Investment

Top tips for buying a house to rent

4 min read

Renting property can be a good idea, however there are some things to note compared to a regular house purchase, read on for our top tips.

  • Abigail Bolton Senior Digital Website and Content Marketing Executive
    Abigail Bolton

    Senior Digital Marketing Executive

    Published November 27th 2023

man in his 40s looking at tips for buying a house to rent out

Buying a house to rent out has become increasingly popular as a way of investing money, especially in desirable locations. You may also be thinking of buying a house for your child to rent, as a way to give them a helping hand. Renting property to a family member is common, but there are some things to note compared to a regular house purchase if you want to buy-to-let.

Find our top tips when buying a house to rent out below:

Finding the right house to rent out

Finding the right property to rent out will depend on your needs. For example, are you thinking of buying a property to rent out for students? Is it for family members or children? Or is it a flat for working professionals? In any case, rental yield is usually an important factor, especially if you’re buying a second home. Another consideration is the location, you’ll want the security of having tenants, and so doing research of the area will be crucial to understand if the type of rental property you want, is right for the area. Also consider if the property is likely to increase in value, or if there work to be done that could increase the value.

When viewing properties, make sure you have a list of questions to ask the estate agent, or current owner of the property, especially if it already being used as a rental.

There are different risks to look out for when you want to rent out a house, compared to a regular purchase. Rents aren’t guaranteed, while finding good, reliable tenants can be an issue, as well as falling house prices and the need for major repairs. It’s important to keep things like this in mind when you’re in the house hunting process.

The house buying process for rental properties

As with any other house purchase, you’ll need to cover the cost of expenses like surveys, solicitor’s fees and Stamp Duty Land Tax. Unlike buying a house to live in yourself, you’re going to need to arrange a buy-to-let mortgage. These are riskier for lenders, partly because they’re usually interest-only. This allows you to keep monthly repayments down and turn a profit on your rental, but it also means you may need a deposit of between 20-40%.

If you’re buying a house to rent to family, things are more differences, as you’ll need a specific type of buy-to-let mortgage. This is due to the fact that family members don’t usually charge each other the full market rate, in turn making the investment more of a risk to a lender.

You’ll also have to pay a 3% surcharge on top of the usual SDLT, which is another thing to consider. Apart from that, the process of buying a home generally runs as it does with any other purchase.

Your landlord obligations

With your purchase complete and a new set of keys in your hand, you now have some new responsibilities as a landlord. This includes arranging buildings insurance, which is necessary for a buy-to-let mortgage and can protect you in the event of something going wrong with your property. It’s also a good idea to get landlord insurance and rent guarantee insurance to give yourself some added protection. Your landlord responsibilities also include drawing up a contract for your tenant, with an Assured Shorthold Tenancy (AST) the most common form of this. Additionally, you need to ensure your tenant is legally allowed to rent property in the UK, protect their deposit, supply an up-to-date Energy Performance Certificate (EPC), meet fire safety regulations and arrange an annual gas safety check, providing your tenant with the certificate.

Renting out a house checklist

Whether you’re about to become a landlord for the first time or just after some more information, don’t miss our top ten tips in our renting out a house checklist:

  1. Know your mortgage responsibilities and tax liabilities

  2. Set rent levels accordingly

  3. Consider hiring a letting agent to let and manage your property for you

  4. Get to know your tenants through referencing and checks including right to rent

  5. Arrange suitable insurance, including buildings, rent guarantee and landlord insurance

  6. Register with a body such as the National Residential Landlords Association (NRLA)

  7. Put together an inventory of the property’s condition and contents prior to tenants moving in

  8. Know and perform your landlord responsibilities and legal requirements

  9. Supply an EPC and fulfil fire and gas safety obligations

  10. Provide tenants with the government’s guide on how to rent

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