Buying property to rent out before owning first home

[turnedwheel]

I live in London due to work. I'm not sure if I will live here for ever. I don't really want to be stuck in a massive mortgage and so I'm happy renting for the next few years.

I do feel a bit of fomo about not being on the property ladder. I can easily afford a house in my home town with a buy to let deposit (25%). Obviously that cheap of a property wouldn't be my first choice but I'd definitely live in it if I had to and be close to family.

Is this a daft idea?

I thought you weren’t allowed to get buy to let before owning your own home but I could be wrong

Definitely not something I've come across? Happy to be corrected though. Maybe certain mortgage products are like that.

I don't think its entirely a daft idea as long as you choose carefully, bargain hard on price and go with a repayment btl mortgage and not an interest only one. The most important thing is to pay down the capital as quickly as possible, overpay if possible.
So many interest only btl landlords are really struggling to make a profit now that borrowing costs are more normal -and capital appreciation, for the time being, seems to be a distant dream.

You are wrong

You can buy a Buy To Let as a first time buyers but there are a number of lenders who insist on You owning your own home so it just means there are less to choose from

Mortgage lenders like proof you have somewhere else to live, so that you don’t get a BTL and then live in it yourself (bypassing some affordability criteria from residential mortgage ).

You’d probably be OK with proof of a job and long term rental at the other end of the country. A good broker would know which lenders would accept your circumstances and save you wasting money on application fees for those that wouldn’t.

Youd have to work out what your rental yield would be after management charges, upkeep and mortgage interest, insurances, then take off tax and see if this is enough to make a profit and cover downtime between tenants .

If you’re close to or at the HRT threshold already, it will be harder for you to repay the capital on the mortgage as this comes from the post tax ‘profit’.

You’ll pay CGT when you sell it which will knock a chunk off any appreciation.

It’s not a good time to be an amateur Landlord with high interest rates & a stagnant property market making it far easier to make money on your savings by sticking them in a high interest account. No risk/ no stress.

Make sure you do loads of research into being a LL in 2024 and you will come across lots of horror stories that will probably make you change your mind. Even on Mumsnet there are people who have been unable to get tenants to leave when they want them to for example, or tenants who have trashed their property.

Of course you may be lucky and have excellent tenants. But why take the risk when you can get a good return on savings at the moment? FOMO isn’t a good reason, I’m afraid.