Take a close look at rent-back funding
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Peter Beaumont chief executive Residential Property Solutions
Some sale-and-rent-back firms have now had their interim authorisation confirmed by the regulator.
This is good news, not only because it enhances their credibility but also because it’s a big hurdle cleared until next year when all firms will have to apply for full authorisation.
But no sooner is one problem resolved than another one presents itself and for many rent-back firms the latest headache is funding. Unlike RPS, most don’t have access to a significant pool of funding.
To overcome this many have turned to armchair investors - private individuals who are able to fund individual transactions.
Unfortunately, armchair investors have slipped under the Financial Services Authority’s radar and remain unregulated, leaving tenants exposed to considerable risks.
But the FSA has wised up to this and in its latest consultation paper is proposing to outlaw armchair investors from all transactions other than non-profit-making ones. This will effectively take them out of the game.
So some rent-back firms are going to face a funding crisis and we have developed several schemes to help such companies continue trading. But we are only looking to work with a small number and will not be able to help them all.
Brokers should check how the companies they refer business to fund their deals. If armchair investors are involved, my recommendation is to think twice - you don’t want to create more problems for your clients in the future.
