Back in the boom days of 2007 and 2008, simple, single occupancy buy-to-let deals were the first port of call for property investors; and residential BTL lenders the obvious provider of choice for what was usually readily available funding. Times are, as they say, a-changing however, and the market has now seen a trend towards more complex HMO and multi-unit investments, such as student properties due to market demand and the attractive returns on these types of properties. For such deals, considered more challenging by vanilla lenders and sometimes rejected as a result, there is merit in approaching specialist, subjective lenders - generally far better positioned to manage the process involved, for a variety of reasons. As one such lender, Shawbrook has helped to increase the opportunities for investors in the market.
Perhaps the most critical difference between a vanilla BTL and a specialist lender, is the case-by-case consideration given by the latter. Most will have specialist teams that underwrite each application on its individual merits, whereas vanilla BTL lenders use an online rules-based, ‘tick-box’ system which will discount all but the most straightforward investments. Work is undertaken using an efficient system with competitive rates, but it requires stringent rules to make sure this efficiency is maintained. This approach requires clients to have full credit scoring in all necessary fields which is difficult for some investors, meaning clients often have to adapt and change their business models to access necessary funds.
Of course, pre-determined criteria reduces the cost of processing applications, and these savings are usually passed onto clients that meet the requirements. As a result, the fees of specialist lenders can be marginally more than those of the generic BTL lenders. Fortunately, more complicated investment opportunities are not necessarily longer and more drawn out, as is often assumed. At Shawbrook, for example, we commit to providing a decision within 72 hours on every case, and often deliver in advance of this. Shawbrook review each case on its own individual merits, working with our talented network of brokers for the good of the client. Our flexible approach helps investors secure the required funding.
In most instances - and this is certainly true in Shawbrook’s case - brokers play a crucial role in supporting specialist lenders; indeed they are at the very heart of our business. For example, they will undertake research on investment value which can be particularly important where there are multiple units. Every lender will look to the valuer to comment specifically as to how the value would be affected if all the units were put on the market for sale at the same time. Often it will lead to a reduction in the value attributed, as the properties would then be more attractive to investors in bulk and a discount will be expected to buy multiple properties.
Understanding these kinds of technicalities help the brokers manage client expectations and helps to ensure the initial decision made remains unchanged after valuation and avoids disappointment following broker feedback. Shawbrook recently changed its criteria and will work off the aggregate value on properties with up to 5 units.
New opportunities will continue to present themselves in the property investor market, and for deals of a complex or challenging nature, a specialist lender like Shawbrook is likely to play a critical role in helping investors secure the funding required to take advantage of them.
