If you can’t afford to buy in the area you would like to currently, and can’t compromise on space, it may be worth considering buying a property in an area that’s not right for you and continuing to rent in the area you want to live in for now.


It will get you on the property ladder – having had a mortgage and paying it off every month will help show lenders that you are reliable and therefore improve your credit rating.

Rental income – in general monthly rental amounts are more than monthly mortage repayments therefore buying and renting a property out could mean you earn money from the rent each month. This additional income could then be put towards saving for a deposit on a house where you want to live.

Even if your rental property doesn’t generate an income, and just breaks even, if you have a capital repayment mortgage every payment your tenants make will effectively go towards reducing your overall debt, therefore increasing the percentage of the property you own. This means you will get more than your original deposit back (assuming the property hasn’t gone down in value).

Increasing your deposit – if you buy a rental property in a location that increases faster than where you would prefer to buy to live, or buy a property below the market value, any money you make when you sell the rental property in the future could be used to increase your deposit on a house for you.


Property prices could go down – if the property market crashes and you need to sell your property during this time you could end up losing money. Even if the value of your property does increase it may not increase as fast as the property prices in the area you would prefer to live in, effectively decreasing your deposit amount.

Tax – any profit made on rental income will be subject to tax and if you are paying off part of the amount borrowed in the loan with your monthly repayments (capital repayment) you will not be able to include this part of your mortgage payments in your profit & loss calculations, meaning you may have to make tax payments even if you haven’t “made a profit”.

Deposit – banks will only lend up to a maximum of 75-80% of the property’s value if you are buying it for rental purposes. This means you will need to supply a deposit of at least 25%, whereas on a residential property, depending on your credit score mortgage lenders will usually lend up to 80 or 90% of the property’s value (95% if you qualify for the government deposit guarantee scheme).

Voids – if your rental property is empty for any period of time you will still be responsible for paying the mortgage, and other associated costs, on top of your usual monthly outgoings.

Time – it will may take longer to find a property that you can buy enough below market value for it to be a good investment than it would to find a property as a home.

If this is you and you don’t have enough time to look for an investment property yourself but would like to invest we may be able to help find the investment for you or set you up with a partner who has the time but not the capital to invest so you can team up on the purchase.  Please contact us on to see what we can do to help.