Is buying a flat a good investment: The buy-to-let case for and against

Flats are among the most widely purchased buy-to-let properties in the UK, particularly in cities. They are typically more affordable than houses, easier to maintain externally, and often well-located for tenant demand. But they also come with structural considerations that houses do not, leasehold ownership, service charges, and a more complex relationship with the building as a whole.

Whether buying a flat is a good investment depends on the specific property, the local market, and how the various costs and risks are modelled. This article sets out the key factors on both sides.

The case for buying a flat as an investment

Flats typically offer higher gross rental yields than comparable houses in the same location. This is partly because the purchase price is lower relative to the achievable rent, a two-bedroom flat in a city centre may cost 20–30% less than a two-bedroom terraced house while achieving similar monthly rent. For investors focused on income return rather than capital growth, flats in strong rental demand areas can produce attractive yields.

Demand for flat rentals is consistently strong in most UK cities, particularly from young professionals, couples, and students who prioritise location and low maintenance over space. Voids tend to be shorter than for family houses in similar areas because the tenant pool is larger.

External maintenance is typically the landlord's responsibility only for their flat internally including the building's structure, roof, and common parts are maintained collectively by the freeholder or management company through the service charge. This reduces the landlord's direct exposure to large, unexpected structural repair costs, though the service charge itself represents a real and sometimes unpredictable cost.

The case against buying a flat as an investment

The most significant structural issue with flat investment in the UK is leasehold ownership. The majority of flats are sold on long leases, typically 99, 125, or 999 years, rather than freehold. As the lease shortens, the property becomes harder to mortgage and sell, and the cost of extending it increases. Once a lease falls below 80 years, the cost of extension rises significantly due to the inclusion of "marriage value" in the calculation. Landlords buying leasehold flats should check the lease length carefully and factor the cost of future extension into the overall investment return.

Service charges and ground rent represent ongoing costs that are outside the landlord's direct control. Service charges fund the maintenance and insurance of the building's common parts, and can be significant, particularly in older or more complex buildings with lifts, communal heating systems, or large communal areas. An unexpected major works bill (for roof repairs, external redecoration, or cladding remediation) can represent thousands of pounds with limited notice.

Cladding and building safety have emerged as significant risks for flat investors since the Grenfell Tower fire in 2017. Buildings over 11 metres are subject to a five-year inspection programme and in some cases require EWS1 (External Wall System) certificates before mortgage lenders will lend against them. Flats in affected buildings have been unmortgageable in some cases, creating severe liquidity risk. This is a risk factor specific to flat investment that does not apply to houses.

Capital growth for flats has historically lagged behind houses in many UK markets. Over longer time horizons, houses have typically appreciated more in value than flats in most regions. This may partly reflect the leasehold issue reducing the intrinsic value of flats relative to freehold houses, and partly reflect stronger demand from owner-occupiers for family houses. Also see our article on property investment strategies.

Key questions to ask before buying a flat as a buy-to-let investment

• How many years remain on the lease? Anything below 90 years should prompt careful analysis of the extension cost and whether it is priced into the purchase price.

• What are the annual service charges? Request the last three years' service charge accounts and any Section 20 notices (major works consultations) to understand the cost history and any upcoming large expenditure.

• What is the ground rent? The Leasehold Reform (Ground Rent) Act 2022 has restricted new leases to a peppercorn ground rent, but many existing leases have escalating ground rent clauses that can reduce the property's mortgageability.

• Is the building EWS1 certified if it is over 11 metres? An uncertified building may limit your ability to sell or remortgage.

• Does a share of freehold or commonhold structure exist? Flats with a share of freehold give residents more control over the building and remove the ground rent risk.

• What is the rental yield after service charges, ground rent, and landlord insurance? Gross yield on a flat looks attractive but can be significantly compressed by service charges.

For a detailed comparison of flats versus houses across yield, maintenance, financing, and long-term returns, see our article on buy-to-let houses versus flats. Use the August rental yield calculator to model the net yield on any flat after all known costs before committing.

Also see: Rental yield · Buy-to-let · Leasehold · Freehold flat · Service charge · Ground rent · Commonhold · Landlord insurance

Disclaimer: This article is intended for general informational purposes only and does not constitute legal, financial, or professional advice. Landlord and tenant law is subject to change, and the information in this article reflects the position at the time of writing. You should always seek independent legal or professional advice before taking any action in relation to your property or tenancy.