How to become a landlord

Is buy to let worth it?

It can be, but the margins are thinner than they were. Higher mortgage rates, the Section 24 tax rules and new tenancy law mean the deal has to work on today's numbers, not on hoped-for growth. In parts of the North East, low prices and strong rents still produce good yields. In much of the South, many landlords now rely more on long-term growth.

Step 1: run the numbers

• Yield. A year's rent divided by the price. Then take off running costs for net yield. Use the rental yield calculator.
• Rental cover. Lenders want the rent to cover the interest by 125% to 145% at a stress rate. Check it in the deal analyser.
• Cash flow. Rent minus mortgage, letting fees, insurance, repairs and empty months. Plan for at least one month empty a year.

Step 2: the deposit and the mortgage

Most buy-to-let lenders want a 25% deposit, and you will also pay the higher rates of stamp duty. See how much deposit you need and the stamp duty calculator. Some lenders accept first-time landlords, and a few accept first-time buyers, usually with a minimum income.

Step 3: in your own name or a company?

Higher-rate taxpayers often find a limited company more tax-efficient, because a company deducts mortgage interest in full. Basic-rate taxpayers with one property often stay personal. See limited company buy to let and Section 24, and ask an accountant.

Step 4: your legal duties

• Gas safety check every year, an electrical safety report at least every five years, and a valid energy performance certificate.
• Smoke alarms on every floor and carbon monoxide alarms where needed.
• Right to rent checks, and protecting any deposit in a government-approved scheme.
• New rules under the Renters' Rights Act, including rolling tenancies and the end of section 21. See our Renters' Rights Act guide.
• A licence if the property is an HMO or in a licensing area. See HMO licences.

Costs people forget

• Letting or management fees, often 10% to 15% of the rent.
• Landlord insurance, safety certificates and repairs.
• Tax on the rental profit, and capital gains tax when you sell.

Is it regulated?

Most buy-to-let lending to someone buying as an investment is not regulated by the FCA, so we can talk to you about it. There are exceptions. If you became a landlord by accident, for example you inherited a home or could not sell, or if you or a relative will live there, it can be regulated "consumer buy-to-let", and we cannot help with that yet. Our form asks a few questions to check.

Common questions