How to choose the right buy-to-let property

Explore key considerations, research tips, and expert advice to make a successful investment decision.

Investing in buy-to-let properties can be a profitable venture, offering a steady stream of rental income and the potential for capital appreciation. It’s never quite that straightforward, however, and there are many factors involved. One of those choosing the right buy-to-let property and everything that entails. Here, we explore some of the key considerations when it comes to choosing the right buy-to-let property.

What do I need to know about rental yields?


Location is important when it comes to choosing a buy-to-let property – and we’ll get to that soon– but a factor many landlords consider first is the rental yield. 


What’s the rental yield? 

In simple terms, it’s the annual rent you receive on a property expressed as a percentage of its purchase price. It’s a quick and easy way to compare the potential return from different properties and areas.


Why’s it so important?

It’s all about maximising your income. A high rental yield increases the chances of getting a good return on your investment, which is what being a landlord is all about. Of course, there’s property appreciation (and we’ll get to that in a bit), but regular income is also of high importance. 


Just remember that a high rental yield isn’t the only thing to consider. You also need to factor in other costs like: 


  • Maintenance
  • Insurance
  • Periods when the property might be empty (known as a void period).


These all contribute to your overall yield, as you’ll need to pay these costs either monthly or annually from the rental income. 


Rental yield example


Let’s say you buy a property for £200,000, and you rent it out for £1,000 per month.


Your annual rental income in this scenario is £12,000 (£1,000 x 12 months).


To calculate the rental yield, you divide the annual rental income by the property price and then multiply by 100 to get a percentage.

So, in this case, your rental yield works out as ( £12,000 / £200,000 ) x 100 = 6%.


This means you are earning 6% of the property’s value in rent each year.


Before you take the plunge and invest in a buy-to-let property, make sure you’ve done your sums and worked out your potential rental yield. 

Capital appreciation potential in buy-to-let investments


While the rental yield is important, let’s not ignore capital appreciation, which is the increase in your property’s value over time. Capital appreciation is the difference between what you paid for your property and what you could sell it for at a later date. 


Rental income can give you a steady income month to month, but capital appreciation is where there’s potential to make larger gains in the long run. Historically speaking, house prices generally only go up in the UK, with the previous 10 years seeing an impressive 73% rise


That’s not to say they will always go up, however, and there’s no such thing as an investment that can’t fail. Therefore, it’s important to remember that capital appreciation isn’t guaranteed. It depends on a whole host of factors like the property’s location, the state of the housing market and wider economic conditions.


Example of capital appreciation


Let’s say you purchase a property for £250,000. Over the course of several years, due to factors such as improvements you’ve made, increased demand in the area and overall market growth, the value of the property increases.


Five years later, you find that similar properties in the area are now selling for £300,000. This means your property has likely also increased in value by the same amount.


The difference between the price you paid (£250,000) and the price you could potentially sell it for now (£300,000) is your capital appreciation. In this case, your property has appreciated in value by £50,000 over five years.

Capital gains tax

The aim might be to see the property’s overall value increase, but that would also mean potentially paying capital gains tax when you sell it. Capital gains tax is a levy paid on the profit when you sell a property that’s increased in value. It’s the difference between the price you paid and the selling price. It will be important to factor this into your investment calculations should you decide to sell.


Capital rising


When you’re choosing your buy-to-let property, don’t just look at the rental yield. Think about the potential for capital appreciation too. In the best-case scenario, you cover the short and long-term prospects, turning your good investment into a great one. 


Evaluating property types for buy-to-let property investments


There’s no one-size-fits-all approach to buy-to-let – different property types can offer different benefits, and it’s all about finding what fits your investment goals.


Individual homes


First up, we’ve got individual properties. These are your typical houses and flats. They’re a popular choice for many landlords because there’s always demand for places to live. Whether it’s a family home in the suburbs or a city centre flat perfect for young professionals, residential properties can offer a steady stream of rental income.


Houses in Multiple Occupation


Let’s not forget about Houses in Multiple Occupation (HMO). These are properties rented out to three or more people who aren’t from the same household (like students or young professionals). They can offer higher rental yields, but they also come with additional responsibilities and regulations.


Multi-unit freehold blocks


Multi-Unit Freehold Blocks (MUFBs) are another type of property to consider. These are buildings that have been divided into separate units, each with its own title deed. They’re several flats under one roof, and you, as the landlord, own the whole block. MUFBs can maximise rental income as you’ll have multiple tenants all paying rent. However, they can also require more management and maintenance, so it’s worth considering whether you’re ready for the extra responsibility.


Holiday let


Holiday lets are rented out on a short-term basis to holidaymakers. They can be a lucrative option, especially if they’re in a popular tourist destination. The potential for higher short-term rents can lead to impressive rental yields. But they can also be more unpredictable, with periods of high demand followed by off-peak times when the property might be empty. Plus, you’ll need to consider the additional costs of managing and maintaining a holiday let, including higher wear and tear and the need for regular cleaning and check-ins.

When choosing a buy-to-let property, think about what type of property aligns with your investment goals, budget and how hands-on you want to be as a landlord. It’s all about finding the right fit for you and what makes the most sense financially.

Should I research local markets for my buy-to-let?

The location holds plenty of weight when it comes to purchasing a buy-to-let and understanding the local rental market is a necessary step in the buy-to-let investment journey. But what factors go into determining the right location? 

You should research the average rental prices in the area. Are they in line with what you were expecting? Will the potential rental income cover your mortgage payments and other costs? Gather the right information to make sure all the numbers add up.

Next, consider the demand for rental properties. Are there plenty of potential tenants looking for a place to live? High demand can lead to higher rents and lower vacancy rates, which is ultimately good news for landlords.


But it’s not just about demand, as you also need to consider the competition. Are there lots of other landlords offering similar properties? If so, you might need to think about how you can make your property stand out from the crowd.

Don’t forget to consider local infrastructure, amenities and travel connections. Properties near good transport links, shops, schools and leisure facilities are often more attractive to tenants. These factors can significantly impact demand and rental income.

Finally, think about the type of tenants you’re likely to attract. Are they reliable? Can they afford the rent? Are you targeting students, families or single professionals? A good tenant can make your life as a landlord a whole lot easier.

Before taking the plunge and investing in a buy-to-let property, make sure you’ve done your homework and researched the local rental market. Doing so will help you make informed decisions about the buy-to-let property.

Analysing market trends for property selection

Being able to grasp market trends is a fundamental part of any successful property investment. These trends provide valuable insights into the current state of the property market and help you make more informed decisions.

Property prices are a key indicator of any market trend. An upward trend in prices suggests a strong market with potential for capital appreciation. Conversely, falling prices could signal a weak market but may also present opportunities to purchase properties at a lower cost in the hope the market picks up in the future. 

Rental demand is another factor. High rental demand can lead to increased rental prices and lower vacancy rates, enhancing the profitability of a buy-to-let investment. However, a decrease in rental demand may necessitate adjustments such as lowering rent to attract tenants.

The broader economic landscape also influences market trends. Factors such as interest rates, employment levels and economic growth can impact both property prices and rental demand. Monitoring these economic indicators can help investors anticipate changes in the property market.

Local trends, including infrastructure developments, regeneration projects and demographic changes, can also significantly impact property values and rental demand. For instance, a new transport link could increase demand in a previously overlooked area, while a growing student population could boost the rental market in university towns.


Analysing local market trends is a step in the right direction to selecting a buy-to-let property. It enables investors to understand the dynamics of the property market, identify potential opportunities, and mitigate risks.

Property size and its impact on rental income


The size and type of a property often have a significant impact on rental income, and it’s an important factor to consider when selecting a buy-to-let. 


We’ve covered how larger properties, such as three or four-bedroom houses, can command higher rents due to their ability to accommodate more tenants in an HMO. But they can also be particularly appealing to families looking to rent rather than buy.


Smaller properties tend to be more in demand in cities. These often include one or two-bedroom flats located in purpose-built buildings or conversation. They may achieve lower rents compared to larger homes but are usually in higher demand due to prime renting demographics.


When considering property size, balance the potential for higher rental income against factors such as demand, affordability for tenants and your ability to manage the property. Being on top of the local rental market and tenant demographics will help inform your decisions about the best type of buy-to-let property. 

Assessing property condition and maintenance needs


A property in good condition can attract a higher calibre of tenants and potentially command a higher rental price. It also reduces the likelihood of costly and unexpected maintenance issues in the near future. Ultimately, you’re buying somewhere that’s ready to go and needs little repairs or maintenance. 


That doesn’t mean you should rule out properties requiring more extensive work. These opportunities, often available at auction, can often be acquired at a lower cost. With the right renovations, these ‘fixer-uppers’ can be transformed into highly desirable rental properties, potentially offering a significant return on investment. It’s important to note that properties needing a significant amount of work don’t typically qualify for a buy-to-let mortgage. 


Regardless of the property’s current state, a comprehensive property inspection is a must. View the property yourself and consider getting a survey. If you’re purchasing with a buy-to-let mortgage, a survey is usually part of the application. But if you’re buying with cash, you’ll need to make your own arrangements.  


In addition, consider the ongoing maintenance needs of the property. Regular maintenance is key to preserving the property’s value and ensuring it remains attractive to current and prospective tenants. Maintenance includes everything from regular property checks and servicing of appliances to addressing any issues raised by tenants in a timely manner.


Assessing a property’s condition and maintenance needs is an important step in the buy-to-let investment process. It influences the property’s appeal to tenants and can give you an idea of its potential rental income. 

Affordability and budgeting for investment properties


Affordability and budgeting are worthwhile considerations when investing in buy-to-let properties. Ensure that the buy-to-let aligns with your financial capabilities and goals.




The first step is to establish a clear budget. This should include:


  • The purchase price of the property
  • Any renovation costs
  • Ongoing maintenance expenses
  • Insurance, such as landlord’s buildings insurance and rent guarantee insurance
  • Estate agent and property management fees if you’re using a professional to let and manage the buy-to-let. 


Don’t forget to factor in periods when the property may be vacant and not generating rental income. As a rule of thumb, some experts say to hold back one month’s rent in case of void periods


Ongoing costs


Affordability extends beyond the initial purchase. Think about the ongoing costs of owning a rental property, including mortgage repayments, if applicable. These costs should be balanced against the expected rental income to ensure the investment is financially viable.


It’s also wise to have a contingency fund for unexpected expenses or changes in circumstances, such as a sudden major repair or a longer-than-expected vacancy period. Doing so can help safeguard against unexpected outgoings, such as boilers potentially breaking down.

Financing options for buy-to-let investments


When it comes to financing a buy-to-let investment, there are several options available, with buy-to-let mortgages being one of the most common. Indeed, one in three landlords are believed to have a buy-to-let mortgage in place. 


A buy-to-let mortgage is specifically designed for investors planning to rent out a property. Unlike standard residential mortgages, buy-to-let options are usually interest-only. This means the monthly payments cover only the interest on the loan, and the original loan amount (the capital) is repaid in full at the end of the term.


Lenders typically require a larger deposit for buy-to-let mortgages, often around 25% of the property’s value, although this can vary. The interest rates and fees may also be higher than those for residential mortgages.


The affordability assessment for a buy-to-let mortgage is usually based on the potential rental income from the property rather than the borrower’s income. Lenders may, however, still require the borrower to have a minimum personal income, typically around £25,000 per year.


Are there other finance options?


Other financing options include cash purchases, bridging loans and leveraging equity from other properties, but these come with their own considerations and risks.


Explore all financing options and seek professional advice to understand the costs, benefits and implications of each before committing. This will help ensure you choose the most suitable financing option for your circumstances and investment goals.

Buy-to-let mortgages with Molo

Molo offers a forward-thinking way to get a buy-to-let mortgage, with the process taking place entirely online. We provide a range of mortgages suitable for different types of buyers, including options for individuals, limited companies, houses in multiple occupation (HMOs) and holiday lets. 


Buy-to-let mortgages for individuals purchase an investment property

Limited company

Buy-to-let mortgages for landlords borrowing through a limited company


Get an HMO mortgage for up to 12 lettable rooms


Our standard process for valuing MUFBs up to 6 units helps you avoid costly specialist valuations

Holiday Let 

If you have a minimum 12 months’ experience renting out a property, buy a home that you can rent out throughout the year

First-time landlords

We lend to first-time landlords or buy-to-let first time buyers 

Portfolio mortgages

Get a mortgage for up to 20 properties

Loan-to-values (LTVs) start from 80%, meaning you only need a deposit of 20% of the property’s sale price. So far, we have processed over £1.4 billion in mortgage applications and provide round-the-clock access to your application without any paperwork or appointments​.