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Buy-to-let may help with first step on property ladder

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The ever-increasing price of houses is making it more and more difficult for first-time buyers to get a foot on the property ladder. Added to this is the fact that the base rate of interest has been increased yet again, making mortgages more expensive and placing that first purchase even further beyond the reach of newcomers to the housing market.

It is easy to see how many people who do not yet own a home of their own could become frustrated and pessimistic about their chances of ever doing so. However, according to one investment adviser, the current climate if anything should be embraced as an opportunity to both obtain a property and make it work as a source of income.

A key problem for first-time buyers is raising a deposit to obtain a standard residential mortgage. James Grantworth, marketing director Of Let Mortgages, advises such buyers to consider the buy-to-let market instead. It is possible, he says, to obtain a buy-to-let mortgage without needing to collect capital for a deposit as long as the investor is willing to shop around and drive a hard bargain.

According to Mr Grantworth, the buyer must first identify properties - whether existing, new build or off-plan -that interests them. Then, they need to negotiate with the owner or developer for a discount of around 15 per cent on the market value. This creates "instant equity" and the prospective buyer should hopefully then be able to find a lender who will advance them the money for a buy-to-let mortgage without any deposit.

It may take some searching around to be able to put all the components of such a deal together, he added, but once the various deals are in place, the buyer has "an opportunity to invest in the UK property market at zero cost".

A buy-to-let investment may represent a useful vehicle for buyers looking for a residential property of their own. By renting a property out for a few years, then selling on at an increased price, they can both cover the payments on their buy-to-let mortgage and then use the profit made on the resale to fund a deposit on a residential mortgage.

All the signs are that buy-to-let is one of the safest forms of investment in the current climate. A recent report from the Royal Institute of Chartered Surveyors revealed that the rentals market in the UK is running at a nine-year high, fuelled by "a strong economy and low unemployment".

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