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 need to understand all of 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 depends on keeping the property tenanted and achieving a good market rent that covers all the costs of the property and running the business, which means buying something with strong demand that exceeds supply now and in the future.
Different locations have different tenant 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 most reliable and quickest way to gauge current and likely future demand is to work with a qualified estate and letting agent that deals with property and tenants every day.
Understand your costs
Work out your initial, ongoing, and periodic investment costs, and put together a budget so you have a clear picture of what capital reserves you need and how much rental income the property can 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.
Because buy-to-let mortgages have different application criteria and terms than standard residential mortgages, note that many BTL mortgages are only offered through mortgage brokers, so it's advisable to work with a regulated, qualified broker who can help ensure you get the right deal for your investment needs.
Take specialist tax and legal advice
Property investment is a complicated area of taxation, so working with a property tax specialist and/or wealth adviser is important to make sure you are investing in the most tax-efficient way. They can help you understand how best 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 your overall tax bill.
Importantly, plan and have an exit strategy in mind for when you 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 with turnover over £30,000. Even if you don’t currently have that level of rental income, consider 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. A few particularly poorly performing, more expensive locations with negative growth are pulling the average down.
Of England’s major cities, the top three performers are:
1. Newcastle +3.9%
2. Liverpool +3.6%
3. Leeds +3%
In some of the more affordable areas, rents are rising by 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 slowing wage growth, that supply shortfall 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.
