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4th August 2026 | Baya financial

Month: October 2020

How to take advantage of lender delays

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Well it’s Friday again and things seem to be closing in a bit… let’s hope the valuers keep working.

I thought, as this industry is definitely one of the winners during this pandemic, I would discuss managing timescales and how we can take advantage of them.  Currently the property market is incredibly busy.  That is great, when so many businesses are really struggling… BUT we have to keep abreast of timescales when we are starting our projects.

We are seeing a lot of investors overlapping projects. Not knowing the delays, particularly if you need the funds from a refinance, will cause cashflow and stress problems.

These are the main areas to concentrate on as an investor

  • The timely return of documents.  Lenders have service level timescales, which really can range from 24 hours (bridging) to 15+ days (term).  Our job is to get as full a pack as possible up to the lender, so we don’t keep going into a queue.
  • Use the time we will have to wait for a valuation report to be returned to your advantage.  This can be dead time, so making sure we have a full set of documents required can save many days, as we can get that in ready for them to meet the report – therefore requiring the underwriter to look just the once.
  • Do your groundwork, so you minimise the surprises.  Make sure that your lawyers have seen Land registry documents, so there are no curve balls later on.
  • Source of deposit.  Lenders need the audit trail – so keep those documents in one place for ease.
  • Buildings insurance – put that on risk, ready for the reinstatment value confirmation from the valuer, again that eases the last minute stresses.
  • Valuations – we have covered this a couple of weeks ago, but as we move towards another lockdown, keep abreast of how your tenants are, so you are aware of any quarantine issues and giving them plenty of notice and contact details so they can let you know if there is a problem.
  • Be realistic of the value if it is a refinance.  If it is needed for another project, make sure  you are working towards the most conservative value – you don’t want drop on the value scupper your plans.

As always we are here to talk you through any questions you have. The advantage of using a broker like us is that we stay one step ahead as much as possible!

Back to basics: what you need to know about JVs

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So here we are again, it’s Friday! It’s been a busy week for us this week, the new lockdown rules don’t seem to be putting off investors which is good to see. It’s important to get your figures right and factor in additional time in these uncertain times – for the purchase, refurbishment and refinance – but on the whole we are seeing serious investors pushing forward.

Today I’m going to talk about joint ventures. It’s a popular topic at the moment, for two main reasons. Investors are looking for an alternative or addition to bridging in this uncertain time, especially when there is planning involved or if it’s a complicated transaction. Many people are looking for an alternative to their savings, and with share prices so uncertain and the premium bond rules changing there fewer options for your cash. Investing in property through another investor is an alternative. You may not have the time or experience to invest yourself, so joining with an experienced investor can work well if done right.

How does a joint venture work?

There are two ways you can structure a joint venture; by using Angel funds, or setting up an SPV which includes your JV partners.

What are Angel funds?

This is where you borrow money on an unsecured basis, as a loan from your investors. You can structure it in many ways, the important factor being that it has got to work for both parties. Usually it is a short term investment used to fund the purchase or refurbishment and then once you can refinance the property it would be repaid.

How does it work alongside mortgage lending?

Lenders will want to see a few things to ensure that they are happy.

  • There must not be any charges on the property relating to the investor
  • The funds must be borrowed for a reasonable interest rate – not too high or low
  • There must be a clear repayment method. This is usually the refinance, so the end value and term mortgage have got to allow this, but if the investor funds have a monthly payment then this must be worked into your affordability
  • You need to be bringing something to the deal yourself. Ideally this would be some cash and the experience.
  • The lender is likely to want to know the source of funds, so your investor may need to provide bank statements or an explanation as to where the funds have come from.

Pros and cons?

The biggest advantage of this way is that it is usually a short term agreement. It’s a way to start a relationship with a JV as once their loan has been repaid then the relationship is over.

Where is can go wrong is that your investor has no control over the deal, it’s all in your name. They need to be ‘hands off’, so make sure they are happy with that arrangement. You also need to add in the contingency of not being able to refinance and pull all their funds out. Make sure you have a plan b, and that they understand what could happen and how you will move forward in that scenario.

What about using an SPV?

This is where you set up a company which involves the investor and you. You can set up the director and shareholder arrangement to reflect who has brought what to the deal, and any directors as well as shareholders with over 20% of the shares will need to go on the application. Bear in mind that your directors are the ones in control of the company, and the more directors you have the longer the decision making progress can be!

Pros and cons of this method?

You have got to be so careful with your due diligence in this scenario, you are entering into a financial application with your JV partners. You will be financially linked with them for a long time, so you need to be sure there is nothing in their background which could cause you issues. Use your solicitor to draw up agreements and understand exactly what you are getting into.

Before you start, you need to understand what your JV partners’ priorities are and ensure that you want the same outcome from the deal. Everything needs to be discussed at the beginning, as things are likely to change and you need to be on the same page as the deal progresses.

The big difference to using angel funds is that this is likely to be a long term relationship, where each member of the company is taking an interest in the deal and therefore you will all win or loose depending on how successful you are.

Make sure you go into this with your eyes wide open. JVs can be a great way to grow your portfolio but they don’t come without their own risks. Due diligence is the key word here!

Have a great weekend!

Let’s get COVID valuation savvy!

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I can’t believe Friday has come around again so quickly.  I have written this blog is to keep everyone safe AND try and to curb costly reinspection fees for us all.

So this week we have seen some more restrictions in place, and a more severe lockdown looking likely. With this in mind I wanted to talk about valuations; and how we can keep them as smooth as possible over the next few months – as it’s not looking likely that it will be getting better soon!

Prevention is better than cure… so the easiest way to manage valuations at the moment is to try and arrange them for when the property is vacant.

For purchases

This should be easier (unless you are buying with tenants in situ). It’s really important to speak to your agent and find out if anyone is living there before you view the property anyway and this may affect your buying decision.  Get them to confirm that there are no vulnerable tenants or those with COVID/self-isolating.  They should also have their COVID procedures to protect all involved.

The difficulty is that you are paying for the valuation, in a sellers market, but have no control over the visit.  Any ‘muck’ ups are at your expense.

For refinances

There’s a common misconception that you need to have your property tenanted to get the best valuation figure; This just isn’t true for a number of reasons:

  • The surveyor will use market rent rather than the rent you are receiving for the property. Their argument is that charging above market rent is not sustainable, particularly if you have a newly renovated property.
  • The rental may not even matter to your project anyway. If it has a high yield, then it’s less likely to affect your max borrowing, therefore not something to be concerned with. The only time it may affect the valuation is if the surveyor feels that the property has not got sufficient demand – having a clear interest in the property and Spare Room information can counter act this. Try and get ASTs signed/deposits paid without the tenants living there if you time it right.
  • Where you are looking for a commercial valuation on a large (7 bedroom or more) HMO it’s slightly different. The surveyor will still use the market rent though, so having some ASTs signed and deposits paid may help, but we see market rent used rather than passing rent in most of these scenarios.

The advantages of valuing a vacant property

I talk about this with lots of my clients, as an alternative viewpoint

  • Your property looks beautiful!
  • You may have decided to pay for some professional photos to be carried out for marketing and your portfolio, so arranging the survey visit at this time means they get the same view. (keep appointments separate!)
  • It’s the best your property will look, when tenants move in it will never be quite as clean and tidy so take advantage of it!
  • This will help you demonstrate and back up your value figure and rent estimates.
  • It creates a much better impression for tenants. You’re not asking them to leave for a valuation shortly after they move in
  • You haven’t got the extra admin of arranging a time that they can all be out the house, or the worry of finding out about someone self isolating the day before the appointment!

What if your property can’t be vacant?

There will be instances where having a vacant property isn’t possible. We had a case last week where the client is buying a tenanted property and will serve notice once it has exchanged. This property has highlighted that you need to be extra cautious when arranging a valuation.

The surveyor obtained keys from the agent, the tenants were given 48 hours notice and advised to be out of the property for the appointment. The valuer found a tenant who was showing COVID symptoms and self isolating in his bedroom! The surveyor was understandably furious with the situation.  Thankfully we worked with the lender on what had been inspected – thus narrowly avoiding an additional £900 charge to revisit the property and complete the survey.

So my top tips in this scenario would be:

  • don’t assume that your agent is doing anything! You need to check that all tenants are aware of the appointment and have confirmed that they will be out – preferably 48 hours before, in case you need to move the appointment.
  • Ideally you can meet the valuer at the property to ensure that it is vacant
  • If that isn’t possible then ask for the agent to meet the valuer, so they can check the property before anyone enters. These rules may now change due to the additional restrictions in parts of the country, but it’s worth asking.
  • Ensure that your tenants are clear on their responsibility to their housemates as well as their landlord if they are showing symptoms and/or have to self isolate.

I hope this helps, if you’ve got any other questions then please give me a call. Have a good weekend everyone!

Case Study: A refurbishment in progress

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Happy Friday everyone.  As the Winter closes in… hopefully not us! I thought it would be good to give an update on a case that we blogged about some months ago.

The property got caught up in the lockdown back in March; it was stopped by Octopus and we were able to work with Lendwell to complete the purchase.

The property is a detached grade II house.  A solicitors practice had been using it for some considerable years and our client is reinstating it in it’s original glory and selling it.  Interestingly, whilst completing the works, an elderly gentleman (85 years old) came round as he had lived in the property as a child – his name and date were on his bedroom wall behind new wallpaper! He was able to give some valuable insight which our client found really helpful.  Our client has also managed to visit the adjacent properties to see their original features to help him with his restoration.

The important areas to focus on as an investor are timescales and costings during the current climate. The project has had issues with builders, particularly on the grade II areas.  It’s surprising that a builder can do a really shoddy job and think it looks great – but doesn’t meet the grade II regs that he has been paid for!  There have also been time delays getting materials as I am sure you have all encountered.

The client has had 2 drawdowns from the lender.  As his attention to detail on the paperwork is top drawer, the drawdowns have been really smooth and timely.  It is important to get these details right, as it can cause delays, usually when you don’t have the time or the funds for a delay. Lendwell are keen to build relationships with their clients, and the feedback that we have had for this client has been so positive.  This will make it so much easier when we approach them for the next project, as the client has proven their professionalism and commitment – which often helps when the project isn’t so straightforward or not quite as profitable!

We spoke to our client, Greg from Chamberlain about his biggest challenges about his project and he commented:

“It has been getting started on the outside works and the windows. These parts of the project have been the only areas where we’ve been at the mercy of other parties, namely the local conservation officer to sign off to sign off the window drawings and the building firm whom I had engaged to build a wall to create a courtyard garden.

The building is Grade II listed, so without the sign off of the local conservation office I was unable to order the manufacture of the new timber sash windows which has meant we’ve not yet been able to begin the installation. Once we were able to arrange a meeting on site with the chaps making the windows and the conservation officer it was agreed there and then. This week I visited the workshop where the windows are being handmade and we have a fitting date for later this month. I was hoping to have the installation begin at the end of August.

For the garden wall at the rear of the property, the original building firm I had engaged let me down. Three months in all they had managed to do was build a sample panel of bricks I was embarrassed to show the conservation officer, block a drain with the mess made in the process and grossly miscalculate the amount of bricks required to build the wall! Frustrating to say the least but during this time I had an inkling things were going the wrong way. I was able to engage a local firm who are due on site in 3 weeks’ time to begin the works, which is the final element of the project. Party wall agreements have been signed and we are ready to go.

I think pent up demand during lockdown has meant there is a huge demand for builders and quite often they don’t communicate as well we would all like. When there’s big demand I think  many become complacent and forget about the times when things may go quiet. Consequently, they don’t pick up the phone or call you back. In the case of my first builder, in hindsight I don’t think they had the experience required to deliver the works to the standard we need for a Grade II listed building. I am confident we have finally found a capable firm though, with a healthy track record and financial position”.

I have included some update pictures of where the client has got to, there are more on our Instagram page @Bayafinancial and we will share the finished article when we get there!  You can see all Greg’s progress pictures on his Instagram page, @Chamberlaingrp

Some examples of what we have achieved for our clients

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This week I want to talk to you about what we do and give you some examples of the types of deals we are able to help with.  We have been talking a lot recently about commercial and HMOs but that’s not all that we do!  Here’s a couple of examples of what else Baya have completed for our clients.

A seemly ‘vanilla’ case

We were asked to help raise some money on a client’s portfolio a couple of months ago.  She has about 20 properties, all in her personal name, which she has build up over the last 15 years.  She had some issues with a bank during the crash of 2008 which took a long time to resolve, causing some credit problems. On the face of it this was a straightforward case but when we delved a bit deeper there were some issues:

  • The overall portfolio yield wasn’t enough to pass the majority of lender’s stress tests, meaning most lenders would not be able to help at all. This can be the case with older portfolios with properties bought before the new rules came in.
  • One of the properties has been used as a holiday let as the client was looking to increase her income. Again this is something most lenders cannot help with.
  • One property was a flat above a restaurant in a parade of shops, so many lenders would not look at this either

By using more specialist lenders, we have been able to raise funds against 5 of her properties and pay off some property related debt. This has put her in a position where she can start to grow her portfolio again.  In this instance, we used two lenders.  We chose lenders who not only do not look at the outside portfolio, but also who have the most generous income multiples for rental properties, particularly for property in a personal name as this is often much higher than for limited companies.  We found a specific lender for the property above commercial in order to maximise the amount we could lend, as many restrict the loan to value of these properties.

Refurbishment and conversion to residential from semi-commercial

A client approached us to buy a small semi-commercial property in Manchester.  It has been used as retail on the ground floor but was now vacant, with a vacant flat above.  His plan was to convert the whole property to two flats to rent out under permitted development.  The end value and rental was good, and he has experience so this seemed like a straightforward refurbishment bridge.

We then found out that the planning usage for the upstairs property was actually a tattoo parlour, and so it fell outside of permitted development rights.  With the right lender on board, however, this was not an issue and we were able to complete prior to planning being approved.

Why are Baya and our lenders different?

We are a broker who builds relationships, as I’m sure you know.  This is not just for clients though; we are so careful with the lenders that we work with.  We need to know that we can trust them to deliver on what our clients need.

We have started working with more ‘vanilla’ lenders, and but that I mean lenders who require more from their clients in terms of income, credit, property type, source of deposit and so on.  The rates are lower, but they are strict with their criteria so its not for everyone.  What is so important is knowing where you fit within the market and how rate conscious you can afford to be – and that’s where we can help!  We will find you a solution that works for you, with your experience and goals in mind.