The words complex and specialist are often used in the intermediary market, particularly in the buy-to-let sector. But are these terms still relevant, or have they become barriers that overcomplicate the lending process?
Rather than hiding behind them, it’s time to simplify and clarify what specialist buy-to-let really entails, helping brokers better serve their landlord clients.
WHY CLARITY MATTERS IN SPECIALIST BUY-TO-LET
The demand for specialist buy-to-let products continues to rise, with landlords exploring new ways to optimise their portfolios through diverse property types and financing structures. As they refine their investment strategies, by considering property choices, locations, and yield optimisation amongst other factors, it has become increasingly apparent that they are relying more than ever on advisers to navigate a dynamic and ever-evolving lending landscape.
Beyond the complexity of properties, borrower profiles add another layer of intricacy. Imperfect credit histories, multiple income streams, or the structuring of limited companies can make standard financing a little more challenging. This is where specialist lenders like Foundation Home Loans step in, offering tailored products and manual underwriting to help brokers secure the right deals for their clients.
However, we acknowledge that, by calling ourselves a specialist lender, we may sometimes contribute to the perception that buy-to-let lending is more complicated than it needs to be. That’s why our goal for 2025 is to provide greater transparency, break down outdated perceptionsand making it easier for brokers to place specialist buy-to-let cases with confidence.
UNDERSTANDING VALUATION METHODS: INVESTMENT VS. COMPARABLE
One key area of confusion we regularly encounter is around property valuations for specialist buy-to-let properties. Many intermediaries request an investment valuation, assuming this will be the approach surveyors use. However, the valuation method depends on the location and type of property, and lenders cannot guarantee an investment-based valuation in every case.
Surveyors typically follow a comparable basis approach, requiring at least three recently sold properties within a defined area to support their valuation figure. If a property is in an investment-heavy location, such as a university town or an area dominated by a major employer, there’s a higher likelihood that an investment figure will be considered. However, in predominantly residential areas with few HMOs or investment properties for example, valuations will usually be based on comparable sales instead.
KEY TAKEAWAYS
A common misconception is that requesting a commercial valuation guarantees an investment-based valuation. In reality, commercial surveyors apply similar principles to residential surveyors, but with the added potential to include investment figures where appropriate. The key takeaway? A commercial valuation doesn’t automatically mean a landlord will receive a yield-based or investment valuation.
For standard HMOs or MUFBs (multi-unit freehold blocks), the valuation approach depends largely on location. As alluded to previously but is worth reiterating, areas with a high concentration of investment properties tend to support investment-based valuations, whereas secondary HMO area, those just outside major cities, often default to comparable valuations. These are the hardest locations to assess, making it essential for brokers to liaise with surveying firms before proceeding.
By demystifying valuation methods and how surveyors assess different property types, we hope this will help brokers to manage client expectations, structure deals effectively, secure the best solutions for their landlord clients and embark on more transparent and accessible specialist buy-to-let journey.
