In my role as an experienced buy-to-let (BTL) investor, I am constantly asked what lenders should be doing to stimulate more sales in this marketplace.
As this sector of the market continues to grow, is there more that lenders could be doing to help support brokers and clients to maximise the opportunities that exist? While there are a number of lenders who, through their flexibility of product and criteria, are supporting the market, I believe there is clearly a lack of understanding of the psyche of the BTL client and the brokers who support their endeavours.
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So if I was a lender trying to increase market share in this sector, what would I be doing to achieve this goal?
Getting advice
I have found that brokers who hold a portfolio of their own are those that have a finger on the pulse when it comes to what is needed to drive this market forward.
To take advantage of this, I would create a forum of top BTL brokers and ask them what works and where the gaps are in the market. At the moment there are many generic industry events, but more recently there has started to be some diversification with packager conferences and secured loan events, but apart from those run by landlord bodies, there appears to be no channel to discuss the BTL mortgage market.
Know the market
I was told at the start of my financial services career, if you are going to sell or advise on pensions you need to buy one. I firmly believe this runs true in BTL.
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If I was a lender I would make it a prerequisite that each broker consultant who offers support to advisers in this sector must be active in the market and any individual who comments on the market should do likewise.
Education
To me this should be a key objective. The more brokers and clients who can be educated the more products are likely to be sold.
Where do clients go to get advice on the BTL market? Usually to property companies who sell their own products. This may well be a recipe for disaster as, while I am sure there are reputable organisations out there, it would be hard not to be biased if the end game was to sell a two-bedroom new build apartment.
Likewise, the clients rely on the press who will always look to a dire headline in order to sell copies.
So why can’t lenders provide BTL updates on the market that brokers can send to their clients, not just a product push, but a document covering analysis on the market, hot spots, and information on houses in multiple occupation, for example?
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Treat BTL clients differently
Experienced BTL clients are investors, not someone entering the market for the first time. The sophisticated investor understands the market but is so often treated in precisely the same way as a normal mortgagee.
While progress has been made recently there is still room for improvement.
Why ask for bank statements when a BTL is not normally a living expense?
Why use rental coverage as a percentage of the loan when some investors want to buy a property and rent at a loss for tax purposes or have purchased for capital growth only? Why treat a client who has managed to obtain a second-hand property with a discount as a pariah?
There are many individuals who bought right-to-buy properties but don’t want to have the responsibility of servicing a mortgage. They come from a culture of renting and prefer it that way; they want to release equity by selling and renting it back.
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Build a rapport with experienced landlords and they will come back to you for more. Give them the ability to manage their whole portfolio through you. Offer the facility to use existing data to pre-populate application forms, for example. Appreciating that a lender might not want all the eggs in one basket, but banks manage to do it.
Many BTL property investors are now buying outside their own locality and so want something more than a normal valuation. An automated valuation model might be great for a lender but does nothing for an investor 200 miles away who wants to know if the electrics and gas appliances are up to scratch.
Set up a BTL department
The experienced broker and client want to discuss cases or portfolios with lenders staff who know the market. So should a lender have a separate department manned by experienced and skilled staff in this market?
What about a dedicated phone line that is manned till late in the evening? Remember that more investors are now employed and have day jobs as well as their guises as property investors. A dedicated website where investors and brokers can obtain the latest information on the market would not be a bad thing.
Incorporate an education section on the site where there are information sheets that can be downloaded, such as ‘Tax Guides’, ‘Tenancy Deposit Schemes’ or a ‘How to Choose a Letting Agent’ guides.
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How about a credit card type information card given to each BTL mortgage client? Link the card to a millionaires club based upon amount of lending, perhaps a bronze, silver, gold and platinum card dependent on the amount of mortgages held. Consider an event for your top BTL clients and their servicing intermediary.
Marketing support
As mentioned above, lenders need to support brokers by providing them with quality materials that can be used to help educate clients and keep existing clients informed. However, very few lenders do so.
While I don’t purport to fully understand lending risk, what I do understand is that the lenders that grasp some of the nettles above will count on the support of those intermediaries and clients who specialise within the BTL market.
