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Who’s up for a bit of commercial funding?

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Happy Friday everyone.  Sadly back to the UK weather – it really was very lovely working from a holiday apartment.

The commercial sector has been hit much harder due to COVID.  To be honest, due to the increase in online purchasing, the larger retailers were already having issues, but COVID is definitely nailing a few extra nails in.

So what is available and how has the market changed with regard to lender appetite?

Fully commercial

Well owner occupied, whether fully or on an opco/propco basis is almost impossible.  Lenders still deeming this as very high risk; that said I think the door is just latched, rather than locked.

Semi commercial

This is still a popular area and lenders are offering a number of products up to 75% LTV. Each lender has its own appetite regarding the commercial covenant, but the important part to check is how they will calculate the rent. As always there are a number of ways to skin the cat; For example only allowing the residential rent to raise the funds; or allowing a particular percentage split of commercial to residential.  Please make sure you have your sq footage figures ready as well as the value splits in advance of spending on valuations, just to be sure it works.

Commercial to residential conversions

This is probably the biggest area for investors, due to a number of properties falling into the Permitted Development area.  This has been further relaxed recently, providing many more opportunities. We have lenders that will lend against the property with a commercial usage, ie. even without full planning coming through.  Each council has its own way and timescale for looking at these properties so I would always suggest having a chat with them to see how they will treat it. Having something in writing from them can really help with the lender’s application too as it can mean the difference between completing before planning or PD is approved.

Investors are such a savvy, thick skinned breed. We have weathered so much over the decades, that having a creative approach to offer options on a given property will always keep us ahead of the economical fallout.  Your strategy may need to change but there will always be opportunities out there!

Diversifying your portfolio: Serviced accommodation

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Hello everyone, in what seems a very wet week for most.

I am, however, writing this from an apartment in Belaggio, Lake Como.  I have realised that you really can work anywhere and at a time when we have been so isolated, a new set of walls is as good a break as any at the moment.

The changes due to COVID have made us realise just how easy it is to have a working break.

Holiday lets are now back on the product lists for a lot of lenders – rightly so, as they are really in demand.  Staycations are seeing quite a surge in bookings, even going beyond the usual end dates of school holidays.  It makes sense as we currently have 155 countries on the quarantine list, so holidaying abroad is not always an option.  This is not going to change any time soon with a combination of a significant increase in price for foreign holidays for next year, cautious holiday makers and a new love from many of UK holiday destinations.  Many people (Ellie included!) have had a lovely holiday in the UK this year and are far more likely to do the same next year.

What we can offer

Lenders are far more keen on holiday lets rather than serviced accommodation; the difference being that a holiday let is somewhere you would stay for a long weekend or a week, rather than something that would be used for a single night’s stay.  City centre apartments are more tricky to place so think about your location and the types of tenant you will attract.

Ideally the mortgage would fit based on the 12 month AST figure.  This does give us more flexibility with lending, and in these uncertain times does give the lender, and you as the borrower,  more options.  If it doesn’t fit on the single AST figure, then we would need to see to see a track record of this or another similar property.

In terms of experience, we do require you to have another buy to let in the background, or if it’s a refinance then you need to have owned it for 12 months.

You can use any platform to advertise your property, Air BnB did have a bit of a bad reputation but this seems to be over now, it is far more important to look at the type of client you will attract.

As always, please give us a call if you want to chat through any enquiries you have.  Have a good weekend and enjoy the sunshine!

Case study: The importance of the ‘route of least resistance’

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Happy Friday everyone – by the time you get this I will be on my way to Pontechianale for a well earned break…

This week is a case study on the importance of the ‘route of least resistance’

The case involved a commercial property in London, with planning to change to 3 flats and keep the commercial on the ground floor.  The client is an experienced investor with a mixed portfolio as well as having carried out many refurbishments.  They wanted to borrow 70% LTV for the purchase.  The valuation was ordered within a few days… we had a 5 week completion time and it all seemed on track and straightforward.

We complete on plenty of refurbishment loans, and clients often are looking at the lowest cost option, forgetting that actually what they want is a quick, pain free completion and that they are confident will complete on time. The lender we chose are not expensive by any means and they have very reasonable legal and valuation costs, but they may not be the cheapest headline rate.

It was also important that we had a clear exit in place as lending against commercial at the moment can be tricky.

Everything started out very positive and felt like it would be a fairly painless completion.  Then the first curve ball flew in… there was a £200k down value, albeit the GDV was bang on. The vendor wouldn’t budge on the price and so discussion time was required to decide what to do.  The clock is still ticking. As the GDV came in as initially expected, they decide to proceed.

While this was going on, as happens on cases with a short completion date, we were getting all the due diligence and documents signed off by the lender.

Then we received a call from the client to say that the family has now got involved and offered money so the funding is not required at all.  We hadn’t asked for an up front fee, so you win some and lose some. He’s a good client of ours, so we know he is happy with our service and we moved on to other cases.

I then got a call a week later to say there was some confusion on the family help and £200k net is still required for completion in 2 weeks.

This is when clear communication was required. Due to family funding, the shareholders increased from 2 to 7, which included funds from 6 different accounts, including 3 offshore companies, which increases the due diligence. You think COVID is a moving glacier, cases can be a bit like that too!

The important thing to work towards is The Route of Least Resistance… always focus on the prize. This is particularly important on a case that has exchanged and requires a speedy completion and includes many stakeholders.

The Directors were a dream to work with, but the client’s solicitor gave us many challenges.  I have learned over the years that the name and prestige of a law firm does not necessarily give you the right solicitor.  It is always about the person actually handing the case that matters.

The lender, Lendwell, were amazing, as always.  They are sensible and don’t invite dramas of any sort. Full communication with their lawyer, Melissa at Lightfoots, also made a huge difference.

Completion was 10th August, all on time.  The client can now get on with the refurbishment and we will be ready to look at the refinance for them once it’s completed.

Baya offers the steady hand on the rudder at all times.  However tricky something may seem, keeping your eye on the prize is what gets it over the line.  Thanks everyone involved.

 

The benefits of a broker who wants to build a relationship with their clients

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Good morning all, I hope you’ve had a good week.  This week I’m going to talk about the benefits of a broker who wants to build a relationship with their clients.  We differentiate ourselves by doing things a bit differently to most mortgage brokers, and this is how.

We are not a headline broker!

I have always said to our clients that we never try and lull them in with amazing but unachievable rates.  We want you to come back again and again, so doing the right thing is key.  When we quote a client on day one, we will do all we can to ensure that we deliver on that quote.  Things can change, and obviously the valuation can change things but in the majority of cases this is what we complete on.

The rate is also not the most important factor in choosing a lender and a broker.  We are conscious of the route of least resistance, that trying to fit a square peg in a round hole is extremely time consuming and probably won’t end well!  We have worked with our lenders for long enough to know that sometimes even when they say they offer something it generally doesn’t happen.  For example; we have a lender who says they lend to ex-pats, but in reality they make it so tricky its just not worth it.

We don’t like to over commit and under deliver.  We run our business on returning clients and recommendations and want you to love the service we provide.  We will spend time talking through deals and we have plenty of experience handling unusual cases; so whatever curve balls are thrown our way we can usually deal with them!  You will benefit from the relationships we have with our lenders, and their trust in us.  Recently we have managed to complete on a few cases without the exact information the lender required, challenged where we can to achieve something that others just wouldn’t be able to – or take the time to do.

We are transparent with you – if anything changes, we will let you know straight away

This is really important at the moment, as lenders are changing criteria like the wind.  There has been a number of examples recently where we have changed lenders after we have submitted a case as things have changed.  We want you to have all the options available to you, and we don’t want you to be disadvantaged due to COVID, or anything else which is outside of your control.  This gain can be time consuming but we will always put in that time to ensure you have the outcome you need.

We will not step off the accelerator until solicitors have completed

There are some brokers out there that will get to formal offer and stop chasing.  They just don’t have the time or resources to be able to keep speaking to solicitors; trust us, it can be very time consuming. But Baya will chase to the end and we know that this can be the most frustrating part of the transaction, so we are there ready to fight on your behalf!  We know that time is money, and delays on your purchase or refinance can have cost consequences.

Baya financial is a safe pair of hands.

Enjoy your weekend.

 

Credit where credit’s due and why you need a broker with good lender relationships

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Hi everyone, on what is possibly the hottest day of the year.  I have full respect for all those people working all day with masks on.

I thought I should blog this week on how fantastic some of our lenders have been recently.  With the furlough schemes coming to an end, there have been quite a few pinch points in the conveyance process, due to what I call ‘musical chairs’ – really a continual swapping of staff either through furlough or holidays.  What is wonderful is the patience shown In these instances. As a hand holding type of brokerage, we value our calls with lenders.  With all the changes in criteria and risk appetite, it really does require patience to manage all stakeholders in the process.

The 3 lenders I am going to highlight today are:

Fleet Mortgages…

Although they are the vanilla end of specialist and work through a portal system, they have been amazing.  I can honestly say that their communication and seamless transition on a case between different underwriters  is unbelievable.  They really have removed the stress from our cases, which at the moment is worth it’s weight in gold.  They are effective communicators and have such a kind manner. And they always pick up the phone to save a long email conversation.  This week we have had a mortgage offer in under 3 hours from final satisfaction of evidence, in a world when everything appears far slower than ‘normal’.  Thank you Fleet!

Lendwell….

As most of you may know, these guys only launched at the end of February 2020.  We work with a lot of Northern investors, particularly in the HMO and conversion area, and Lendwell have a straight arrow approach of the least resistance . They are such a refreshing lender, who deliver on their terms and do a lot of work upfront to ensure we are able to do the same to our clients.  It doesn’t feel like we are in this weird world when working on cases with them.  High five Lendwell!

Shawbrook…

Well these are the anchor for us at the moment.  They have kept as bullish in this climate as they can, but it genuinely feels like they want to be back to pre-COVID as soon as possible.  I appreciate that for a larger lender, this can be very difficult.  Their ease of having an instant, professional out of office service is incredible.  We have a great BDM in Lee Williams, who is tireless in keeping us up to date, without offering hollow guarantees.  It feels like they really want to get the business over the line, adjusting processes, if necessary. Thumbs up Shawbrook!

It is at times like these, that loyalty and keeping to the original terms are so important.  The market is pretty buoyant, but all of these lenders have helped lower the stress levels at a time when all our anxiety tables are higher than usual. It all goes to show that although low headline rates are great, delivering on service is what really counts right now.

Stay safe, stay sane and have a good weekend

Positive news from the mortgage market

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This week has been a really positive week for mortgage news and I wanted to share some with you! After the stamp duty announcement last week it really is looking like we are starting to see some shoots of normality.

New lower rates

The market is becoming more competitive again and we are seeing lenders compete in the 75% LTV space which is really encouraging. Precise have dropped their single let limited company product rate to match what Landbay are offering. This is a really positive sign that lenders are back to pushing for business through the door and went to increase their volumes.

We have seen an increase of rates across the specialist lenders since lockdown so it’s really promising to see these rates coming down again.

Moving towards 75% LTV across the board

Since March we have seen a reduction in loan to values with most lenders as they assess the market and the future of property prices. Now we are starting to see that return almost to ‘normal’ which is really promising:

  • we can get to 75% (gross) on most bridging cases, including heavy refurbishment where you are funding the refurbishment costs yourself. Where you are borrowing the refurbishment costs then this is restricted to 65% of the GDV, but the initial loan itself is not restricted (as long as there is sufficient profit).
  • We can get up to 75% on term limited company mortgages for single let properties with rates as low as 3.54% on a 5 year fixed with specialist lenders (circumstances vary so please speak to us about what we can offer for you), which is as low as we could get to pre-COVID
  • We can also get to up to 75% on small (up to 6 bedroom) HMOs on a bricks and mortar value. We have got lender options for this too which is fantastic as we can cater for many clients and their circumstances. We still have hybrid valuation options up to 75% too, although these are more limited for now.
  • For large HMOs we can get up to 70% with some lenders. This is great news as we have been a bit restricted in this area previously. I am hoping we will be back to 75% shortly – fingers crossed!

Holiday lets are back

After a few months of uncertainty around holidays in the UK, now that we are allowed to travel, lenders are turning on the tap for holiday lets!

This is great news, especially as I think that the UK will have an increased popularity for holidays moving forward. A combination of people trying out British holidays this year and seeing what amazing places we have, as well as an inevitable increase in cost and apprehension towards foreign holidays over the next few years will mean we need more holiday rentals. I think self contained units will be popular as people want their own safe space, which is great news for investors.

We have a couple of lenders available, one in particular is very appealing. They will lend up to 75%, don’t require any accounts or holiday let experience (as long as you have other investment experience) and will use the market AST rental so there’s no need to demonstrate income you have received for the property.

There are a couple of restrictions so it’s best to speak to us about your circumstances and whether your property fits. The main one is that it needs to be in a location that is suitable for someone to stay for a week. This means it does need to be a holiday location, rather than a city centre.

And we’ve had some planning changes!

Add to all this, the government have announced the relaxation of planning to allow more properties to be converted to residential and extended both out and up.

These changes will come into force in September, so this should increase the number of available properties and allow investors to take advantage of new opportunities. Any refurbishment works that fall under permitted development are easier to complete; they also offer the buyer more certainty over what can be achieved.

As always, if you have any questions then let us know, we are happy to have a chat!

 

Valuation methodology… Is there one?

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Morning everyone – it’s Friday again.  I personally feel that the marathon mentality is now more important than ever; especially for you small business owners. There is, as you know, very little down time.  Be kind to yourself and have courage to take some time off.

Today starts with a bit of a rant, as the methodology behind valuation figures is something really frustrating me.  As you are all aware, there is an array of valuation figures available to surveyors; market value; vacant possession; 180 day market value; 180 day vacant possession; 90 day vacant possession; hybrid; fully commercial….. depending on the lender and property – but does it really make any difference currently to the figures that valuers are putting down?

I appreciate that these are uncertain times, but as an example we recently valued the same 5 flats on their own freehold through two different lenders and only a few weeks apart. The first valuation was on the 28th May and second was 23rd June.  The first had a market value of £1,405,000 and a 180 day of £1,260,000, with demand under 3 months.  The expected value was £1,575,000. The second valuation came in as £1,210,000 market value and no 180 day figure.  How can anybody’s expectations be managed when this happens? How can anyone believe that the price is fair and not just a finger in the air depending on the time taken and the risk appetite of the valuer.

Yet it’s not all bad news

Prices on residential purchases seem to be there or thereabouts,  and the valuations we are receiving don’t seem to be getting much of a haircut. This is encouraging for investors purchasing projects at the moment and we mustn’t forget this fact. It seems to be the end values that are being reduced.

So what are we doing about it?

What we need to learn from our frustrating week is that it’s so important to look at your figures and work our your worst case scenarios going into a deal. We also need to look at options on the term mortgage with minimal exit fees or a short term fixed rate where we can.

We have started working with a new lender who can not only look at a hybrid valuation for HMOs, but they also offer a tracker product with no early repayment charges. This is in response to needing a lender with more flexibility, while still offering what we need in terms of day one remortgages, and allowing investors funds and director loans. These, among other things, are integral to us offering products that work for our clients. Having the flexibility of a penalty free tracker will add another option for our clients to allow the current issues to pass and then look to refinance at a later point.

It’s a hard task trying to stay one step ahead at the moment, but that’s what you as investors need from your broker – we are doing our best to do that in challenging times!

Case Study: Capital raising during COVID

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Hi everyone, hope you are all keeping well.

Capital raises are an important part of the investor business plan – particularly at the moment, when properties prices are likely to come down.  So banking any excess equity allows the chance to get to the auctions and opt for some cash purchases or use it for deposit monies.

That said, currently lenders can have an issue with capital raising, particularly if an ongoing property is not on the cards.

The right choice of lender is really important when considering this. 

We have recently completed on a case which all started and completed within COVID. The client had two unencumbered properties which he wanted to refinance WITHOUT any evidence of where the funds are going. He also wanted 70% LTV.  This was all achieved in 6 weeks.  We started with a desktop valuation, which was all that was available at the time although the confidence level wasn’t enough and we had to move lenders. In the mean time another option Had become available with a full valuation as lockdown eased and this allowed an extra 5% LTV.  We completed a refinance within 6 weeks with this lender even with all the issues that COVID threw at us.

Both properties, by chance, had lease extensions, but those were not paid for out of the funding.

It really is important to understand what you are trying to achieve, before the lender is chosen.  Lenders are still adjusting their appetite regularly, so keeping in constant conversations with them is really important for us to keep abreast with all the updates.

It’s also so important to consider the trade off between the LTV you are trying to achieve, and the interest rate. It may well be that we have to sacrifice something to allow you to have the funds to move on to your next deal, but looking at the bigger picture is key in this market.

Have a good weekend, especially if you are venturing out!

Looking after your credit file in today’s market

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I hope you’ve all had a good week, I’m not quite sure how it’s the end of June already!

This week things seem to be getting busier with more properties secured and some more reasonable prices! Hopefully this is a good sign for things to come.

What I want to talk about today is the importance of looking after your credit file in today’s market. Lenders are being careful with who they lend to, and are more cautious than normal given the situation. This is inevitable really, if there is history of a client not paying a bill or mortgage, they are statistically far more likely to do it again, and with the current financial uncertainty this could become something that is more likely.

Usually, we can speak to the specialist lenders we work with and where there is a good explanation for poor credit they can look to lend. They understand that as property investors you have lots of tenants and utilities particularly can be an issue.

What we are seeing at the moment though, is that this is not necessarily the case. We are seeing some lenders formally restrict their criteria to allow less credit issues, as well as others who usually take a more pragmatic approach have a blanket rule on any blemishes.

So what can you do?

First of all, you should all be checking your credit search each month anyway. You can use a free company such as Credit Karma, who email each month with your new report. they also notify you of any changes to it. This means that if there are any issues, for example something has gone to an old address, or a direct debit hasn’t been paid then you can rectify it immediately – this should stop any future defaults.

Secondly, when you approach your broker for a mortgage make sure you know if there’s anything on the search and give us the exact details of it. This means that neither of us are wasting time applying to lenders who won’t be able to help. It also means you’re not worsening the issue by adding additional credit searches to your file.

How can you future proof yourself?

As well as the above, I think it’s really important to look after two things moving forward.

Cash flow is always key in property development and investment. It’s vital to keep on top of this, and it does nip at your heels. Especially in today’s market you need to be building in contingencies for time and cost to ensure that this doesn’t cause any credit problems down the line.

Being realistic with your costs, timescales and end values are also key to ensuring that things run smoothly over the next 6-12 months. Getting this wrong could impact on your cash flow and credit file. We are happy to run through figures with you on your exit, and where we are looking at a bridge we will always ensure that it fits at a conservative estimate on that exit.

As always, give us a call if you’ve got any questions. Have a good weekend, hopefully the sunshine will continue!

How to navigate through today’s property market

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Hi everyone, I’ve made it to Friday on my week back off furlough! Hope you’ve all had a good week too.

It’s been a bit of a mad week in for us; there had been plenty of enquiries which is great and shows that investors are back to it. There have been so many of you loosing out on properties which have sold for well over what you were expecting though, which has been frustrating. I have likened it to the shops reopening – lots of investors getting excited about being able to attend an auction or visit a property just like we are seeing queues outside every shop this week!

Demand is also outstripping supply, and although new properties are coming into the market there is still a lot less than there was.

Do you want to be an early adopter in this scenario?

Paying above the odds now is not going to do you any favours long term. You’ve got to keep looking at properties at a business transaction and not get emotionally involved. If you’re relying on bridging finance then we need to ensure that the GDV works, and you need to be mindful that if you are refinancing we will need that GDV to work, even if there is a market readjustment over the next 6 months. Now is the time to take advantage of opportunities by making sensible decisions, not to get drawn into a bidding war to win the prize.

With any development loan, whether that’s a refurbishment bridge or ground up, you have to be able to work back from your GDV and have enough profit in the deal to make it work.

How is this affecting valuations?

This is an interesting question! On one hand we are seeing properties selling for in excess of the asking price or auction guide price, and on the other we are still seeing cautious valuations. Valuers are always going to be cautious, and they do have to rely on sold comparable property prices so where sales are only going through now they won’t be available to use for about 3 months. They will also have a potential future down turn in the back of their mind, so they will not want to push the boundaries of what is achievable. Time will tell whether we can bounce back from this quickly, and whether prices continue to rise but I suspect that things will start to calm down over the next month or so. I am not expecting a sustained rise in prices.

Enjoy your weekend, and as always if you have any questions then please give us a call!