‘Unmortgageable’ homes tempt buy to let investors

Landlords prepared to renovate difficult properties could find lucrative buy to let opportunities among 1.5 million UK homes that many mainstream lenders will not lend on.

Research from specialist lender Together estimates that about 6% of Britain’s 28 million residential properties would be rejected by numerous high street banks because they fall outside standard lending criteria.

The list can include thatched cottages, solid-wall homes, high-rise flats and properties with short leases.

Houses close to commercial premises or without workable kitchens and bathrooms may also be turned down.

Rent income attracts

For buy to let investors, the potential rent income is a significant draw and is the main attraction for 35% of respondents purchasing one of these properties as an investment.

Price also matters with 28% pointing to the lower purchase cost as the biggest attraction, rising to 32% among those buying a main home.

Ryan Etchells, the chief commercial officer at Together, said: “One of the less visible challenges facing the UK property market is the sheer number of properties that mainstream lenders are reluctant to finance.

“That means a significant number of homes are effectively out of reach for ordinary buyers.”

Strong buyer appetite

He added: “While they don’t feature in official housing shortage figures, they represent part of the wider supply problem and highlight the scale of investment needed to bring more homes back into the ‘mortgageable’ market.

“The good news is that there is a strong appetite among buyers who are prepared to take on these properties and invest in improvements.

“However, many are still unaware of the alternative finance options available to them.”

Among people who had bought or seriously considered such a property, 44% said it offered better value and was more affordable than a conventional home.

Tenant demand

Renovation was another factor and almost a third (31%), wanted a restoration project, while 28% believed they could add value before selling the property at a profit.

The work involved did not deter every buyer and 31% said they knew the project would be difficult but considered it worthwhile.

Another 21% believed the possible rewards outweighed the risks.

Nearly one in five (19%), were prepared to take a chance that others would not, while 12% said they had underestimated the challenge or had not understood all the risks.

Mainstream lending restrictions can apply even where a home is habitable and located in an area with buyer or tenant demand.

The property may still fail an automated assessment because of its construction, condition, location or lease terms.