In this month’s buy-to-let (BTL) masterclass, I’d like to focus on how brokers can get involved in the market.
Working on the basis that 9 per cent of all new mortgages transacted in the UK are BTL, if as an individual broker your own market share is below this then perhaps you are missing out. In fact, the Council of Mortgage Lenders (CML) reports that borrowing by BTL investors will rise more quickly than borrowing by home owners over the next two years. It will account for 13 per cent of gross lending in 2007 and 14 per cent in 2008, up from 11 per cent in 2006.
So how can you go about increasing your market share and building a robust plan to increase the BTL mortgages sold in 2007?
DOME
At the start of any planning it is always useful to use the DOME formula:
Diagnosis: where am I?
Objective: where do I want to be?
Method: how am I going to get there?
Evaluation: how do I monitor that the plan is working?
Diagnosis
Ask yourself the following:
Do I want to enter this market?
Why am I missing market share?
Is it KASH – knowledge, attitude, skill or habit?
Objective:
What do I want to achieve? Whatever it is make sure it follows PRAMKU:
Precise;
Realistic;
Acceptable;
Measurable;
Known;
Understood.
Method
If it’s knowledge or skill in the BTL sector that is holding you back there are many publications on building a BTL portfolio available for purchase or download on the internet. This includes lender websites.
But to get real knowledge, invest in a BTL property. In my experience advisers with their own portfolio inevitably have a higher penetration of BTL clients. In most cases, however, it could be the ‘without prospects, you have no prospects’ syndrome.
So let’s look at ideas you might include in your plan.
The first area to review is your client base to look at the penetration within it. If we consider that the average number of BTL properties held by landlords is 4.5 each, the chances are existing landlords are going to invest in another. The trick is to encourage this further by providing key knowledge to investors, such as
they know that 90 per cent loan-to-value mortgages are available. Why not e-mail and tell them? A well segmented client e-mail database is an invaluable tool.
But what about support for clients with larger portfolios? This year many lenders have increased their maximum portfolio sizes. Do your clients know this? Perhaps they’re not investing further as they think they’ve reached their perceived limit.
As for potential clients with no BTL properties, they need to know how to enter the market. A proven way of supporting client education is through a simple seminar.
Write an invitation to your clients within the target age range (35-55 years) and demographic criteria and invite them to a local seminar; a one-in-five response is not unknown. It’s also worth remembering that many BTL landlords use the market for long-term investment and come from a variety of backgrounds. A survey carried out by Mortgage Express regarding BTL confidence showed that only 8 per cent surveyed were professional landlords. The following table from the above mentioned survey shows the sectors and professions that BTL landlords are most commonly from. This should enable you to look at how you target your seminars.
Look at getting 30 clients or potential clients to attend, remembering to take into account ‘no shows’ in your planning. Always choose a well known venue such as a local football or rugby club. In my experience, a 90-minute early evening presentation is sufficient to hold interest and generate potential business. For additional content, the CML website is a useful tool when creating a thought provoking seminar.
A good idea is to invite a BTL lender to present on lending criteria; they may even help with sponsorship. It also makes sense to invite one of your more experienced landlords to talk about their experience and how they have built a portfolio. Creating and organising a seminar can initially be time-consuming but is an effective way to create interest and can be used repeatedly. You can even support the seminar with advertising in local press to generate new blood.
While providing good advice and service to existing clients is fundamental, you should always be spreading your net further afield. Letting agents, for example, are an invaluable source for finding local landlords. Why not refine your seminar and offer it to a letting agent’s landlord client base? According to a recent Mortgage Express survey of over 3,000 landlords, 95 per cent are looking at maintaining or increasing their portfolio. Clearly the opportunity to find new business or refinance existing portfolios is outstanding.
Over the last 12 months the growth of ‘buy your house for cash’ property companies is evident – open any local newspaper and you will see their adverts. Have you considered contacting them to offer them mortgage advice? Remember these cash purchases are either kept for their own portfolio or for resale to potential landlords or new clients.
Evaluate
Whatever method of marketing you choose don’t forget to evaluate your results. Identify what is working and what elements need to be changed. If necessary adjust your plan of action but keep going as the rewards are sure to come.
