We all know how challenging it can be for first-time buyers to purchase a residential property to live in. It feels as though there’s hardly a day goes by when I don’t see a story about how spiralling house prices, high interest rates and the large deposits needed to secure a mortgage means owning a home is becoming an increasingly distant dream for many people. And yet there’s another group of first-time buyers who you don’t tend to read nearly so much about in the media; a group who’ve chosen to take a different approach to getting a foot on the property ladder – the first-time buyer first-time landlords. Although it’s not a common route to property ownership, there are people out there whose first venture into the world of bricks and mortar involves buying a property solely with the intention of letting it out. Not only is it a way for them to enter the property market, it can also provide them with some extra income, which could come in very useful if they’re raising the deposit needed to buy a place of their own. However, as well as the usual difficulties facing those trying to secure a residential mortgage, first-time buyer first-time landlords can also encounter additional challenges as they navigate the process of entering the rental market. Securing a mortgage This is a classic catch 22 situation as first-time landlords are unlikely to be cash purchasers and so usually require a mortgage to purchase the property that’s to be rent out. However, as they don’t own a residential property, first-time buyer firsttime landlords often struggle to secure the mortgage they need as they’re an unknown quantity for many lenders. Also, buy to let mortgages often require a larger deposit and without existing equity in another property, it can be harder for them to raise the required deposit. Understanding their legal obligations With around 170 rules and regulations that must be adhered to1, ranging from health and safety standards to tenants’ rights, owning a rental property for the first time can be a steep learning curve. Lenders can be reluctant in approving buy to let mortgages for landlords who have little experience or no experience with owning a rental property. Managing a rental property Managing a successful rental property includes everything from dealing with tenants to handling repairs and ensuring the property is up to standard. Failure to do so could lead to high turnover Why Broker and Lenders need to understand the challenges facing First-Time Buyer First-Time Landlords 10 MORTGAGE NEWSLETTER Roger Morris Group Distribution Director ModaMortgages
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