Types of Buy-to-Let Investments in the UK – Which One Could Suit You?

Buying a property to rent out can be a great way to generate income, but not all buy-to-lets are the same. Each type comes with its own rules, potential returns, and risks. If you’re thinking about becoming a landlord, it’s important to understand the main options before you choose one.

At Mortgage Brokers Near Me, we help landlords every day to find the right mortgage for their property – whether it’s a single-family let, a student house, or even an Airbnb. Below, we’ll break down the most common buy-to-let types so you can see which might work for you.

Student Let

What it is:
A property rented to university students, usually on a per-room basis, with contracts covering the academic year.

Pros:

• Strong demand in university towns and cities.
• Higher yields than standard single lets.

Cons:

• Higher wear and tear.
• Most income is concentrated during term time.

Example costs & returns (hypothetical):

• Purchase price: £240,000
• Deposit: £60,000 (25%)
• Mortgage: £180,000 at 5% interest-only = £750/month
• Rent: £450/month x 4 students = £21,600/year gross
• Annual costs (repairs, insurance, furniture): ~£3,000
• Estimated profit: £21,600 - £9,000 (mortgage) - £3,000 = £9,600/year

Things to consider:

• Mortgage lenders may require experience as a landlord before approving a student let mortgage.
• Properties must meet safety standards (e.g., fire doors, alarms).

Frequently Asked Questions About Buy-to-Let Investments

1. What is the minimum deposit for a buy-to-let mortgage?
Most buy-to-let lenders ask for at least 25% of the property’s value as a deposit, although some may accept 20%. The exact amount depends on your circumstances, credit history, and the type of property you’re buying.

2. Can I live in my buy-to-let property?
No, a buy-to-let mortgage is for rental purposes only. If you want to live in the property, you’ll need a residential mortgage.

3. How is buy-to-let income taxed?
Rental income is taxable, and you must declare it to HMRC. You may be able to deduct certain expenses, such as letting agent fees, repairs, and mortgage interest (subject to current tax rules). Always speak to an accountant for personalised tax advice.

4. Do I need a special licence for an HMO?
Yes, most HMOs require a licence from the local council. The exact requirements vary depending on the number of tenants and the property’s layout.

5. How do lenders decide how much I can borrow for a buy-to-let?
Lenders look at the property’s potential rental income, usually requiring it to be 125–145% of the mortgage interest payments. They’ll also consider your personal income, credit score, and any other debts you have.

6. Can I get a buy-to-let mortgage as a first-time buyer?
Some lenders allow this, but it’s less common and can come with stricter requirements. Speaking to a mortgage broker can help you find lenders open to this option.

7. What happens if I can’t find tenants?
If the property is empty, you won’t earn rental income, but you’ll still have to pay the mortgage and cover other costs like council tax and insurance. Some landlords keep a contingency fund to cover these periods.

8. Are short-term lets like Airbnb riskier than standard tenancies?
Short-term lets can bring in higher income per night, but they also mean more frequent vacancies, cleaning, and guest management. Seasonal demand can also cause income to fluctuate.

9. What is ground rent and service charge, and do they apply to buy-to-lets?
If you’re buying a leasehold property, you may need to pay ground rent and service charges to the freeholder or management company. These costs can reduce your overall profit and should be factored into your calculations.

10. Should I use a letting agent or manage the property myself?
A letting agent can save you time by finding tenants, handling paperwork, and managing maintenance, but they charge a fee. Self-managing can be cheaper but takes more effort and responsibility.

11. Can I switch from residential to buy-to-let?
Yes, but you’ll need to apply for ‘consent to let’ from your lender or switch to a buy-to-let mortgage. Terms and fees will vary.

12. What’s the difference between gross yield and net yield?
Gross yield looks at rental income compared to the property’s value, while net yield accounts for expenses like maintenance, insurance, and mortgage costs. Net yield gives a clearer picture of your true return.

Buy-to-Let Types at a Glance

Each type of buy-to-let comes with different costs, income potential, and management needs. Here’s a quick summary to help you understand the basics before speaking to us for tailored advice:

• Airbnb / Short-Term Let – Flexible letting with potential for higher nightly income, but more turnover and seasonal demand.
• HMO (House in Multiple Occupation) – Several tenants in one property, potentially higher income but more licensing and safety requirements.
• AST (Assured Shorthold Tenancy) – One household on a single contract, simpler to manage but typically lower yields.
• Social Housing Let – Often longer contracts and secure income, but rent levels are usually lower.
• Student Let – Let by the room to students during the academic year, strong demand in university areas but higher wear and tear.

Every investor’s situation is different – from deposit size to location, to how hands-on they want to be.

The best way to know which works for you is to speak to us directly. Our team at Mortgage Brokers Near Me can review your circumstances, explain your mortgage options, and guide you through the process from start to finish.