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Where do you go for a heavy refurbishment bridge?

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Hi everyone. How are you all holding up? Hopefully there is now and end in sight.

I’d like to share a case with you that complete earlier this week. I think it could be a lesson on ‘route of least resistance’.

The client came to us earlier in the year to purchase a Grade II listed building. It is currently an empty solicitors practice.  Planning was submitted to convert it back to a family home, and this was granted prior to completion.

The property has a low purchase price if £135,000 and needed £82,000 of works; it was also near Wales and not in a city. That combination restricts the lenders available, due to their minimum size fund.

The valuation had come back mid March, so a time when some uncertainty was appearing. That said, the lender agreed to get it offered on a 180 day post works value of £265,000. This was now the 20th March. Just before formal offer was issued, the lender called to say all heavy refurbishment cases were being put on hold for 6 weeks.

Having not heard from the lender, I called them in early May to see what was happening and despite the high profit margins, they declined the case without even refunding valuation costs.

We now needed a speedy solution as completion was set for 8th June.  I got in touch with Daryl Norkett at Lendwell. They only launched earlier as a new bridging lender to the market this year, and this was below their minimum purchase price… but they looked at it and liked the deal and the client.  They issued terms on 12th May based on the pre-COVID valuation, using the full market post works figure of £295,000.  Feeling optimistic, we pushed forward with legals.

They are a lender that works towards sensible solutions, with minimal fuss. Even with slightly higher rates, my client was extremely happy with the low stress approach.

Completion was achieved on time, which was 8th June – just 27 days from issuing terms.

Stress and fuss are often an overlooked, significant, cost. It is important not to forget that when micro focusing on the monthly rate.  This is especially important in this market.  Lendwell completed on the original terms, the goal posts were not moved.  This is something we are seeing more often currently and having that trust counts for so much.

I would like to thank Daryl and Jenny at Lendwell, together with Melissa at Lightfoots. A really top team.   We are looking forward to the next one!

The week’s Baya update

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Hello everyone. I can’t believe how quick the time is going through this lockdown. This week I want to update you on a couple things that are emerging as we start applying for ‘post lockdown’ mortgages.

What do property investors need to know about bounce back loans?

Many people have been applying for bounce back loans, and for good reason. There is limited help available for LTD companies, and we welcome all help from the government to keep the cogs of our business moving. Your accountant will say you can use the loan for any purpose as long as it’s for your business, but that’s not the whole story!

However,  I am finding lenders are not looking at these loans as favourably as you may expect. I have been getting a number of lender emails saying they WILL NOT allow use of the BBL funds.

Some are allowing them to be used with your own cash, but they are being treated very differently than Angel investments.

For purchases, especially for properties that need refurbishment, then you cannot solely rely on the bounce back loan as your deposit. Lenders want you to have some ‘skin in the game’ and the loan still counts as borrowing for the purchase. Some lenders will allow it to be used for some of the purchase or refurb costs, but others will not allow it at all. Not a straight arrow at all.

The other potential issue is the refinance, if you use the bounce back loan to fund a deposit or purchase now on a bridge facility, as bridgers are a bit more flexible, when you come to refinance once works are completed then it may be an issue. This again does depend on the lender.

This is something that I am currently trying to gather more clarity around, and am challenging lenders where I can. I appreciate that lenders choose their own rules, but the purpose of the Chancellor’s funding is to keep the companies buoyant.  If a companies SIC code is for property investment, then how can a lender not allow that to be used.  We need investors to be able to buy, which uses valuers, solicitors and lenders – the cogs of our industry wheels. Why is it that investor companies are always treated differently than other companies?

What about looking at your deal costs and end values?

We are starting to receive our first ‘post lockdown’ valuations this week, and are seeing surveyors airing on the side of caution as we would expect, particularly in the 180 day valuation figure. This is likely to continue for some time, as there is so much uncertainty around a second peak, as well as so many employees on furlough so the full economic impact will be uncovered in the months to come.

The important work is at the beginning of a transaction. Managing end values, particularly if they are more than 3 months away, is crucial to the return on investment. Demand is currently outstripping supply of properties, so sale prices are still holding.   A conservative end value, as well as a contingency needs to be worked into figures as a stress test so you can ensure that we will have lending options, and it’s something that will work.

There are opportunities out there, but we all need to ensure we are working within the current parameters. Under estimating timescales and over estimating end values isn’t going to work in the current climate.

Hope you all have a good weekend.

What to watch out for with payment holidays

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Hi everyone, hope you’ve had a good week.

This week I’d like to share what I’ve learnt this week about payment holidays on your buy to let portfolio.

Firstly, I’d like to caveat this with the importance of asking for help from your mortgage lender if you think there’s any chance you could have an issue paying your mortgage. Payment holidays are a great way of helping your cash flow where you think there could be an issue and the government have said that this will not affect your credit rating and will not show as a missed payment.

What were payment holidays designed for?

The government acted very quickly early on in the pandemic to try and mitigate the economic impact of COVID-19. One of the early interventions was the introduction of payment holidays for those who need it, and in the main this was designed for residential mortgage customers. This was simply because those mortgages make up the vast majority of mortgages in the UK and this was very much a ‘one size fits all’ approach.

The reason this moved to buy to let mortgages, was due to tenants being in the same position of not being able to pay their rent as home owners; I think that’s important to recognise as I go on to explain the impact this may have on your future borrowing as an investor.

So what is the impact of a payment holiday as a property investor?

What we have started to see this week are lenders’ reactions to clients taking payment holidays on their portfolios.

What they have said, in the main, is that a landlord who is stretched financially enough to warrant a 3 month payment holiday is not eligible for further lending. So if you have a payment holiday on any mortgage, you won’t be able to refinance in order to raise capital on your existing portfolio, or buy another property.

Please think carefully about whether you want the option to borrow in the near future, as the payment holidays will be evident on your credit search and bank statements (even though they don’t have a detrimental effect on your credit rating).

Some lenders are giving the option of repaying the missed payments back, as they appreciate it may have not been a well thought out decision at the time, especially as customers may not have been made of the potential consequences.

To be clear, this is only a issue for clients looking for further borrowing, whether that be for a new property or refinance of an existing one. If you want to take advantage of the current opportunities in the market then think very carefully about whether a payment holiday is the right decision.

As always, if you want to chat through your options then give me a call. Have a good weekend!

Communication and information is key now more than ever

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Hello everyone.

As we get to the end of mental health awareness week, I hope you are all keeping a check on your mental health, and focusing on your own oxygen mask BEFORE helping others!  This will be a marathon rather than a sprint, so very important to look after ourselves.

My blog today is focused on how we can keep momentum going with your cases during this time.

Be upfront with your information

There is still a glacier shift in offerings compared to where we were, and many caveats on higher LTV products.  We are able to get to 75% with most cases now where we need to, so please let us know your priorities from the beginning.  With these caveats on certain cases it is so important to be upfront about your whole deal to ensure that the solution we find is appropriate.

Things are changing by the day so I hope that we will have more to offer over the coming weeks, particular in the bridging market.

Time management of your case

As furlough (clearly a life line for a number of companies) is all or nothing, there are either fewer numbers of staff or a bit of a musical chairs way of working within companies.  Staff can be in one week and off the next, so our ability to manage that is key to keeping as much momentum as possible with your case.  This is affecting lenders and solicitors, so all the way through the process.

The best way for you to help us control this is to be timely in your delivering of information and documents.  It is very easy to lose a couple of weeks on a daily accrual basis.  Valuers are now back, although this will be a slow process to get all companies back, so the options currently are limited.  We need to get your property in the queue as early as possible.  We will, of course, act as quickly as we can to keep that momentum going.

Managing valuations around tenants

Please check before instructing your valuation if any of your tenants are shielding.  That information is key to managing a physical viewing.  There are clear guidelines around how surveyors value a property, for example opening all doors beforehand and ensuring all tenants are out of the property for the whole visit.  It is so important to have these conversations with your tenants prior to booking, as your will be charged for additional visits.  It goes without saying that valuations cannot happen where someone is self-isolating or showing symptoms of COVID.

I have managed to get some viewings done via WhatsApp video and photos to avoid the valuer entering the premises, so there are other options.  Lenders are also still using desktops where they can.  As always, it is vital to be upfront and honest with us and your tenants so no time and money is wasted.  Forewarned is forearmed!

Enjoy your long weekend, as always we are here to chat through any cases you have so give us a call or drop and email to book in a conversation.

 

 

 

Are physical valuations back on?

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After a very promising speech from Boris on Sunday, it’s been quite slow in terms of a response from lenders this week.

Some lenders are now getting physical valuations instructed, which adds to the desktops and automated valuation models (AVMs) that we have been using. Valuers will be busy, so get into the queue!!

I am hoping that by next week we will have a more solid direction from RICS and we can see more lenders’ reaction from that.

What we have seen though, is house builders return to sites and construction workers start again. This is great news for investors looking at development and refurbishment projects as they will be able to start looking at potential deals, together with finishing off what’s been started. Where lenders were very averse to larger projects, we are hoping that this shift will now mean they are able to start looking at them again.

The other great news is that house viewings can now resume, meaning that the build up of those waiting can start to shift.  We are hoping that this means an increase in properties coming to the market, and more opportunities and discounts for investors. This rule change also means that renters can start to look to move again, and the prospect of filling an empty property which has just been refurbished is less daunting!

It is small steps this week, but we are starting to see activity increase. We are hopeful that next week will bring more good news and some more policy changes!

Enjoy your weekend, and we will keep you updated next week with any changes that appear.

What is available in the bridging market?

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Hi everyone. How sane is are we all?  A long weekend should help!

The bridging side of funding did take a bit of a hit early doors.  This may have been due to where the funding comes from, together with the risk element of a viable exit.  With potential down valuations further down the road and uncertainty of timescales, it can cause issues to funders.

That said, as always, as time goes by lenders are able to start giving better options.  We are now able to offer up to 75% LTV on standard residential and semi commercial properties.  We are also able to offer both Automated Valuation Model (AVM) and desktop valuations, which lets you complete without the need for a physical valuation.

If you want to borrow the refurbishment funding, then a full valuation will be required. That said, providing it is not an auction situation, we are able to get the case to pre-offer, pending a full valuation report.

I think the important point to be made is there is funding available.  Lenders have a tenacious appetite for lending money and will find ways through the lockdown to achieve this.

The industry is reasonably buoyant and even in this new ‘normal’ we are able to complete cases.

I  am here to discuss opportunities, so call me to chat through your options.

 

New products emerging in this changing market.

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A couple of weeks ago, as we all entered ‘lockdown’, most lenders reduced their product range and made some restrictions. They focused their energy on getting cases that had valuations completed and helping those in need of payment holidays. This has given them some time to think about their lending proposition going forward.

As we spoke about last week, lenders are starting to make changes to allow lending to continue through this time; I am sure we will start to see more of this. E-ID checks to avoid certification, independent legal advice via video call, and the removal of the requirement for witnessing all need to be considered to allow a mortgage to complete.

The major issue to contend with is valuations. Desktop valuations are something commonly used within the residential mortgage market, but we haven’t seen them take off within the specialist side of things. They do have their limitations, and that is why they often don’t work in this scenario; where properties need work completing or have just finished a refurbishment, HMOs, and flats above commercial property all fall outside of what a desktop can cater for.

What we have seen this week, however, is a number of specialist lenders turn to desktop valuations to allow mortgages to complete without a full valuation.

The first lender is a competitor within the vanilla end of the specialist market. They are allowing desktop valuations for standard properties up to 60% for purchases and refinances. There are some caveats; it needs to be a standard property, a single AST and there are some other property restrictions. It’s suitable for a limited company and personally owned properties though, with no outside minimum income requirements and rates start at 2.99%.

The other lenders are more commercially minded, so they can be more flexible around and property types and the purchase structure (although it still needs to be a single property on a single AST). We can stretch the loan to value up to 75% in some scenarios and rates start at 3.99%.

These lenders work well for more complicated transactions, so they can be flexible on the source of deposit, company structures, and outside income. We currently have a property with one lender which is a flat above a commercial unit, which many other lenders will not look at, so they are looking outside ‘normal’ properties.

We also have access to a number of bridging lenders who are happy to work with a desktop valuation up to about 50% loan to value depending on the case.

What we are seeing is that lenders are keen to keep going and find new methods of working, so if you have any deals you would like to talk through with us then please give Jackie a call to chat through your options. We are very much open for business and working with lenders who are the same!

Lenders: Pulling the stops out to keep clients safe

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In a time when we are all feeling quite vulnerable to this virus, imagine having a 2-week old baby and being told you need an independent witness to sign your personal guarantee? This is a client of ours who needs to complete this refinance as soon as possible, so the situation was increasing their anxiety levels more than somewhat.

As a broker, Baya really wants to keep our clients safe, I can’t think of anything worse than finding out she was ill as a result of getting the document signed.  With this in mind, I called the lender, Shawbrook, to see how they could help.  All through the current situation, I have seen that they are working away at how to change systems to accommodate the current challenges, and this is a great example that proves just that…

Lee Warne took my call. He listened to me patiently and empathised with the very real worries of our client.  It was clear that Shawbrook also did not want any risk to the client’s health, or her new baby.  After a week of working with their lawyers, Pure Law, they generated a one-off personal guarantee contract – WHICH DOESN’T NEED AN INDEPENDENT WITNESS. How cool is that – and no mean feat either.

We are all stressed at the moment, and a touch impatient as well.  In these times it is so important to have a broker who has your best interests at heart, as well as a lender who is prepared to do all they can to find a way around a tricky situation. Shawbrook said they would find a way, and they delivered as I believed they would.

Enjoy your weekend and stay safe.

A welcome, sensible attitude in a stressful situation..

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Hello everyone, I hope you are all staying safe and sane – the latter being the most difficult I fear.

I thought this week’s blog should be something motivating, so I have written it about a case that completed yesterday.  It’s at times like this that believing you are in a safe pair of hands is the most important thing for us all.

The lender was Hampshire Trust Bank and the case was sitting with solicitors ready to complete at 75% LTV, which is high at the current time. I had a call from Alex Upton, Commercial Director, who had issues with the LTV given the current climate. The benefit of taking the time to call me and discuss their concerns meant a sensible solution could be easily and quickly achieved.

After discussing the merits of the case, we agreed on a 3 months retention of interest,  which was a very simple solution and the client was happy as they could keep the 75% LTV.  The updated formal offer was completed within a few hours, so no delays at all.  The lender and solicitors were excellent and communicative, therefore reducing the stress.  Thank you to those at Hampshire Trust Bank and Paris Smith that were involved in this.

All companies will be having to furlough some staff, including us, but I am holding the fort at Baya and still working on all cases.  I hope we can be called a safe pair of hands as well.

As always, if you have any questions please don’t hesitate to get in touch.

5 things you can do while the mortgage market is waiting to get back to normal

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Hope you are all well and settling into your new normal. This week I thought I’d give you some ideas on what you can do while we are all at home and things have slowed down a little.

1. Take stock of what you have

Whether you’re a new investor or a portfolio landlord, it’s always a good idea to allocate some time periodically to assess what you have and whether it is performing well enough for you. This could be cash savings, property or any other investment. Now may not be the time to make any changes, but knowing what you have will allow you to assess your return on investment and know what is doing well and what maybe isn’t working well for you.

2. Spend some time learning

We have all (as a general rule!) got some more time on our hands than usual and although it is tough at the moment, we can use this time effectively to take our minds off other things.

There are so many online resources and the majority of them are free. We are the preferred partner of the Property Investors Network in Watford, and PIN is running an array of online courses so have a look on their website for details. There are plenty online, depending on what you are interested in learning about. It doesn’t have to be property-related directly, you may want to learn about remote working, time management, accountancy tools – the world is your oyster!

3. Alternative strategies

Once you’ve looked at your current portfolio, you may want to think about whether you want to move to different strategy. Could that be a different location, focus on a higher yield, a bigger project, or a smaller one to give a quicker income?

This is a great opportunity to carry out some market research on new strategies and areas. It’s a good idea to chat through your finance options too, so give us a call if you want to find out what is available and how it all works.

4. Networking!

This may seem like an odd one given the social distancing rules, but there are plenty of online places to network! There is a fantastic community on Instagram and LinkedIn among other places. PIN has moved a lot online and are hoping to have some online networking events. Now we do have a bit more time, why not engage in conversations with people you follow or arrange a chat with them.

If you’re a regular at networking events, there may be a pile of business cards that you haven’t got round to contacting, so is this a good time to do that? Arrange a chat and coffee over Zoom and use this time to do the things you don’t usually have time to do!

5. What’s your next move?

We don’t know how long this is going to last, but we do know that things are starting to get back to normal in some places around the world, and it won’t last forever. Having some plans for when it does will help you hit the ground running, and take advantage of the situation. We are all hoping for a rush of transactions when valuers start getting back out there – will you be first in the queue? Again, we are happy to chat through your next project, and some lenders are allowing us to start mortgage applications so depending on your circumstances there may be things we can do to start the process.

Stay safe everyone