First-Time Buyers Becoming Landlords: A Growing Trend

The barriers for first-time buyers becoming traditional homeowners remain high. However, the barriers to becoming a first-time landlord and getting on the property ladder are lowering.

February 10th, 2025

First-Time Buyers Becoming Landlords: A Growing Trend

The number of first-time buyers who are also first-time landlords remains limited. Obtaining buy-to-let mortgages as a first-time buyer is often more challenging. Lenders often impose stricter criteria.

Data from Hamptons indicates that 35% of homes sold by landlords are now purchased by first-time buyers (FTBs). This is a significant increase from 16% in 2016.

Not all of these are purchased to live in, with a number being purchased as investments.

Additionally, in 2024, there were 3.1 first-time buyers for every buy-to-let investor in Britain, indicating a competitive market for new landlords.

The Telegraph insight suggest a growing interest among first-time landlords, although precise numbers remain unclear.

It’s Not Just About Affordability

First-time homebuyers often rely on high loan-to-value (LTV) mortgages, requiring substantial deposits and facing stringent affordability checks. For landlords, however, buy-to-let mortgages come with a different set of criteria:

Rental Income as a Metric: Lenders assess rental income potential rather than personal income. This approach makes financing more attainable for those with lower personal earnings.
Interest-Only Mortgage Options: Many buy-to-let mortgages are interest-only, reducing monthly outgoings and making cash flow management simpler.
Fewer Emotional Constraints: Homebuyers might overextend financially for a dream home. In contrast, landlords make decisions based purely on yield and investment returns.

The UK’s rental market has seen sustained demand. This is due to lower barriers to entry. Affordability challenges for buyers drive this demand. There is also a growing preference for renting among younger generations. This demand provides first-time landlords with:

Professional Support Availability: Letting agents and property management services simplify the process for new landlords.
Predictable Tenancy Demand: Properties in high-demand areas are quickly rented out, ensuring steady income.

When you combine these factors, you start to realise something important. FTBs are seeing rental property as a way to get onto the property market. They can benefit from appreciation in values. This is true even when their personal income multiples don’t allow them to buy for their own occupation.

HMO or AST?

The number of HMOs in England and Wales has risen significantly. There are over 475,000 HMOs across the country as of 2022. HMOs offer average rental yields of 7.5%, outperforming traditional single-let properties, which yield around 3.63.%.

Typically lenders have been reticent to lend to first time landlords for an HMO. However, Shawbrook Bank reports that HMOs now constitute 34% of its buy-to-let business. This is an increase from 27% the previous year.

All in all, HMOs are more complex and regulatory heavy. However, they do offer benefits. This is true even for the first time landlord.

The First Time (old) Barrier

First-time landlords (FTLs) often face more challenges in securing financing for buy-to-let properties than experienced landlords. These difficulties stem from a combination of factors. These factors include lender risk assessment, a lack of track record, and specific regulatory and market conditions.

It doesn’t have to be a preventative issue. There are good reasons for first-time buyers and first-time landlords. Additionally, the view among lenders is changing.

Financing as an FTL can be challenging. Careful planning is crucial. Sound financial management is necessary. Professional guidance can help overcome these obstacles. Get in touch if you want more details.

The Bottom Line

The barriers for first-time buyers becoming traditional homeowners remain high. However, the barriers to becoming a first-time landlord and getting on the property ladder are lowering.

The view of lenders is becoming more friendly. With an active rental market, we expect it to grow.

If you want more details on how to finance as a first time landlord, then get in touch below. If you are a first time buyer or first time landlord, feel free to get in touch.

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.