A recent study found that the number had risen in the first quarter to 23% of all BTL mortgages – the latest evidence of a trend that can be traced back to 2011.
But like much in the post-2008 market, the story is complex. First-time landlords represent a return to investment in bricks and mortar – they also indicate nervousness about selling up.
Property 118, an online community for landlords, is the first door many aspiring landlords knock on. According to site partner Neil Patterson , they tend to be aged between 35 and 45 and come from occupations associated with property, such as plumbing or building although there are accountants and solicitors as well.
But, despite a familiarity with property, this type of first-time landlord may still find much of the BTL market incomprehensible. Patterson says that a particular problem is jargon. “Things like ‘gearing’, ‘loan to value’, ‘valuation’ – there’s quite a few words that we will use even within our own industry that will be called different things.”
Wannabe landlords also have to shift into a commercial frame of mind. “The first thing to get across to a first-time buyer is the difference between buying an investment property and a residential property. Often people fall in love with property whereas a BTL is more of a commercial decision. It’s a business, not a personal residence, and they don’t often understand the difference.”
A sector where rental yields can reach up to 10% is an attractive investment for those with the cash. But for others, it is simply a way of staying afloat. Last month Platform, the intermediary lender for the Co-operative Bank, revealed that a fifth of its recent BTL business came from customers who rented their existing property when they moved rather than selling it.
These “accidental landlords” are in a very different place than those eyeing up a portfolio, says Platform’s business development director Lee Gladwell.
“What we’re dealing with here is largely people who are in a situation where they have to let out their existing property in order to move.”
As long as economic uncertainty continues, he expects that the need for this kind of mortgage to continue.
Applicants for Platform’s Let-to-Buy mortgage must provide evidence of their circumstances and motivation for taking out the loan, including a copy of the offer for the new residence. Gladwell says that brokers can do a “fantastic job” helping borrowers with the new set of issues that BTL mortgages throw up. “If anything, I think the sector could do more to promote the fact that there is that kind of breadth of advice available.”
For first-time landlords, the most valuable advice may have little to do with the mortgage itself. Andy Young, chief executive of BTL specialist brokers TBMC comments: “The main risk associated with first-time landlords is their lack of experience in managing a rental property, such as finding tenants, collecting rent and complying with legal requirements.”
He recommends that brokers arranging finance for first-time landlords ensure that they have a good knowledge of the BTL mortgage market. “Lending criteria varies significantly from lender to lender and the market is very dynamic, with products being withdrawn with little or no notice.”
Still, the BTL market shines through the economic gloom – and if a broker can arrange the right mortgage, there is much for the client to gain.
As Young says: “With a volatile stock market and stagnant house prices, now is an excellent time for landlords to invest in buy-to-let property.”
