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Buy to let for the many, not the few

by: BM Solutions
  • 08/10/2019
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Eight out of 10 landlords have fewer than five properties, and four in 10 have only one. Is your attention focused in the right place?

 

The private rented sector (PRS) is still dominated by a diverse group of landlords with just a handful of properties.

More than 90 per cent of them trade as individuals, not limited companies, and many have straightforward borrowing needs.

But limited company lending, portfolio business and complex buy-to-let punch above their weight in the mortgage intermediary press.

They are important too, but don’t let the move towards larger-scale landlord lending fool you. It’s not always the size of the portfolio that determines the opportunity a landlord client can offer you or the help you can give them.

 

Landlord lowdown

Nearly half (45 per cent) of landlords have just one rental property. This represents 21 per cent of the PRS, according to the English Private Landlord Survey 2018.

A further 38 per cent own between two and four properties, representing 31 per cent of the sector.

That totals 83 per cent of landlords with up to four properties and just 17 per cent with five or more.

Of course, the larger landlords represent a huge swathe of the PRS – 48 per cent – but the majority is still owned by those with small portfolios.

Despite the undoubted professionalisation of buy to let, the rise of limited company lending and the reduction of aspiring first-time investors, non-portfolio landlords are still the most significant segment of the sector. Even if they are not expanding, they need to refinance periodically.

Many of these smaller-scale landlord clients need the help of a good broker to find the best products available in the traditional, standard buy-to-let sector.

 

How can you help them?

 

Education: Landlords with a handful of properties are more likely to manage them in addition to their day job than those who manage large portfolios as a full-time business.

They may therefore not be fully up to date on each and every change faced by landlords over the last 10 years, and those set to come. You can talk them through their obligations, educating them on everything from the Prudential Regulation Authority lending rules to the withdrawal of tax relief.

Rate: All borrowers want to pay a low rate.

Those with the most complex needs may be willing to pay a premium for a niche mortgage that meets their requirements or requires bespoke underwriting.

But your small portfolio clients should not have to pay over the odds in terms of rate. Those landlords with a clean credit record and numbers that stack up on their investment properties will rightly demand a competitive mortgage with minimal and transparent fees.

If they do not want limited company lending, they do not need top-slicing and they do not need to fix for five years to access the level of borrowing they need, they should have access to one of the lowest buy-to-let rates on the market. Make sure you find them one.

 

Service: All mortgage borrowers want their deal to be done as quickly as possible, of course, but some buy-to-let underwriting process now take longer because of the new requirements for portfolio lending. Those with complicated circumstances understand that a more detailed investigation of their application is needed.

Your non-portfolio clients with straightforward needs shouldn’t have to wait for a decision and they should be able to get an answer immediately.

BM Solutions led the way with the One Minute Mortgage in 2003 and your landlord clients can get a decision within seconds, 24 hours a day. Standard buy-to-let clients expect the same level of technology and service they’d get from a residential mortgage lender.

Its streamlined portfolio lending process means that smaller portfolio landlords can benefit from leading technology and service too. Take away the hassle and uncertainty by choosing an established and trusted lender.

Be proactive: Of the 94 per cent of landlords who run their portfolio as an individual not a limited company, many do so as a hobby or a long-term pension plan.

As such, they may not always remember to come to you to renew their deals or even keep track of them. This means they run the risk of reverting to their lender’s standard variable rate (SVR) if you are not proactive about keeping in touch.

You need to communicate with your small-scale landlords regularly enough that you are front of mind if they do think about switching deals, as well as getting in touch at least four months before renewal to ensure you are not beaten to it by the existing lender.

After all, they will be offering a rate switch before the existing deal expires, so get in early to make sure your client knows it’s you that’s looking after their best interests.

 

 

For the use of mortgage intermediaries and other professionals only

If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication to be used with or to advise private clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. Birmingham Midshires is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628. This information is correct as of October 2019 and is relevant to Birmingham Midshires products and services only.

 

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