Using the provided funds for property investment instead of personal homeownership through a buy-to-let venture.
A growing number of first-time buyers are choosing to become landlords instead of homeowners, with one such individual being Matthew Small, a 29-year-old video game developer from Wembley, north-west London. Matthew's decision to invest in a buy-to-let rather than purchase a home of his own is not uncommon, as high house prices and rising interest rates make affording a property in his desired location challenging.
Matthew's parents are gifting him £50,000 to use as a deposit, but unlike his siblings who used the money to buy their first homes, Matthew plans to build a buy-to-let portfolio instead. Living with his parents allows him to have a secondary source of income, a priority for him, while also continuing to spend time with his loved ones.
Matthew's job enables him to work remotely, which has made it possible for him to live with his parents without paying rent, instead contributing towards food bills. He appreciates the companionship and does not see any inconvenience, as his parents have retired and his father is approaching retirement age.
The trend of first-time buyers entering the rental market is reflected in the increasing number of first-time landlord applications, with Buckinghamshire Building Society recording a 20% increase since last year. Claire Askham, head of mortgage sales at Buckinghamshire BS, remarks that there has been a noticeable rise in enquiries from first-time buyers living with family, intent on building multiple income streams through property investments, second jobs, or side businesses.
Having extra income generated from an investment property, or even a portfolio of them, can support future mortgage applications for first-time buyers who might otherwise find making their way onto the property ladder a struggle. Some first-time buyers choose to invest in affordable areas, such as Merseyside, Manchester, and Preston, where rental demand is high and money goes further.
First-time buyers must be cautious, however, as lenders are less likely to finance first-time buyers who plan to let properties rather than live in them. The fear is that these buyers are attempting to secure what's known as a back-door residential mortgage, a type of mortgage fraud where borrowers pretend they will let the property out when in fact they intend to live there. Instead, Matthew plans to use a buy, refurbish, refinance, and rent strategy to build his portfolio, investing in properties he can add value to through extensions or conversions, remortgaging after completion, and using the released cash to fund subsequent buy-to-lets.
Matthew hopes to start his investment journey in Aylesbury, Buckinghamshire, where his brother lives, as he considers it an up-and-coming area with plenty of development potential. As he carefully evaluates the average yield for the location and searches for the best rental opportunities, he aims to maintain a long-term financial security by accumulating multiple buy-to-lets in his portfolio.
1) Matthew Small, a first-time buyer from Wembley, is using his parents' gifted deposit to invest in buy-to-let properties, rather than purchasing a home of his own.2) Claire Askham, head of mortgage sales at Buckinghamshire Building Society, has noticed a rise in enquiries from first-time buyers like Matthew, who plan to build multiple income streams through property investments.3) The trend of first-time buyers entering the rental market could support future mortgage applications, as extra income generated from investment properties may give them a stronger position on the property ladder.4) However, lenders are less likely to finance first-time buyers who plan to let properties rather than live in them, as there is a fear of mortgage fraud involving back-door residential mortgages.5) Matthew Small is using a buy, refurbish, refinance, and rent strategy to build his buy-to-let portfolio, starting in Aylesbury, Buckinghamshire, where he sees development potential for long-term financial security.
