Multi-unit considerations and funding options
With the Property Investor Show coming up, property professionals have been at the forefront of our minds at Shawbrook this week. The market is growing and there are some really exciting opportunities out there for experienced investors. But there are also challenges, and each week we talk to brokers and investor clients who are still struggling to secure funding for properties that are considered more complex.
This is particularly true of multi-units – for example a house converted into separate flats, blocks of flats or a street of mews houses. Despite a significant scope for investment in this property type, funding options are still few and far between in the UK with the majority of vanilla BTL lenders having restrictions surrounding multi-units.
It’s a real challenge for property investors, so when we launched Shawbrook in 2011 we made a conscious decision to develop a lending proposition for the property investor market that would embrace professional professionals with large property portfolios or those with non-standard properties, including multi-units.
One reason for the lack of funding options for multi-units is that they are not easy to assess with online decision making tools – making them a no-go for vanilla BTL lenders. Vanilla BTL work is undertaken using an efficient computerised system, but it requires stringent rules to make sure this efficiency is maintained.
By contrast, multi-units are complex in nature and require a more human approach when it comes to application and underwriting – for both the broker and the lender. So what should a broker look out for when dealing with multi-unit cases?
Firstly, it’s important for brokers to do their research on value. Where there are multiple units, every lender will require a view on how value would be affected if all the units were put on the market at the same time. Often there can be a discount in the value attributed to this as the properties are considered to be more attractive to investors and therefore a discount would be expected to buy multiple properties.
At Shawbrook we will work from the aggregate value (each individual unit value added together) up to 5 units. We also lend on multi-units over 5 units although the value we work too will depend on the valuer’s comments. We understand that each property investor client has different requirements, and we work to make our offer as flexible as possible.
Client experience should be another consideration for brokers. Multi units are a different ball game to straightforward buy to lets, and clients need to be experienced in managing these types of property – it’s a skill to manage multiple tenants within one location. For this reason, we lend to experienced property professionals with a successful track record in the sector, and will look for this in applications that we receive.
The arrival of new lenders like Shawbrook makes it an exciting time for brokers with property investor clients who are looking to maximise their returns by managing these and other types of specialist property, and are looking for a lender that wants to take the time to understand them and their model. One size certainly does not fit all in the property investor market – and we are here to offer clients and brokers the tailored approach to lending that has been missing for so long.
Karen Bennett, Head of Sales and Marketing, Commercial Mortgages, Shawbrook Bank