Towards the end of 2009 Rightmove predicted that 2010 would be the year of the professional landlord.
The property website warned that post-election 2010 “we could see less forbearance shown by lenders to those with accumulating arrears”, meaning that more forced sales were expected in the latter part of 2010. Rightmove said it measured a 15% fall in the number of properties advertised for rent in the last six months of 2009 and that it believed existing landlords could find themselves in an increasingly privileged position in 2010, where competition from new landlords is frozen out by a dearth of buy-to-let (BTL) mortgages.
This last point only serves to strengthen the professional landlords hand in that it should enable them greater access to the limited number of available buy-to-let deals through their contacts, experience and market know how.
Of course intermediaries can play an important role in helping landlords of all shapes and sizes operating in the BTL market. Sufficient market knowledge and experience will enable them to accommodate an assortment of client needs, ranging from portfolio mortgages for professional landlords through to amateur landlords. This will inevitably come in the form of ensuring BTL clients get the best available deal at the correct LTV with the best rental income requirements at competitive interest rates.
But in addition to this there are other elements in the process that brokers can become involved in such as insurance and even looking to set up an affiliation with a lettings agent for clients with a growing property portfolio.Providers also have an important part to play in the support process though the provision of products, innovation, service levels and a certain degree of education for intermediaries which will allow them to add value to their BTL client’s requirements.
As in any area of the market, confidence is key to a competitive marketplace. BTL has certainly had its fair share of problems over recent years and it is only now that some tangible confidence is returning to landlords. However, the combination of funding issues, some house price instability and the recent rise in capital gains tax (CGT) has resulted in a number of amateur landlords departing this market.
The rise in capital gains tax earlier in the year certainly caused a number of headlines and was heralded in some quarters as the end for the BTL investor. But a good number of professional landlords have maintained the view of BTL as a long term investment and continue to see the potential of the market.
In order to really get the most from BTL, knowledge is king for intermediaries. A major influence, or should I say benefit, for this type of finance is its willingness to consider valuation and not just purchase price. Professional landlords can source purchases at below market value, whether by simply having the local contacts with estate agencies, or because they may be involved in multiple transactions and can therefore drive a harder bargain.
Short to medium term lenders remain the only current funding route for professional landlords on this basis. Many have the provision to lend 75% of valuation and as such can, in some instances, fund 100% of a purchase price in the case of a discounted purchase. This can be overlooked by some quarters and whilst it is up to providers and packaging partners to help educate intermediaries, it is clear intermediaries should also fully investigate all possible solutions for clients.
At Tiuta we work closely with intermediaries and as such have developed a product that allows professional landlords – including those using a limited company vehicle – as most professional landlords do – to buy a property below market value, fully funded, and then transfer that loan to a BTL deal and release all the capital uplift. This enables them to go on and build a portfolio without huge capital injections and works to give landlords, developers and investors the security of a guaranteed buy-to-let mortgage after completion of the works.
For landlords, both professional and amateur, product innovation remains the key driver in this market but this has to be balanced by a sensible attitude to risk. It is also time we stopped ostracising otherwise successful entrepreneurs who may have accumulated some minor credit impairments in what has been one of the most severe downturns experienced for many years. Unfortunately, many lenders continue to do so, but there are some signs that BTL is moving in the right direction especially for influential elements such as professional landlords.
Intermediaries need to recognise this and look to broaden their scope when assessing ways to target and service such clientele. Fortunately help is out there if they look in the right direction.
George Patellis is CEO at Tiuta
