Buy-to-let

A popular investment

Buying a property to let out remains one of the most popular ways to generate an income from property. Some investors build substantial portfolios and make buy-to-let their main source of income, while others invest in a single property as a sideline, or as an alternative to a traditional pension.

Researching the local area and understanding the type of tenant it's likely to attract is essential before you buy. We'll help you assess the rental income you can realistically expect, so you can weigh this against the investment you're considering.

Do your sums

As with any investment, it's important to plan ahead and understand what kind of return the property is likely to generate before committing.

Rental yield is one of the clearest ways to measure how hard your investment is working for you. It shows the return you're generating relative to the property's value, which makes it much easier to compare different properties and areas objectively, rather than relying on price alone. A higher yield generally means stronger rental income relative to the purchase price – though it's worth weighing this against capital growth potential too, as areas with strong yields don't always see the strongest price growth, and vice versa.

To calculate the percentage gross rental yield on your investment:

(total income per year ÷ the value of the property) x 100 = % gross yield
 

To calculate the percentage net yield:

([total income – total costs] ÷ the value of the property) x 100 = % net yield
 

To calculate annual running costs:

mortgage repayments + estimated refurb costs + vacant time (estimate 30 days per year) + service charge and ground rent (if the property is leasehold)
 

Setting the right rent

Set a realistic rent from the outset. Pricing too high can deter tenants and extend void periods, meaning you'll be covering costs like your mortgage without any rental income to offset them.

This is a brief introduction to buy-to-let investing. There's a lot more to consider, and every situation is different, so we'd always recommend speaking to your local Winkworth lettings team and seeking independent financial advice.