT) and Capital Gains Tax (or Corporation Tax if they own the property as part of a limited company). Here’s more info on these taxes.
The Renters’ Rights Act 2025 is having a knock-on effect for landlords’ finances and cash flow. For instance, stricter rules for rent payments mean you can no longer accept more than one month’s rent in advance or take any rent until both parties have officially signed the tenancy agreement. Landlord insurance is increasingly important to protect against unpaid rent.
And don’t forget your other running costs, such as maintenance work for fair wear and tear in the property. Under the Renters’ Rights Act, the government is bringing in stricter standards for healthy homes – for instance, landlords will need to respond promptly to tenants’ complaints of mould and damp.
Adopt a professional mindset
The days of more casual landlords are probably behind us. Instead, people should treat purchasing a buy-to-let as a serious business decision. While you don’t require a whole portfolio of properties, you do need to adopt a professional mindset.
For example:
- Organise a system for your financial admin – HMRC’s Making Tax Digital initiative requires landlords to keep digital records and send quarterly tax updates to HMRC
- Keep up with evolving legislation – the first major wave of the Renters’ Rights Act changes are now live and more are to come, along with reforms such as the EPC shake-up
- Research managing agents and their fees – if you don’t want to handle the day-to-day operations of being a landlord, you might hire a managing agent but need to factor in the ongoing cost
Talk to an experienced professional
If you’ve got any questions – or would like general guidance from a professional – get in touch with your local Winkworth office. We’d be happy to chat.
