Are you our next young landlord? Here are 7 things you need to know

An amazing 1 in 3 UK adults has an aspiration to become a landlord. Of those questioned by Market Financial Solutions, 60% thought property investment was a good way to build long-term wealth. In addition, 37% said they would opt for property investment rather than stocks and shares, while 53% agreed property was a safe and stable asset.

The survey also found the younger you were, the stronger your appetite for property investment. When grouping the results by age, more than half (54%) of 18 to 34 year olds harbour an ambition to be a landlord. This compared to the 33% all-age average and 14% of those aged 55 and above.

If you’re one of the under 34s tempted by buy-to-let and would like to start a property investment portfolio while you’re still young, here are 7 things you need to know:

1. You can rent out the only home you own: it’s a novel trend but some young buyers forgo living in the first property they buy, preferring to rent it out instead. The idea only works if the landlord stays in rented accommodation themselves, ensuring the income from their rental - less tax and expenses - covers their own costs.

2. 18 years old may be a bit ambitious: unless you are in the ultra-fortunate position of being a cash buyer, most landlords use a buy-to-let mortgage to invest in property. Lenders do not look favourably on 18 year-old wanna-be landlords. Why? Usually they don’t have the credit history or wage required to meet affordability requirements. 

3. 21 is more likely: lenders are more likely to consider a buy-to-let mortgage application once the borrower hits 21. They will, however, still want evidence of a good, steady income and a sparkling credit history, while owning your own home and making regular mortgage repayments would also be a bonus.

4. You’ll probably need a bigger deposit: even if young landlords have a blemish-free credit history and a healthy pay packet, lenders will still expect a substantial deposit. While owner-occupiers can get away with a deposit equating to 5% of the property’s value, a landlord typically needs to have a deposit worth 30-40% of the purchase price.

5. Your mortgage rate will almost certainly be elevated: lenders see buy-to-let as a riskier activity than owning your own home due to fluctuations in tenant demand, rental values and property management costs. As such, they apply a higher mortgage rate to a buy-to-let loan compared to an owner-occupier one.

6. You’ll need to understand what a yield is: it’s the yield which will determine whether your investment makes a loss or profit but don’t panic if you’re unsure of how to calculate this. We can crunch the numbers for you – just tell us the price of the investment property you want to buy and the size of your deposit, and we’ll work out what rent you could achieve, together with the yield.

7. You’ll know where to find the best yields: the best yields are where the sweet spot is – that’s when the price of an investment property to buy is perfectly balanced with the amount of rent the accommodation could generate. The yield will depend on the type of property bought, for how much and where in the country. A good agent will help you track down the best yields for your budget.

If you would like to know more about becoming a landlord and sourcing an investment property, please get in touch. We can prove age shouldn’t be a barrier to buy-to-let.