Top Tips for complex buy-to-let

"The result is a data set containing no high-value transactions at all, and a dramatic decrease in the average property value and loan size."

This means yields on such complex buy to let properties can be volatile. The data from Mortgages for Business showed yields on HMO and SCP fell by 0.9 per cent and 0.6 per cent respectively, while yields on MUFB and vanilla property rose 0.5 per cent and 0.2 per cent respectively.

Advisers whose clients are reliant on the income streams complex buy to let can bring should encourage investors to diversify their income streams, particularly as Mortgages for Business describes such complex deals as "not stable", which makes contingency planning all the more important.

Navigating uncertainty

Products available to buy-to-let investors may have burgeoned in recent years but tougher affordability rules have reduced what landlords can borrow.

This is all the more pertinent for first-time landlords. Figures from Moneyfacts in April this year (see table, below), revealed that while there are more products for first-time landlords in 2017, compared with 2015, the overall percentage represented by first-time landlords of the buy-to-let market has fallen. 

This suggests, according to Charlotte Nelson, finance expert at Moneyfacts, greater uncertainty and a reduction in borrowing amounts.

She says: "There is uncertainty in the market, which has made some providers more risk-averse. By their nature, first-time landlords lack experience in managing rental properties, and this is considered more of a risk now than perhaps it once was.

"Also, the tougher affordability rules which have reduced the amount landlords can potentially borrow are being felt in the market, with the average two-year fixed rate at 70 per cent loan-to-value, having risen by 0.14 per cent to 3.16 per cent since January.

"This could be disproportionately affecting first-time landlords, who want to borrow at higher loan-to-values."

As a result, borrowers will face more checks and questions about their finances, so they really need to do their homework.

Know your lender

While the scope of products for general buy-to-let products looks rosy, as the above table for Moneyfacts suggests, the actual number of mortgages available for the so-called complex buy-to-let, such as HMOs, is starting to be reduced.

Figures from Mortgages for Business revealed at this end of the buy-to-let marketplace, although the number of lenders operating in the cheaper, more complex end of the market have risen slightly, the products on offer are on a slight downward trend compared to the fourth quarter 2016.

With more lenders around but fewer products, advisers must therefore understand what each lender is offering, and what their processes are, says Harry Landy, managing director of Enterprise Finance.

"Be persistent even if the high-street lenders turn a client down. Specialist complex BTL lenders can and do lend on unusual properties in challenging circumstances."