In the live webchat, Tan gave his advice to readers on a number of questions, including queries about particular cases, how to start targetting professionals and what brokers and landlords can do to improve their BTL business propositions.
Good morning and welcome to our buy-to-let webchat. We will begin at 11am but if you have any questions you would like to ask our expert Ying Tan, submit them in the comment box above.
mortgagesols
I am Ying Tan Managing Director at The Buy to Let Business. I would be deligted to discuss/answer any questions you may have regarding the buy to let market.
ying tan
My buy-to-let customers only have a couple of properties. Professional landlords tend to be below the radar, but do you have any advice on how I can target them?
max b
Hi Max, there are a number of networking events around various parts of the country. The NLA (National Landlords Association) for example hold these on a monthly basis. The attendees are more established landlords who quite often have portfolios in excess of 10 properties. If you are able to attend these, this would be a good starting place. If you have bigger budgets then you can invest in google pay per click for keywords such as “Mortgages for Large Landlords,” “Portfolio Landlords” etc. Enquiries may then be directed to the relevant place on your website and a large landlord lead will follow. Also try working with local letting agents. Once you have a large landlord client base ensure you ask for referrals as like minded individuals mix. Business will then soon snowball.
ying tan
I want to diversify my buy-to-let portfolio and explore new pastures. Vanilla BTL is a good investment but what area of the market should I turn my eye to next?
desmond
Hi Desmond, To diversify you will need properties that are different to your current properties within your portfolio. By Vanilla I presume you mean a standard house rented to a family or professionals. This should give you good capital growth in the future but may not give you a high yield.
With this in mind you could look at getting properties which are rented to students which is slighly more exotic and returns a much higher yield. Ex local authority houses with lots of rooms are ideal for this. You may have to compromise on capital value increase but the rental yield will be high. The other advantage of students is that they pay termly as opposed to monthly which increases your cash flow.
Funding for student properties is still readily available, just ensure you check with your local council in regards to possible HMO license. To have a wider breadth of choice of mortgage lenders you should stick to no more than 4 students on one AST agreement.
I personally have properties renting to students at £1200 per month, the same property to a family would rent for £850 per month.
ying tan
I’ve noticed more applicants applying for resi mortgages on likely buy-to-let properties. I know it’s wrong but if lenders are turning a blind eye and it’s not provable, what’s the compliance position?
a.n other broker
Hi, This is a slippery slope downwards and if you are aware of it being a residential property and they have applied for a buy to let mortgage you should 100% not proceed with the application. Lenders are very hot on this at the moment and if you knowingly submit an application you may be removed from their panel, this affects your long term position as a broker.
As brokers we should do our own due diligence to satisy ourselves that this is not happening. At The Buy to Let Business we ask all clients to sign a declaration confirming they will be letting the property, as well as using a common sense approach when we do our fact finds to ensure we are comfortable that the client will let the property and not live in it.
Recently lenders have moved away from doing buy to let mortgages for first time buyers with this in mind. In my opinion lenders are not turning a blind eye to this.
ying tan
I let out a property to a number of students. It has come to my attention that some student properties, or Houses of Multiple Occupancy (HMOs), are subject to a licence. How do I know whether I need a licence or not? How much do they cost? And are there penalties for operating an HMO without a licence?
audreigh j
Hi Audreigh, you are correct some student properties are subject to a HMO license other properties may not be. It is best to check with your local council as it does vary from council to council.
Equally some lenders also have their own definition. The cost for the license can be around £1000 but again varies from council to council. As a general rule a HMO is when a property is occupied by 5 or more people comprising of 3 or more households.
There will no doubt be big penalties running in to the tens of thousands, so it makes financial and commercial sense to ensure you have a HMO license in place for the relevant properties. Good Luck!
ying tan
Our next question has come in from Colin: “I have two buy-to-let properties with small mortgages which generate a decent income. In the current economic climate I am in the process of dotting the ‘i’s and crossing the ‘t’s to make sure that my finances are watertight should the unexpected happen.
To that end, I have just taken out an insurance policy to cover me in the event of rental voids. Are there any other insurance policies I should be looking at, other than the obvious buildings and contents?”
colin
Hi Colin. The other key insurance which can be obtained via providers such as HomeServ/BritishGas that is very useful for landlords is one that covers boiler breakdown or water leaks (Emergency Home Cover).
Cost can be from as little as £15 per month and tenants can call them directly if there is a problem. This potentially saves you from receiving a Friday night call on a cold winters evening from a tenant saying the heating is not working, and the cost of a plumber for an emergency call out which can be astronomical.
ying tan
I am thinking of buying a two-bed flat at auction, hopefully for around £75,000. I have a £25,000 deposit to put down and about £15 more to spend on renovations (the flat is a repossession and may need some work).
I think the flat could generate over £500 a month. What are my chances of getting a buy to let mortgage for an auctioned property? What lenders should I be looking at?
daniel
Hi Daniel, The key areas here to consider are ensuring the property is lettable/habitable, in its current condition and going with a lender who’s current turnaround is fast and reliable.
BM Solutions currently have quick turnarounds and your broker should be able to have a chat with the surveyors (colleys) to establish whether the property is likely to be suitable, getting this assurance upfront is very helpful. If the property is not habitable then you may have to go for bridging in the first instance this is much more expensive.
You will also have to wait six months before you can then remortgage to a standard buy to let mortgage, although lenders such as Paragon and Northern Rock may consider it within 6 months if you can evidence the proof of works.
ying tan
That concludes our webchat and we’d like to say a massive thanks to The Buy to Let Business’ Ying Tan for taking the time to answer questions.
