Deals are the lifeblood of a marketplace lending business like LandlordInvest and there is a lot of work that goes into each deal to take it from a borrower’s initial financing requirement, to getting funded, and ultimately being repaid.

Enquiries

It all starts when a borrower or an intermediary acting on their behalf reaches out to us with a requirement.

Direct borrowers often find us via Google, LinkedIn, social media, industry press, or a personal referral from someone who has previously done business with us. We also do a notable amount of repeat business with existing satisfied borrowers.

Intermediaries (also known as brokers or introducers) account for the largest portion of enquiries and are mostly aware of us already and in many cases have an existing relationship with someone in our team.

You can make an enquiry with LandlordInvest by phone, email, or by filling out a short online form.

Underwriting

When we receive an enquiry, our underwriting team will check the information provided, consult with the borrower or intermediary if more is required, and respond with indicative terms, which are usually offered the same day.

We have some basic criteria to quickly filter enquiries such as that the borrower is a UK resident or has a UK-registered company, UK bank account, and as we prefer to lend to professional property investors, that they are not a first-time buyer.

We undertake simple initial due diligence (DD) such as checking Land Registry for the relevant property, Companies House for the borrowing entity, and general online and news research. Some deals will fail at this stage due to negative information about the borrower or the property learned from past press.

Further DD includes a credit check (using a credit referencing agency such as Experian) as well as manual investigation into the track record and portfolio of the borrower.

It is important to look at the equity the borrower has in the deal and what they would stand to lose if there was an issue with the sale, refinancing, or the development.

Unlike some lenders, LandlordInvest looks carefully at the affordability of the deal and considers the borrower’s ability to make payments not just from their salary and the potential sale or refinancing of the security property, but also using income that might come from other properties in their portfolio.

An independent valuation of the security property will always be conducted by a RICS regulated third party. We will consider the value of the property alongside what it would be if the property was marketed to be sold on a tight deadline. We will also do our best to take into account the different states the housing market and broader economy could be in at the time the loan is due to mature.

Borrowers seeking a development loan must have an additional assessment of their development site and plans by an independent building surveyor.

Security

We will take a first or second legal charge over the security property. We will also consider more than one security property being included to alter the loan to value (LTV) of the deal and potentially reduce the interest rate and/or the risk to lenders.

We also require a personal guarantee (PG) from the borrower or directors of the borrowing company as well as a Debenture over the borrowing company. We may also seek additional guarantees from separate guarantors of the borrower if required.

Legals

At this stage, if our investigation has returned positive results and the borrower has provided everything asked of them, the case will be passed to one of our specialists from our panel of approved lawyers. The borrower must use their own SRA registered firm with at least three SRA registered partners.

The lawyers will progress with the conveyancing and keep us informed so that when the deal is nearing completion we can publish it to our audience of thousands of lenders. We wait until right at the end of the process to publish a loan listing to our platform, as they are usually funded very quickly. This minimises the chance of disappointment for lenders if a late-stage legal issue scuppers the deal, or lender frustration at funds being tied up whilst not earning interest if the conveyancing takes a long time after a listing has become fully funded.

After the platform listing is fully funded, we will transfer funds to the borrower via our lawyers on the completion date and start the loan on the platform. Now it is an active loan and lenders can see the interest due and schedule of payments in their dashboard.

Ongoing management

After completion, a loan’s maturity date may be a year or more away, but there is still plenty that needs to be done.

In the case that a borrower is refurbishing or converting a property to a different use, a member of our team will often visit in person to keep an eye on progress.

If the borrower has taken a development loan, an independent third party will be employed to make regular checks of the development and provide several interim reports. These reports are shared on our platform as further tranches of the development loan are published and funded.

Over the course of the loan, we will continue to take the temperature of the housing market and monitor the sale of similar properties in the area.

During the course of the loan, the borrower may contact our team and arrange to make a partial repayment of the loan.

In the months leading up to loan maturity, we reach out to the borrower to make sure that appropriate arrangements are being made to repay the loan on time, such as the sale or the refinancing of a security property. In some cases we may allow well organised borrowers, who are aware in advance that a sale or refinancing is taking longer than expected, to arrange an extension of the loan.

Enforcement

Although we will always try to proactively seek acceptable and predictable outcomes for our lenders, some borrowers will fail to service or repay their debt and the loan will be classified as in default. In this case, the borrower would be charged penalty interest rates and any legal or third party costs incurred in the pursuit of repayment would be borne by the borrower.

In rare cases it will be necessary to work with a Fixed-Charge Receiver to conduct the sale of the security property, such as by auction.

At the time of writing LandlordInvest lenders have not suffered any capital loss from defaulted loans*.

* Past performance is not a reliable indicator of future results.

Our blogs are for information purposes only. This content is not financial, legal or tax advice. Should you require any advice in relation to the earnings you make from LandlordInvest we recommend seeking independent professional advice. Links to other sites are provided for your convenience but LandlordInvest accepts no responsibility or liability for the content of those sites or of any external site. The information in this blog is correct at the time of posting.