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Buying an investment property has been a popular decision for years, and the current demand for rental properties is higher than ever before due to house prices rising. If you’re in a position to invest in property, it can be a beneficial asset to have. Below, we’ve put together a guide for first time investors. 



Research the areas that you’re considering purchasing your investment property. You should consider the strength of the location, the rental yields that are on offer, the level of demand and the potential for capital growth. It’s also important to look into areas that have positive predictions for price growth and a proven record of investment success. 

The next thing to figure out when you’re looking for an investment property, is who you want your ‘ideal’ tenant to be. This will help you determine things such as the type of property you purchase, house or flat, and whether you purchase in an urban or rural area. For example, if you want a young professional are there good transport links? Or if you’d prefer a family, are there local schools nearby?


Type Of Property

Once you’ve decided on the location you want your property to be in, you can start considering different types of properties. 

  • Off-Plan Properties – This is where you purchase a property before it is fully completed, so it’s still in the planning or development stages. This is often a popular investment type due to the potential for capital growth, lower costs and the appeal for a new build property. These are also often offered at a lower price in order to attract investors.
  • Refurbished Property – These properties are typically historical or period properties that have been renovated in order to meet modern standards. These can be popular with investors who prefer the charm and character of older buildings and want to put their own spin on it. 
  • Residential Property – These are an in-demand property due to the rising house prices in recent years, young professionals are struggling to buy property and so are renting for longer periods of time. 
  • Student Property – As more and more students head off to University, the demand for student rentals is ever increasing. The rent is also higher than it has been, so it’s definitely a good investment as rental yields are rising. Students are often considered to be good renters too, as they have respect for the landlord as they see them as an authority figure. If you’re planning on renting to students, ensure that the property either has good transport links or is close to the University/City Centre. 


Buy To Let Mortgages

If you wish to invest in a house or flat, you may be eligible for a ‘Buy to Let’ mortgage. There are a few conditions to these, you must understand the risks involved and be able to afford to take them, you must have a good credit history and own your own home (whether outright or with a mortgage), and you should earn over £25,000 a year (it’s difficult to find a lender otherwise). 

The loans themselves tend to be more expensive, have a higher interest rate and require a larger deposit. As with a mortgage for buying a house for yourself, there are a variety of different options. 

Fixed-Rate Mortgage

For buy to let mortgages, these are only usually 2-3 years in length. The mortgage rate is fixed for a set amount of time, regardless of whether the lender’s standard variable rate (SVR) changes or not. Once your fixed term is over, the mortgage will be transferred over to a Variable Rate Mortgage, which uses the lender’s SVR to track your interest rate. 


Standard Variable Rate Mortgage

This particular mortgage is prone to interest rate increases, as it tracks the lender’s SVR. This type of mortgage tends not to have any deals or discounts, therefore is considered to be a more expensive way of clearing your mortgage. 


Tracker-Rate Mortgage

With a tracker-rate mortgage, the interest rate tracks the bank rate, set by the Bank of England. It tracks the rate by a particular margin, so it’s common for this type of rate to change, meaning that your interest rate is likely to change. When the agreed time frame comes to an end, you’ll likely be transferred over to an SVR mortgage. 


Interest-Only Mortgage

With this mortgage, the borrower pays off only the interest and not the capital until the end of the mortgage term – usually 20-30 years. At the end of this time frame, the borrower is expected to pay off the loan in its entirety. These are considered to be one of the most popular mortgage types with buy to let investors, but you must be prepared to pay off the lump sum when the time comes.

When investing, the maximum that you’re entitled to borrow tends to be linked to the amount of rental income that you can expect to receive. Lenders typically require the rental income to be 20-30% higher than your mortgage payment. Talking to a letting agent, such as ourselves at Chancellors, will help you find out what price similar properties are renting for. 



There are certain fees that apply when investing in a property, and you should be aware of them before going ahead. One of the main ones being that you will have to pay a higher stamp duty for a property that is not your main home. 

As a basic taxpayer, the Capital Gains Tax (CGT) on buy to let, second properties is charged at 18%, if you’re an additional rate taxpayer then it’s charged at 28%. With other assets, the basic rate of CGT is 10% and the higher rate is 20%. If you end up selling your buy to let property, then you usually pay CGT if your gain is over £12,000. However, couples who jointly own assets can combine this allowance, giving them the potential to earn £24,000 before tax. Any gains that are made must be declared on your self-assessment tax return and will be included when working out your status for the year, which may push you into a higher tax bracket. The income that you receive as rent will also liable for income tax and should also be declared on your self-assessment tax return for the year that it was earned in. The percentage that you will be taxed depends on your income tax band. 

Remember that you will also have to factor in the cost of both rent and landlord insurance, letting agent fees, and any maintenance to the property as this will be your legal responsibility. 

We at Chancellors offer a range of personalised services to suit all landlords, if you’re interested – please don’t hesitate to contact us!

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