Running a buy-to-let business – whether that’s having just one property or a large portfolio – can be profitable over time. It’s one of the few asset classes that can deliver ongoing income while also growing in capital value, and that’s as true in 2026 as it has always been. The caveat is that being a landlord is, and always has been, a long-term investment strategy.
Although you can earn good rental profits month on month from the outset if you invest wisely, property does require capital investment at the start and then periodically throughout the time you own it, so you’ve got to understand all the costs before you begin.
Here are the key things to know and do, to make sure your rental property delivers the return you are hoping for.
Understand the market so you buy the right property
Your success relies on you being able to keep the property contract holdered and achieve a good market rent that covers all the costs associated with the property and running the business, and that means buying something for which there is strong demand that exceeds supply now and in the future.
Different locations have different contract holder demand – for example, some are student-heavy, some are more sought after by working professionals, some are more popular with families – and you need to invest specifically in what they’re looking for.
The more reliable and quickest way to find out about current and likely future demand is to work with a qualified estate and letting agent that’s dealing with property and contract holders every day. If you’d like to know more about the rental market in your area, just get in touch with your nearest branch and have a chat with one of the team.
Understand your costs
Work out your initial, on-going and periodical investment costs and put together a budget so you get a clear picture of what capital reserves you need and how much rental income the property has to generate. These include:
Up-front costs: deposit, professional fees (legal, mortgage, survey), stamp duty (at a 5% higher rate in every band in England), refurbishment, furnishing and ready-to-rent costs (health & safety, fire compliance)
Ongoing costs: landlord insurance, bookkeeping/accountancy, letting and property management agent fees, maintenance contractor costs, periodical repairs and redecoration, plus a 3% allowance to cover any void periods.
By putting down a deposit of at least 25%-30%, you should be able to find a property that can achieve a level of rent that covers all the monthly costs and tax, with enough left over to provide some income for you.
Take out a mortgage and work with a broker
Even if you have enough capital to buy a property with cash, you’re likely to generate a better return on investment by taking out a mortgage. Although the monthly mortgage payments will reduce your ongoing profits, when the property grows in value, you benefit from all the growth on the bank’s money as well as your own.
And borrowing makes your money go further. For example, rather than buying one £270,000 property all cash, you could buy three properties worth £270,000 putting down a 30% deposit on each. It’s possible that you could generate the same level of rental profit as buying one without a mortgage, and you could have three times the capital growth. Even with higher maintenance costs for three properties, you’re likely to improve your returns – which is why some landlords move on to building portfolios.
With buy to let mortgages having different application criteria and terms to standard residential mortgages, it’s also worth knowing that many BTL mortgages are only offered through mortgage brokers, so its advisable to work with a regulated and qualified broker who can help ensure you get the right deal for your investment needs. Contact our sister company Mortgage Scout if you’d like to talk through your options.
Take specialist tax and legal advice
Property investment is a complicated areas of taxation, so it’s well worth working with a property tax specialist and/or wealth adviser to make sure you are investing in the most tax-efficient way. They can help you understand how it is best for you to own and finance your buy to let, and how and when to take income from it.
They can also advise you on how investing in property could impact on your overall tax bill. For example, if the rental income results in you earning more than £60,000, you may end up losing some of your Child Benefits and are likely to lose all of it when you earn over £80,000.*
Importantly, make sure you plan ahead and have an exit strategy in mind for when you come to sell or pass on the property or portfolio. Discuss your plans with both your legal and tax/wealth advisers to make sure you get the maximum long-term benefit from your investment.
Note that many landlords are now subject to Making Tax Digital rules that require those with a turnover of more than £50,000 to keep digital income and expenditure records on MTD compatible software and submit quarterly returns to HMRC. From April next year, this will also apply to those turning over more than £30,000. Even if you don’t currently have that level of rental income, it’s worth starting to use the system, as it will eventually be a requirement for all self-employed earners.
How is the current market performing from an investment returns perspective?
What’s happening to rents in 2026?
In June, Zoopla reported that while average annual rent growth for the UK was 2.1%, around three-quarters of rental areas are growing faster than that. The average is being pulled down by just a few particularly poorly performing more expensive locations experiencing negative growth.
Of England’s major cities, the top three performers are:
1. Newcastle +3.9%
2. Liverpool +3.6%
3. Leeds +3%
And in some of the more affordable areas, rents are rising at 5% or more, including Carlisle and Halifax, which are up 9.1% and 6.5% respectively in the last year.
This strong rent inflation is being driven by a continuing supply issue, with every region still having between 20% and 30% fewer homes available to rent than before the pandemic. So, despite wage growth slowing, that shortfall in supply is still fuelling rent growth. Zoopla expects the average UK rent growth for 2026 to be between 2% and 3%.
What’s happening to property values?
While rental profits and rent growth are vital to running a successful buy to let business, capital appreciation is the long-term bonus of investing in property.
Zoopla’s latest report shows the average UK house price has risen 1.5% in the past year, with a 0.6% increase in the last quarter alone, suggesting the market is stabilising after the post-pandemic rate rises. The North of England is growing well above average, with prices up 3.4% in the North East and 3.6% in the North West.
With inflation over the last 12 months averaging 3.3%, but currently at 2.8% and on a downward trajectory, landlords in most of the country should see their combined investment returns (from rental income and capital growth) staying positive.
If you’d like to discuss what kind of returns can currently be achieved in your area, we’re always here to help. Just contact the team in your nearest branch and speak to one of our buy-to-let experts.
