Special Features

Landlords missing out by ignoring portfolio consolidation

Conor McDermott | Monument Bank
|
30th September 2021
Conor McDermott Monument
"Ultimately, portfolio landlords benefit from working with partners who really understand their business, and can help them get the most from their investments."

For plenty of landlords, 2021 has been a time of purchase activity. The possibility of saving thousands of pounds, courtesy of the stamp duty holiday, has tempted a significant number of professional investors to add to their portfolios.

Research earlier this year by FJP investment suggested that as many as 44% of investors planned to purchase a property in 2021. This is particularly noteworthy given the majority of those surveyed reported feeling that the government had unfairly targeted the buy-to-let space, and that property investment had become less attractive over the last five years.

Clearly, even with those concerns, the prospect of sidestepping stamp duty when purchasing an investment property has been an enticing one.

However, the stamp duty holiday is almost over. The first stage concluded in June, and from September it will be removed entirely, with tax rates returning to previous levels. This provides landlords and their mortgage brokers with the opportunity to take a step back and review the portfolio’s performance overall, considering any changes they could make which would mean the portfolio delivers a more impressive return.

And a big part of that conversation needs to be around consolidation.

Few landlords consolidate their portfolios

It’s striking how few landlords consolidate their portfolios with a single lender, as recent research from Lendlord, a portfolio management platform for landlords & property investors, makes clear.

It found that while around half (46%) of landlords with up to three properties have consolidated their portfolio with a single lender, this drops dramatically as the size of the portfolio increases. For landlords with between four and 10 properties in their portfolio, a paltry 11% have brought together their funding with one lender.

This drops still further to 8% of landlords with between 11 and 20 investment properties, and 7% of those with more than 20% in their portfolio.

The message here is pretty clear. While it’s fairly likely that a small-scale lender will consolidate their portfolio with a single lender, it’s incredibly rare among those with more significant property portfolios.

Jumping through hoops

So why don’t landlords consolidate that borrowing together? Put simply, all too often they aren’t given a compelling reason to do so.

Yes, many landlords will recognise how consolidating their loans together would make managing those investments simpler. After all, a single mortgage repayment date is easier to remember than 10 different ones. However, all too often landlords and their brokers are forced to jump through a multitude of hoops in order to do so by lenders who make consolidation far too complicated. It would be one thing if those complications then led to the expected financial savings, yet there’s a sting in the tail here too, as some lenders make consolidation prohibitively costly.

Just as brokers rightly scour the market when the landlord makes the initial purchase to identify the best possible rates, ensuring that they pay as little as possible at the outset, the same tactic is employed when the time comes to refinance, viewing each loan individually rather than in the whole.

Doing things differently

It doesn’t have to be like this though.

Bringing together those various individual buy-to-let loans into a single portfolio product can not only make managing the portfolio more straightforward, but it can also deliver real financial benefits, ensuring that landlords lower their repayment costs and enjoy more of the fruits of their investment labours.

That only happens if the landlord works with the right lender, however. At Monument we’ve embraced the idea of a fresh approach, centred on a more flexible attitude towards criteria and lending. Our portfolio landlord borrowers are individuals, with their own unique business strategies and investments. If we want to develop the mortgage products they will truly benefit from, and which will mean they get the maximum from their portfolio, then we have to understand those strategies and investments, understand them as individual landlords. It means a more borrower-focused mindset.

Working with like-minded partners

Ultimately, portfolio landlords benefit from working with partners who really understand their business, and can help them get the most from their investments. That starts with the mortgage brokers and tax advisers who can help them arrange the most efficient funding for their portfolio, ensuring that the sums always add up and yields are maximised.

But that also extends to the lenders they use too. There is no substitute for experience and expertise, and working with lenders who truly understand the needs of this area ensures not only that landlords enjoy a more efficient process, but also benefit from products designed specifically for investors in their position.

 

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