Looking to invest in a commercial property without taking on the full financial weight by yourself? Then co-investing in a buy-to-let might be your answer. Joining forces with an investment partner can make entering the buy-to-let market in 2025 more achievable and profitable.

In this guide we’ll explore how co-investing can help you increase your income potential. 

What is a buy-to-let?

A buy-to-let property is a residential property purchased specifically to be rented out to tenants rather than lived in by the owner. It’s a popular investment strategy in the UK, offering regular rental income and the potential for long-term capital growth.

Some examples of buy-to-let properties are:

• Student accommodation
• Residential homes (Multi-Unit Freehold Blocks)
• HMOs (Houses in Multiple Occupation)
• Holiday lets

How profitable are buy-to-let properties?

Buy-to-let investments can be profitable, but it’s important to understand that the financial gains are often long-term rather than immediate. During the early part of your investment, much of your rental income may be spent on costs for the mortgage repayment, renovation, repairs, taxes, insurance, etc. As a result, initial profits may be minimal.

However, usually profitability improves due to changes in market dynamics which affect property value, and rental trends. Both of which can improve rental income as well as capital gains.

In fact, the real return on investment comes in the mid to long term when equity builds up and income begins to exceed outgoing costs.

Why co-investing can improve profitability

Since much of the profitability in buy-to-lets come from value appreciation, high value properties in better performing areas would obviously be the better investment. These properties often benefit from stronger capital appreciation and higher rental yields, leading to greater long-term gains.  

Co-investing can be used to access these properties which you may not be able to afford alone, while also benefiting from sharing risks and costs.

How to fund a buy-to-let as a joint ownership

Most buy-to-let properties are purchased through a buy-to-let mortgage, which differs slightly from a residential mortgage. These mortgages are assessed primarily on the potential rental income rather than just your personal income. 

If you’re co-investing in a buy-to-let, you will likely need a joint mortgage. This allows two or more people to apply for a mortgage together and share responsibility for the loan.

An eligibility criteria exists. And this how it is assessed.

• Credit checks: Each person’s credit history is reviewed. A poor credit score from one applicant could have a negative effect on the application.
• Affordability assessment: While rental income plays the primary role in buy-to-let mortgages, lenders may also look at the combined income to ensure that mortgage payments can be maintained if there are void periods.
• Rental yield: This is a method of measurement that lenders use to check the profitability of the property. The calculation is made by dividing the annual rental income by the property value, then multiplying by 100 to get a percentage. A good rental yield is considered to be between 5% – 8%.

Important to remember: In a joint mortgage, all parties are liable for making mortgage payments. If one person does not pay the mortgage, it will be the responsibility of the other to ensure the payment is made in full.

How much a buy-to-let mortgage costs

• Deposit: Typically 20% – 40% of the property’s value. The minimum averages around 25%.
  
• Interest rates: Usually higher than residential mortgages. Repayments are often structured as interest only. At the end of the mortgage term the capital amount must be paid off in full.
  
• Tax: You will have to pay income tax as well as stamp duty taxes. You will also have to pay capital gains tax if or when you sell the property.
  
• Additional fees: Arrangement fees, legal fees, landlord insurance, etc.
  
• Landlord responsibilities: Being a landlord includes obligations like ensuring safety compliance, handling repairs and maintenance.

Types of joint ownership

You can become a joint-owner with friends, family members, spouse, or civil partner. There are two main legal structures for co-owning a property.

• Joint tenants – All parties have equal ownership, even if one party invests more than the other. If one owner dies, the remaining party will automatically inherit their share. This is commonly used by spouses and civil partners.
  
• Tenants in common – Each party owns a specific share of the property according to agreed terms (usually the amount invested), which can be equal or unequal. 

In the event of the death of one party, the share does not automatically transfer to the remaining owner/s, instead the share can be left to whoever the owner decides. 

Owners also have the ability to sell or transfer their shares as desired. This is often used by friends or business partners.

Preparations before co-investing in a buy-to-let

Legal documentation

Always have a deed of trust drafted by a solicitor. This outlines ownership percentages, responsibilities, handling of costs and agreements in case of exiting co-ownership.

Financial contribution

Discuss and agree on how much each person is to contribute towards the mortgage deposit, fees, costs related to maintenance and repairs. These will also be finalised in the deed of trust.

Know your profit share and tax liabilities

It is important to know how much rental income each person is entitled to and how much they are taxable for. This depends on your ownership structure.

• Joint tenants –  As joint tenants, each party has an equal share, regardless of individual financial contributions and will be entitled to an equal share of the profits as well as be taxed equally. 
• Tenants in common – With tenants in common, each co-owner, by default, is entitled to a share of the profits in line with what they contributed financially. 

If co-owners in a tenants in common get married or enter into a civil partnership the tax for each will default to 50/50 unless it is changed by an HMRC form 17 election

Advantages of co-investing in a buy-to-let

• Shared financial burden: Lower individual investment required.
  
• Easier mortgage approval: Combined incomes and credit scores may help secure better mortgage terms.
  
• Risk diversification: Costs, risks, and responsibilities are spread out.
  
• Access to better properties: Pooling resources may allow you to invest in higher-value or better-located properties with stronger rental yields. This makes it easier to secure a property in a competitive market.

Risks of co-investing

Like any investment, co-investing comes with risks.

• Disagreements over money or management can strain relationships. 
• Defaults in mortgage payments by the other party could affect your credit score.
• Less individual control over key decisions.
• Exiting ownership can be difficult.

Consult an experienced financial advisor

Before entering any co-investment agreement, it is advisable to seek guidance from a qualified mortgage broker. They can help you assess your affordability, tax implications, and investment strategy as well as give insight to more complicated areas of co-ownership and buy-to-let mortgages.

If you’re considering a joint buy-to-let mortgage or looking for help structuring a co-investment, book a free consultation today with a BVS Mortgage and Financial Services mortgage broker for personalised guidance.

Disclaimer: The information provided in this blog is intended for general knowledge and informational purposes only, and does not constitute financial advice.

Most buy to let mortgages are not regulated by the Financial Conduct Authority/ BVS Mortgages and Financial Services is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 2/10/2025

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

BVS Mortgages & Financial Services Ltd is a broker, not a lender. We work within the mortgage market and may earn a commission from lenders, this amount varies between lenders.

Published on 2025/10/12