Receivers to the rescue

Dear Daniel,

Good to speak earlier.

As discussed, we have a borrower with a buy-to-let portfolio in Reading, who has recently been behind on their monthly payments  and the account is in arrears. The borrower has stated that, due to the rise in inflation and energy bills, tenants are not making rent payments on time and some are failing to pay rent altogether. This has therefore, impacted the borrower’s ability to adhere to the mortgage obligations.

Furthermore, in light of the likely future rise in rates in the coming months, we are concerned about whether the borrower will be able to adhere to future monthly payments. And if that’s not enough, one of our team recently visited to inspect a few of the properties, and it is clear that they are falling into disrepair, and we have health and safety concerns. It is clear that the borrower is not managing the properties at all.

In light of the current market, we are considering our strategy and wanted to ask your professional opinion to determine best course of action. Your advice is, as ever, very gratefully received.

 
Mo Gage
Director at Landlord Lenders In

Hi all,

Please see below – a problem that I think we’re all familiar with now, having been appointed so recently on similar buy-to-let portfolios in Liverpool and Bournemouth. Clearly there are currently uncertainties in the market and reduced appetite amongst some investors / lenders. The good news for Landlord Lenders Inc (LLI) is that we continue to find demand from investors, with property companies and independent investors having an appetite for this sort of stock despite the cost of living crisis and current economic climate.

Considering next steps, let’s recap on what we should do to assess the situation:

• Firstly, we’ll need to understand the tenancy position for each property and whether each tenant is paying their rent. If LLI can secure tenancy documents from the borrower, that would be most helpful. Failing that, our team are well used to taking on new appointments with little-to-no information and are well versed at doing our due diligence on the ground. We would look to collect rent as soon as possible as this can be used to pay down costs of the receivership and any surplus would go towards the debt. Should any of the properties be vacant, we would look to immediately secure them and we would consider whether there is merit in re-letting the property prior to sale.

• Secondly, we’ll need to inspect the condition of the properties as soon as possible. We will meet the tenants and understand the condition of the properties. Clearly, if the properties present significant health and safety concerns, we need to pick this up immediately in order to protect the asset and the lender’s security.

• Finally, we would look to determine the value and appropriate sale strategy. We would value the properties on a portfolio and individual basis. It is likely that a sale of each asset individually would achieve a higher overall value, however this comes with a greater risk of not selling the less attractive assets as quickly as we would like to. Furthermore, subject to the level of debt, we may not need to sell the whole portfolio in order to recover the debt.

Meanwhile, let’s crack on with our in depth local market research and select the best method of sale and agent to sell the properties. If we are able to redeem the debt in full via a sale now, we should do this so as not to put the lender’s position in jeopardy. Should further asset management initiatives be required to repay the debt in full, such as re-letting vacant units, we will initiate these and constantly review the market and the saleability of the properties / portfolio until such time that we consider the debt will be redeemed via a sale. All options would be cash flowed to establish the best strategy going forward.

In light of the current economic circumstances, we will need to move quickly on this to mitigate against the ongoing market risk. We have tons of experience dealing with portfolios of this nature in an efficient and effective manner whilst achieving the best outcome – or encourage the borrower to redeem the loan via refinancing.

Here we go again!

D