The Ultimate Buy to Let Guide
Buying ‘to let’ means purchasing a property to rent it out. This guide is crafted to help you understand the process, the benefits, and the potential risks.
Understanding Buy to Let
Buying ‘to let’ means purchasing a property with the intention of renting it out. Whether you’re new to property investment or a seasoned investor, it’s crucial to know the process inside out. This guide provides you with a comprehensive overview of the buy to let journey.
Advantages and Disadvantages
Advantages of Buying to Let
- Long-term investment potential as property values generally appreciate.
- Consistent rental income providing a steady cash flow.
- Opportunity to benefit from new build warranties and insurance policies.
Disadvantages of Buying to Let
- Higher tax liabilities on rental profits (18% to 28%).
- Potential Capital Gains Tax when selling the property.
Measuring Profitability
A key metric in buy to let is rental yield – the percentage return your property investment generates through rental income. A benchmark for a good rental yield is generally around 5%.
For example, if you purchase a property for £100,000 and charge £200 per week, your annual rental income would be approximately £10,400. The rental yield is calculated as: (10,400 / 100,000) x 100 = 10.4%.