‘I’m investing in buy-to-let to save for my own home’

First-time buyers are turning the system on its head by becoming landlords while they rent to build up their own deposit. By Melissa Lawford

‘We sold our buy-to-let in 24 hours and used the money to buy a home’

Mark Scott and Alicia Osbourne-Carey Hertfordshire ‘It’s impossible to buy in London unless you have help or are super rich’

Katie Wilson

The housing market has got so out of hand that first-time buyers are taking a new approach: if you can’t beat ’em, join ’em. Thousands of first-time buyers are now opting to invest in properties they will never live in and stay renting in the more expensive areas they favour.

Nearly one in 10 buy- to-let mortgages are taken out by first-time buyers as young people priced out of London and the South East turn landlord instead.

The number of first-time purchasers applying for buy-to-let mortgages has jumped by 5pc in the past year, according to Norton Finance, a broker. They accounted for one in 12 of all buy-to-let mortgages the firm has processed. This suggests that, nationally, at least 9,000 first-time buyers have become landlords in a year.

Rod Lockhart of LendInvest, a lender, said: “These first-time buyers tend to be living and working in London and buying regional property. Naturally, they want to own their own home, but their affordability in London is much more stretched. They are investing to build up deposits.”

Katie Wilson, 37, editor of The Boutique Handbook, an online magazine, said she could not afford to buy in the capital, where she lives and works. “In London, unless you get a lot of help or you’re super rich, or you’re in a relationship and have a joint income, it’s not possible. I even looked at buying in Margate in Kent, but house prices there have gone up so much too,” she said.

She pays £1,000 a month as a lodger in a house in Hackney. But in 2020 she also became a landlord herself. She could afford to buy in Nottingham, her home town, where she bought a two-bedroom flat for £150,000 from her sister.

“I would never have bought it for myself to live in,” she said. “It’s a total investment.”

She has taken out an interest- only mortgage on which her monthly payments, which she has just fixed for five years, are £200. She receives £700 in rent, on which she must pay income tax, and is able to save £430 a month.

The property is now valued at £180,000, a jump of 20pc. Ms Wilson said she hoped eventually to be able to sell and buy a property for herself.

Other first-time buyers are teaming up to take out mortgages based on their joint income. James Barnett, 25, has been saving by living at home in north London, but could not get a mortgage for a property that he wanted to live in on his salary. “Right now I can get to work easily and all of my friends are here. If I moved further afield, I would be taking a step back,” he said.

He and his brother Nicholas, 23, decided to buy together and completed on a £450,000 two-bedroom flat near Woodside Park, north London, in March. They have split everything equally and are on a standard variable rate mortgage because it gives them greater flexibility if one of them wants to sell.

Their monthly payments on the property are £900 and the rental income is £1,500. “We haven’t made a profit from the rent yet, but that’s not really why we’re doing it. For us it is much more about the potential for capital growth,” said Mr Barnett. They hope to be able to sell the property in future for £500,000, which would give them £25,000 each.

It is a tactic favoured by those who use the so-called “bank of mum and dad”. In 2016 Mark Scott, 35, used a gift from his parents to buy a three-bedroom property in Harlow, Essex, which he let out. He saved the rental profits while he lived at home.

Mr Scott and his partner, Alicia Osbourne-Carey, 34, sold up in 2021. Ms Osbourne-Carey said: “It sold within 24 hours.” They put the cash towards their first home, a £588,995 three-bedroom detached house in David Wilson Homes’ Sawbridge Park development in Hertfordshire.

Andrew Weir of London Central Portfolio, a buying agent, said he was helping a brother and sister in their early 20s who were looking for a buyto-let in the capital. “They are fresh out of university. They have a variety of job options, not all of which are in Britain. They don’t want to delay getting on the property ladder but they don’t know where they want to live,” said Mr Weir.

“They want a tangible asset as a hedge against inflation. It’s a trend that we’re seeing among a younger age group who are not confident of being in one place long term and have a much more mobile approach.”