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How to Invest in Rental Property in the UK

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Are you an overseas investor watching the UK property market and wondering if any requirements need to be followed before you can start your investment?

Can foreigners invest in rental property in the UK?

In short, yes, foreigners can invest in property in the UK without any legal stipulations.

Two-thirds of properties in the UK are bought by foreign investors, with a large percentage of these investors situated in Hong Kong, and over 56% of property investments in London were made by foreign investors. 

This is due to the UK’s open market policy, which means any individual or company can complete a property purchase without restrictions for foreign nationals. However, some processes and regulations must be followed to avoid breaking laws and making expensive mistakes.

Documentation will need to be provided, and the investor must understand the UK property market and what is required from them to make the transaction a smooth process.

The UK is one of the most stable property investment markets globally, which is one of the reasons it’s popular with foreign investors.  

If you’d like to know more about how Yield Investing can help foreign investors buy a property in the UK, follow our non-residents guide.

What is required from foreign investors to invest in UK property?

There is a minimum requirement that foreign investors will need to meet if they want to invest in the UK property market: 

  • Proof of ID and proof of your financial situation.
  • Anywhere from a 10 – 25% cash deposit on exchange (you must be able to prove your affordability before payment is required).
  • If a non-resident mortgage is required, it must be a minimum of £150,000 in most cases.
  • Your current income will need to be provided so your mortgage eligibility can be determined.
  • Life insurance will need to be in place to cover any mortgage.
  • You will need to be correctly established in the UK tax system, and you may need to complete a tax self-assessment.

Financing Options: Cash Purchase vs Buy-To-Let Mortgage

The most common route foreign investors take to secure their investment property in the UK is a buy-to-let mortgage. Most investors will be required to put down a deposit of 20% of the property price, and a mortgage will then finance the remaining amount. 

How to Complete a Mortgage Request 

International investors buying a property in the UK can acquire a mortgage from most central banks/lenders. To secure the mortgage, specific requirements need to be met. These requirements include:

  • Proof of income and employment: Evidence of overseas income and employment stability as a foreign buyer
  • Credit Check: Lenders in the UK will look closely at your credit and payment history to determine eligibility and affect your mortgage interest rate.
  • Property Evaluation: The property you intend to purchase will need to be evaluated, as it must meet the lender’s criteria for an acceptable investment.

How to Complete a Cash Purchase

You can complete the UK purchase without seeking a mortgage if you have the capital. This will make it a more straightforward transition and make the process quicker. You should have the total purchase price within a UK bank account before contracts on the property can be exchanged.

 Cash Purchase Requirements

If you are proceeding with the purchase and using cash to do so, then you will need to meet the following requirements: 

  • Open a UK bank account: A UK bank account will need to be opened in the name of the person purchasing the property, and the total purchase price of the property will need to be transferred into that account.
  • Transfer and convert your funds: You will need to work with your bank in your country of residence to transfer the funds to your new UK account, which may need to be converted to GBP.
  • Proof of funds: When making and agreeing on an offer on a UK property, many sellers/ estate agents will request to see recent bank statements. This will provide proof that you have enough money to complete the purchase.

Once your finances are in place for your purchase, whether using cash or securing a mortgage, you can complete the transaction legally.

Tax and fee implications to consider when investing in UK rental property 

If you are a foreign investor, purchasing and owning a property in the UK comes with the added pressure of paying UK taxes and fees and potentially international taxes. Those who become property investors and then landlords are liable when purchasing as a foreign investor in the UK.

Income TaxIf you buy a property in the UK and intend to become a landlord and make an income from renting the property, you must pay UK income tax on all the rental income.
Capital Gains TaxProperty owners will only pay Capital Gains Tax (CGT) if they sell the property and make a profit. This tax usually applies only to UK residents; however, in some instances, it can also apply to overseas investors. A tax will be applied if you are a foreign investor who has purchased a property through a UK-based trust or limited company.
Stamp DutyStamp Duty will need to be paid when the property purchase is over a certain amount. The UK HMRC calculates Stamp Duty based on the price the property is purchased for. Foreign investors will also have to pay an additional 2% for non-residential properties they are buying outside their home country.

The 6 Stages of Investing in UK Rental Property

Investing in the UK property market can be a lucrative investment for foreign investors looking for a stable rental yield, which can provide a steady return on investment. 

At Yield Investing, we offer a service that helps simplify purchasing a rental property within the UK. We have a team of experts that can handle the process of buying a rental property for you, which will offer you a smooth and stress-free process.

There are usually 6 steps involved when it comes to starting the process of investing in the UK rental property market:

  1. Outline your investment goals and your planned budget.
  2. Contact us at Yield Investing for guidance and to start the investment process. We specialise in overseas clients and can provide help based on our expertise.
  3. Once you have chosen the property investment that is right for you, you will make a deposit and secure the property with a reservation fee.
  4. You then need to explore your options to secure the financing if this is required.
  5. We work with you every step of the way to complete the sale.
  6. We then partner with a housing provider who manages the property.

Investing in Rental Property UK FAQs

Do you need a visa to purchase a property in the UK?

Yes, you can buy property in the UK without a visa. There are no rules that require a visa to own property. If you’re not living in the UK, you can still buy property if you follow the legal steps and requirements to complete the purchase.

If you purchase a house in the UK, are you classed as a resident?

No, purchasing a house in the UK won’t give you residency or immigration status. It also doesn’t give you legal rights to reside within the country where you purchased the property. 

Is now a good time to invest in buy-to-let properties?

Yes, now can be an excellent time to buy a rental property, especially if you’re looking for a long-term investment.

Now is one of the best times to invest in the UK rental property market as it is predicted that by 2025, the average house price in the UK will reach £419,000. The rental market often offers steady income opportunities, and owning property can also lead to potential appreciation in value over time. Adding a rental property to your investment property portfolio can diversify your assets, reducing risk and potentially increasing your overall returns.

Managing Your Investment as an Overseas Investor 

Yield Investment can offer many ways to help with your new investment, including property management. We can handle day-to-day operations, such as tenant screening, maintenance, and rent collection. This can be a game-changer, especially for foreign investors who may not be physically present to oversee their properties. 

We offer total FRI leases with all our properties. These will take away the hassles of managing the property and its tenants, plus you won’t even need a property manager. It is the sure-proof way to have a hands-free investment, sit back and enjoy the rental income. At Yield Investing, we specialise in helping foreign investors discover high-yielding UK property investments that align with their financial aspirations. If you’re ready to explore the possibilities of UK property investment, don’t hesitate to contact us today. Our expert team is here to guide you on your journey towards financial prosperity in the UK property market, so contact us here.

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