Buy-to-let for beginners: the numbers that matter
By Chris Pollitt · Last checked 6 November 2026 · 2 min read
Buying a home to rent out can provide income and long-term growth, but it's a business, with costs, rules and risks. Before you commit, it helps to understand the numbers that decide whether a property works as an investment.
Rental yield
Gross yield is the yearly rent divided by the purchase price. A home bought for £200,000 and let for £1,000 a month has a gross yield of 6%. It's a quick way to compare areas, but it ignores costs. Net yield takes off running costs: letting agent fees, insurance, repairs, service charges, safety certificates, licensing and empty periods. Allowing at least a quarter of the rent for costs is a sensible starting point, and more for older properties.
Yields tend to be higher where prices are lower relative to rents, often in northern towns and cities, and lower in expensive areas where investors are relying more on prices rising. Use sold prices and local rents to compare.
Buy-to-let mortgages
Buy-to-let lenders usually want a deposit of at least 25%. Instead of focusing on your income, they check that the rent covers the mortgage interest by a set margin, often 125% to 145%, worked out at a higher test rate. That stress test often limits how much you can borrow more than the deposit does.
Stamp duty
If you'll own more than one home when you complete, you pay a surcharge on top of normal stamp duty rates in England, and higher rates of Land Transaction Tax in Wales. On a modest property this can add thousands of pounds to the purchase cost, so include it in your sums.
Tax
Rental profit is taxed as income. Individual landlords can't deduct mortgage interest from rental income. Instead they get a tax credit at the basic rate, which particularly affects higher-rate taxpayers. Some investors buy through a limited company instead, which has different tax rules and usually higher mortgage rates. Get advice from an accountant before deciding.
A landlord's legal responsibilities
- a yearly gas safety check and an electrical safety inspection at least every five years
- a valid EPC, with a minimum rating of E for most lettings
- smoke alarms on every floor and carbon monoxide alarms where needed
- protecting the tenant's deposit in a government-approved scheme
- right to rent checks in England
- licensing, where the council requires it, including for most houses in multiple occupation
Rules for private renting are changing, particularly in England, where reforms are ending so-called no-fault evictions and changing how tenancies work. Wales has its own system under the Renting Homes (Wales) Act. Check the current rules for wherever you buy, or use a letting agent who keeps up with them.
Choosing where to buy
Think about who will rent the home: young professionals, families, students or people claiming housing support. Check local rents, the Local Housing Allowance rate, transport links, employers and how quickly similar homes let. A slightly lower yield in an area with steady demand is often better than a high yield where homes sit empty.