Complex Buy-to-Let
by Rob Lankey managing director, Aldermore Commercial Mortgages
The buy-To-leT ladder
Investors rarely want to stop at three properties so why do lenders? Aldermore is different
Every lender claims their offering is unique but I think we have a genuine case to argue this. Why? Because we serve the landlord through his lifecycle. From the first property he invests in all the way up the buy-to-let ladder to investors with thousands of properties. Because we’re one of the few lenders doing both residential ‘vanilla’ buy-to-let and more complex commercial buy-to-let we asked ourselves: how do you lead someone through their lifecycle? We’re developing our thinking in that space. If you have someone who wants to start in buy-to-let or someone with a thousand houses, how do you make your offering to them both seamless? We don’t think there’s anyone else out there trying to do that so we are developing our service in this area to become the market leader catering to both ends of the market and all in between.
A little bit of background There are two distinct markets in buy-to-let broadly
accepted amongst introducers. One is the ‘vanilla’ market lending to individuals which is well served by the like of The Mortgage Works, BM Solutions and our very own Aldermore Residential Mortgages arm. This adopts more conventional processing of mortgages and is usually quite straightforward with little variation. It’s to some lenders a box ticking exercise and if it fits it will move through quickly with little stopping and starting. One of the biggest differentiators between this market and the other side of buy-to-let is lending to limited companies. Most of the vanilla lenders won’t touch this
at all. The other thing that sets complex buy-to-let apart is the property type. Most lenders look to offer one mortgage for one property whereas we’ll look to offer one mortgage across a number of properties. It could be ten houses, it could be a block of flats. Houses in multiple occupation (HMOs) are the other property type that is widely frowned upon by vanilla buy-to-let lenders. Appetite to lend on complex deals in the market is less strong but at Aldermore we are just as keen to help investors do these sorts of transactions as the vanilla deals. If you are chasing high volumes and have the factory process you can understand and deal with the straightforward stuff easily. But you do need a different approach and skill set and be more established to be able to understand what a mortgage on a more complex deal could look like and how it should be managed.
Defining complex Ask five different lenders and you’ll get five different answers! Broadly speaking though, complex deals are many of the areas declined by a vanilla lender. If you get, for example, a £1.5m application from an investor with 500 other properties with 12 or 13 other lenders, as a lender, you need specialist knowledge and understanding to get under the skin of the portfolio and to assess what the relationship with those other lenders looks like. You need to be able to understand whether there’s something in that investor’s house of cards that might bring the whole lot down. What is the vulnerability to maintenance costs; interest rate rises and tenant failure across the piece?
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