# AIB not interested in lending for Buy to Let



## Dermot (1 Oct 2012)

I have been involved in buy to let in a relatively small way for over 30 years. 

I have always kept my mortgages up to date without ever having any communication from the bank.  I am with the same bank for well over 30 years.  I was recently offered a small block of Apartments in a very good town with a gross return of 11% after Management Co fees. The Apartments were fully let and in first class condition. The block is 6 years old and was being sold at 25% of the boom time price.  I made an offer in writing subject to loan which would have been accepted had it not been subject to loan. 

Prior to making the offer I had a meeting with the branch manager and I made my case. I was was looking for a loan of 25% of the purchase cost of the building and I was financing the rest of the price myself.  I was very confident that I would get this Loan. 

Today I got a phone call from the manager after over 2.5 weeks that I was being refused.  The verbal reason was that head office refused it on the grounds that "_*AIB are over exposed to the Buy to Let sector*_"  I made my feelings quite clear on the refusal.  

Should they not be judging the borrower rather than their exposure to a sector.  I am actually not looking for sympathy but rather exposing the myth that AIB are open for business.


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## Brendan Burgess (1 Oct 2012)

Hi Dermot

That is very frustrating. 

You are getting a good income producing asset. You are putting up 75% of the price yourself. 

AIB's problem is that they are facing huge losses on "buy to let" and would judge everything in that light.  They may even have been told by the Central Bank to reduce exposure to the sector. 

Not sure if anyone else is lending to the sector? 

A 25% ltv at investment property rates must make more sense than lending to a FTB at home loan rates. 

Brendan


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## Dermot (1 Oct 2012)

Yes Brendan it is hugely frustrating. The manager actually stated that they would not even consider 20% and I would have a very good credit rating. I am not suggesting that they should go mad lending but if all the banks adopt this criteria there will be a very small market for property that will have to be disposed of thereby creating bigger losses.  I am actually classified as a very good landlord and I love trying to help out all the good tenants that I have.  

I know that it would be profitable for the bank to lend on the loan that I was looking for and this is what puzzles me.  Surely any business should want to do a profitable deal.  
This application will not show up in the "refused"  statistics as the Manager took all the details that were needed from me in their own hand writing and said that they would get the back up paper work from me later.


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## Bronte (2 Oct 2012)

Unbelievable with 75% downpayment.  Is there more to this, are you in negative equity on your other properties?


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## Dermot (2 Oct 2012)

Yes Bronte it is unbelievable and I have no negative equity issues at all. I have a consistent surplus every month on rent roll over repayments every year. The Manager accepts all of this but repeated the same old line " Aib is over exposed to the Buy to Let sector.  I take your point Bronte about " Is there more to this,".  No there are no issues.  I have given the cold facts as in percentage of the borrowing, percentage of gross return, length of time I am involved with the business, with the same bank branch, absolutely clean record and the property is in very good condition,fully let and well located in a good town.


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## PaddyW (2 Oct 2012)

That is puzzling to say the least. I thought banks would jump at a borrower with your credentials. Will you now try with other banks?


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## murphaph (3 Oct 2012)

Seems like madness alright. The banks lent recklessly for years and now when offered genuinely "safe" terms, they refuse to engage. What will hapen to banks that simply stop lending (as many appear to have done)? They'll surely begin to fold as they can't all be sustained through banking fees.


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## Dermot (3 Oct 2012)

Thank you all for your interesting responses. I eventually got speaking by phone to an assistant manager in an another bank this evening. This was after over 24 hours waiting for a call back.  I had been told yesterday that there would be no hope of a face to face appointment until Friday. The person was quite friendly and I put my proposition to them. I was asked about why Aib refused and gave them the reason.  I was asked to provide the following before the they could take a view on forwarding the application further up the line.  My accounts as submitted to revenue for 2009,2010,2011 and a P/l account from my accountant up to 30/09/12. A written valuation by a valuer of my existing property. All bank statements for the past 3 years and proof of cash.  There were a few other minor things.  I was told that it could take 7 to 10 working days for a final decision.    I have the paperwork for 2011 accounts with my Accountant and he would not be able to have what they are looking for until this day week at the earliest. Anyway I got a telephone call this evening that if I can put the same offer in writing as before but not subject to loan they property is going to the under bidder.  I was being given until 12 noon on Friday. I said I would not be making any further offer. 
I spoke to another person today who was dealing with the same branch as I was and his refusal in the last few days was a least as puzzling. I know this persons financial position very well. I am to an extent in shock.  There are absolutely no issues why I should have been refused.  The reason I was given was "AIB are over exposed to the Buy to Let sector".


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## Dermot (3 Oct 2012)

Thank you all for your interesting responses. I eventually got speaking by phone to an assistant manager in an another bank this evening. This was after over 24 hours waiting for a call back.  I had been told yesterday that there would be no hope of a face to face appointment until Friday. The person was quite friendly and I put my proposition to them. I was asked about why Aib refused and gave them the reason.  I was asked to provide the following before the they could take a view on forwarding the application further up the line.  My accounts as submitted to revenue for 2009,2010,2011 and a P/l account from my accountant up to 30/09/12. A written valuation by a valuer of my existing property. All bank statements for the past 3 years and proof of cash.  There were a few other minor things.  I was told that it could take 7 to 10 working days for a final decision.    I have the paperwork for 2011 accounts with my Accountant and he would not be able to have what they are looking for until this day week at the earliest. Anyway I got a telephone call this evening that if I can put the same offer in writing as before but not subject to loan they property is going to the under bidder.  I was being given until 12 noon on Friday. I said I would not be making any further offer. 
I spoke to another person today who was dealing with the same branch as I was and his refusal in the last few days was a least as puzzling. I know this persons financial position very well. I am to an extent in shock.  There are absolutely no issues why I should have been refused.  The reason I was given was "AIB are over exposed to the Buy to Let sector".


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## Jim2007 (4 Oct 2012)

Dermot said:


> There are absolutely no issues why I should have been refused.  The reason I was given was "AIB are over exposed to the Buy to Let sector".



Risk management in a bank is a very complex area, it's not just about the borrower defaulting, you can have the best clients in the world, but if the sector in which they are operating takes a hit, you can expect they will take a hit too. The best way to reduce that risk is to have a well diversified portfolio of loans. As AIB have already told you they are over exposed in your sector and until they reduce that exposure they will not be able to consider new opportunities no matter how good they are.  As the saying goes, when you find yourself in a hole the first thing to do is stop digging - or in this case stop giving out loans!


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## Bronte (4 Oct 2012)

If AIB refuses buy to lets on the basis they are overexposed in the buy to let market, then it means that they will not loan to anyone in this scenario. Presumably even if you had an amount in savings equal to the actual purchase price.  You'll have to try a different bank.  

Isn't there an organisation/government body looking into whether banks are open for business, I think there is an appeal mechanism tied to that, someone else might have an idea on this.  

Curious about why you only wanted 25% when from a tax point of view it's not efficient? Are you going on the basis of prices are low and eventually you'll get capital appreciation, is that your strategy?

Are you thinking that your cash is better tied up in property than savings?

(If you do reply don't forget the property prices rule on AAM)


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## Dermot (4 Oct 2012)

My view on Jim2007's contribution is that Aib are over exposed in every sector of the economy but in order to trade their way out of this they will have to lend on a case by case basis to good propositions or cease to trade.
In relation to Bronte's point. I am at a stage in my life where I want a low risk opportunity with a good return and a very good building.  The capital appreciation is something that I was not factoring into my pricing. The current rent roll on it is relatively conservative.  I did consider the tax implications and I can live with that. I am not a person who is contented with leaving cash in the bank and earning an ever lower return as the months go by.  I was thinking that in this particular case my cash would have been better tied up in property than savings. I am well aware of all the anti landlord taxes and charges but I get satisfaction in dealing with the good tenants I have and have had.  I know all about the other sort as well. Thanks to all the contributors


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## Spear (4 Oct 2012)

Sounds like cash buyers have a massive advantage. Can you source another, smaller, property and put just the cash down?


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## Dermot (4 Oct 2012)

Yes cash buyers have a massive advantage but Ireland being Ireland some will be able to get a well placed contact within the banking system to pull a stroke. 
I will be looking out for something within my cash budget but it probably will take a while to fit all the criteria e.g. Price, % return, building condition and a good letting location.


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## Stockmaster (9 Oct 2012)

Dermot, you sound like they type of person that has a good head on your shoulders and are a good landlord. I agree with you on the return is fine as it is and no need for capital appreciation. I am in the same boat happy to get a good return and providing good accommodation to good tenants. Why don't you join with another investor as an option as the investment is good


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## Dermot (11 Oct 2012)

Thanks for your reply Stockmaster.  I would like to think that it contains a fair assessment of myself and how I think. As I stated in an earlier post the property has now been sold to the under bidder who apparently made the offer not subject to loan. I am reluctant to go down the road again with another investor after a horrendous experience a number of years ago. Thanks for taking the time to post and continued good luck to you


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