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First questions

Purchasing a property for your own use or to rent out is a big investment.

Becoming a landlord is a commitment, which lasts longer than the first decision to purchase the property to gain an income.

Here are some practical questions you need to ask yourself before getting into the letting market:

  • is it the right time to invest? If you do not want your money tied up for a reasonable period of time, buying to let may not be right for you

  • have you researched the local buy-to-let market? Try to reduce risk and purchase the property at the right time and in the right place

  • have you done your sums? Can you keep up the mortgage payments if you are not receiving rent for the property? Can you find the deposit to purchase the property?

For more information, read Buy to let as an investment, Buy to let as an investment in Scotland, and Points to consider before you buy to let.

Do the figures stack up?

Is buying a property to rent out worth the money? What will the value (capital growth) of the property be and what are the overall running costs for the property?

To answer these you need to work out your ‘yield’ (ie the potential returns you can expect on your investment from rent payments, taking into account your property’s value). For example, if the property is worth £100,000 and is rented out for £10,000 per year, divide £10,000 by £100,000 and your gross yield will be identified as 10%.

It’s also useful to work out your net rental yield (ie your yield adjusted for key outgoings). For example, using a net rental income figure of £6,600, worked out as follows:

Gross rent


Less agency fee

-     1,000

Less outgoings, say £200 per month                        

-     2,400



Net rental income


£6.600 divided by £100,000 is 6.6%. This represents the net rental yield.

Income tax must be paid on the money you receive as rent. Capital gains tax and inheritance tax (IHT) are also relevant when, for example, a property changes ownership. For more information, read Buy to let tax implications.

It is best to speak to a specialist to discuss yields and tax in more detail.

What if you already own the property?

You may own a property that you want to rent out. Here are some essential things to think about before you go any further:

  • is there a mortgage on the property? If so, you will need to obtain the lender’s consent to let out the property and you may need to change your mortgage product to a 'buy to let' mortgage

  • a lender may want to see the relevant Tenancy agreement and may want additional clauses added

  • contact your building insurers to tell them that you are letting out the property. If you don't, your insurance may be void

If you own your property as a leasehold (which is very rare in Scotland) then: 

  • check that your landlord will allow you to let the property

  • obtain written consent before letting

  • check how much your service charges and ground rent are

  • check the term of years left on your lease

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