Client A is a self-employed city broker and he has seen what he believes is an investment opportunity in a development close to London Bridge. However, the area is being redeveloped and this will affect getting a full rental yield initially and because the property is on the 10th floor he is excluded from most buy-to-let offers.
What the broker says:
Andy Pickering, mortgage consultant, Chadney Bulgin
I am pleased to see the market is waking up to the fact that buy-to-let really is an investment and should be treated like any other investment. What this means is that some investors will get burnt, especially those that have bought a property without the necessary knowledge or having undertaken the correct research. Let’s face it, if someone asked to borrow £300,000 to invest in a Japanese equity you would expect them to understand the risk.
What the packager says:
Karl Steadman, specialist sales consultant, AToM
With most lenders this application would have gone into the bin. But we are in a fortunate position, as the brokers that use us are extremely professional and while a case might be unusual, we know they have concluded that it should be possible.
This case posed several problems. The area was in regeneration and as such the valuations reflected current values not future valuations. The buyer is young and self-employed, although he is also a home owner and has other rental properties. The rental yield would have failed most providers’ requirements, and this situation was unlikely to change in the short term until the neighbourhood redevelopment work was complete, once the new wine bars and coffee shops were opened, though, the area they would be a magnet for city professionals. Finally, the fact that the property was on the 10th floor, would normally prove an immovable obstacle for the majority of lenders.
However, finding a lender to offer terms was not that difficult. So it was more a case of finding the best deal, which was from Rooftop with its Professional Investor Plan which was secured at a rate of 5.99% fixed for two years.
The most valuable lesson from cases like this is that brokers, packagers and lenders need an honest and transparent relationship, as this means that even the most problematic case on paper can normally be found a home.
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