Expert advice on making money from buy to let

A Beginner's Guide to Buy to Let, and Buy to Let Mortgages

Published on 12th January 2007

This article will teach you the basics of buy to let. In the next five minutes you'll find out:

  • What is meant by the terms "buy to let", and "buy to let mortgage"
  • The main benefits of buying to let
  • The main risks of buying to let
  • A few alternative names for buy to let mortgages that you might encounter

If you're already up to speed on the basics, you might be interested in getting a free buy to let mortgage quote.

What is meant by "Buy to Let"?

Buy to let (or BTL) usually refers to the practice of buying a residential property and renting it out to tenants in order to make a profit. It can also refer to a buy to let mortgage, which is the type of mortgage that is used when purchasing a property that you intend to let out.

What are the main benefits of Buying to Let?

Buying to let has been around for a long time, but really came to prominence in the late 1990s, when a number of lenders started offering buy to let mortgages.

This coincided with a big property boom in the UK, which made buy to let a very attractive investment prospect. The investor could cover the mortgage on a property (and in some cases even make a small profit) by renting it out, whilst at the same time benefitting from the rising capital value.

Property prices in the UK are unlikely to rise quite so sharply again in the foreseeable future, but the same principles still apply - provided the investor views buy-to-let as a medium-to-long term investment, rather than a "get rich quick" plan.

The suitability of buy-to-let as a long term investment has also resulted in a lot of investors turning to it as a potential source of income for their retirement, especially given the recent negative publicity surrounding pensions.

What are the main risks of Buying to Let?

The main risk of buying to let is that the rental income won't cover your costs. These costs will include expenses such as the mortgage, the letting agents' fees, and repairs and maintenance on the property.

You'll also need to be sure that you can cover "void" periods - those times when you don't have paying tenants, but still need to pay the mortgage.

A good rule of thumb is that the rental income needs to be around 130% to 150% of the mortgage payments in order to cover your expenses. So, for example, if the mortgage on your buy-to-let property is £600 a month, the monthly rental income will need to be at least £780, preferably more towards £900.

It's also worth bearing in mind that if you're letting out the property as furnished, you'll probably need to budget a bit more for wear-and-tear.

Alternative names for Buy to Let mortgages

You may encounter the following alternative names for a buy to let mortgage, but they all mean more or less the same thing:

  • Landlord mortgage
  • Letting mortgage
  • Investment property mortgage
  • Investment mortgage loan


So there you have it, a five-minute introduction to the world of buy to let. If your appetite has been whetted, why not get a free buy to let mortgage quote from our team of specialist buy to let mortgage advisors?

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