Trend towards multiple property owning Edinburgh landlords

I am seeing a couple of trends amongst our Edinburgh landlords – both understandable and, I suspect, likely to continue. 

On the one hand, the more serious landlords are investing and buying more properties on the basis that, despite the recent changes and hassles in the Private Rented Sector, buy to let property investing is an attractive proposition. 

However, on the other hand, the ‘hobby’ or ‘accidential’ landlords are throwing up their hands in horror at these changes and are selling their properties.

It was interesting for me to have this anecdotal trend borne out by evidence. 

Whilst the number of rented properties across the Country is increasing from 4.9 million in 2015 to 5.3 million in 2019, the number of landlords across the Country is falling from 3.72 in 2015 to 3.68 in 2019.  This means that the size of the average landlord’s portfolio is 1.44 which is the highest level it has been since records began in 2005 up from 1.32 in 2015 and a low of 1.24 in 2010 (presumably due to the affects of the financial crash).  Another interesting stat is that in 2019, 73% of landlords owned one buy to let property which is a far less that the 86% it was in 2010.

So, what do you need to think about when you get into owning multiple buy to let properties.

Firstly, it is often more profitable and less risky to buy a number of properties than just one for the same outlay.  Not only that it gives you more flexibility and reduces the effects from voids; your risks are therefore reduced too.

If only one property is purchased a void period will result in no income for the investor.  However, if multiple smaller units were acquired the effect of one property being unoccupied is proportional to the number of properties held and a return on your investment will still be maintained.

Additionally, the overall achievable rental return is likely to be significantly higher across a portfolio of several smaller properties rather than a single investment in a larger one. In Edinburgh, for example, rent from one £300,000 property would be £1,300 pcm but from 2 x £150,000 properties it could be over £1,600 pcm.

Time it right

In general there is still an upward movement in the part of the housing market in Edinburgh that is attractive to buy to let investors and this makes property an excellent choice to consider for investment.  Your return on your investment is a mixture of yield from rent and capital growth, perhaps 6% and 3% respectively, so a potential annual ROI of 9% gross.

Maximise your profit potential by adding to your portfolio when property prices are rising, but aren't running away. In Edinburgh we're currently experiencing a fairly 'flatish' sales market with prices increasing but not at an overly accelerated rate. Perhaps this is the future, but a steady 2-4% growth is healthier than boom and bust.

In addition, it's important to review the rental market as well.  Indicators of good timing for growing your portfolio would be when there's competitive tenant demand and rents are on the up (as this will automatically increase your yield).

Plan and prepare

The solid foundations of property portfolio success are often down to advanced planning and precise preparation…

Before investing you need to have your finances in place, plus you will need to have an overall long-term plan.  Taking advice from a qualified financial advisor as how best to fund purchases is essential.

It's important to identify why you're investing in an additional property and what you want that property to achieve.  For example, is it for a pension?  Are you hoping to increase your monthly income?  Is it for a long-term capital growth to use in the future?  Are you planning to live at the property in the future?

It's also essential to know when (and how) you're intending to exit the investment so that a clear and concise exit strategy can be prepared. Again talk to a financial advisor and tax expert before committing to portfolio growth so you can plan how to exit in the most cost-effective way.

Starting the search…

Although there is likely to be a multitude of properties available for purchase in your area not all of them will make the best rental investments so it's important to choose carefully.

When searching for your next investment, short-list several properties taking into consideration the following for each: location, price, potential renovation costs, suitability for the rental market, timescales before being rental ready, tenant demand, achievable rental return, potential for capital growth, plus where it will fit in with the rest of your portfolio. 

I am happy to have a chat with you before you start your search and/or once you have got your short-list.  Not only do I know the local property market but I also know what tenants want and need from a property, what's in demand and which type of properties are likely to be successful for investment purposes. In fact, as risk indicators are sometimes overlooked by those searching for a purchase, I can tell you what's wrong with a property as well as what's right.

Overcoming challenges

Of course having multiple properties isn't without its challenges.  Each element of the rental process will be multiplied… doubled, tripled, quadrupled etc.

Not only will you be dealing with the paperwork and maintenance of a number of properties, you will also be juggling the management of the people who live there, all of whom will have their own demands and needs.

Bear in mind too that there are new financial challenges. We're in year one of a four-year process to drop tax relief for landlords, plus an extra 3% Stamp Duty now has to be paid for each property bought for rental purposes.

So, how can a landlord make juggling multiple properties simpler?

By far the easiest way to manage an expanding portfolio with ease is to engage the help of a property management agent.  As industry experts they will thoroughly vet potential tenants, troubleshoot emergencies and issues and arrange necessary maintenance utilising our bulk buying power with our regular contractors.  They also understand and meet the current legislation, plus will keep on top of essential anniversaries, such as gas safety certificates.

All of the above becomes increasingly harder for a self-managing landlord as their portfolio multiplies but, if you engage the services of a property management agent, your involvement will be minimal.

Watch out for further information on this in future posts on The Edinburgh Property Blog (www.theedinburghpropertyblog.co.uk).

www.thekeyplace.co.uk

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Why Edinburgh landlords need to know how to identify Japanese Knotweed

The Edinburgh Property Blog today features an article from a guest contributor, Jake Ryan of Wise Knotwood Solutions all about Japanese Knotweed ….. something that all landlords need to be be aware of.  Over to Jake …..

Spring begins with a warning for landlords

It has been estimated that Japanese Knotweed costs the British economy an astounding £166 million each year. The invasive plant has been listed by the World Conservation Union as one of the worst invasive species globally so it is critical that landlords familiarise themselves with the destructive plant, especially in spring.

The spring of 2018 was dominated by snowy and icy conditions that caused destruction all over the U.K. However, when it comes to invasive plants, this destructive weather was actually a blessing in disguise as it delayed the emergence of Japanese Knotweed by up to two months. Unfortunately, the same can’t be said this year as the unusually warmer weather has led to Japanese Knotweed emerging even earlier than normal. This is a serious concern and both landlords and tenants must remain vigilant as the invasive plant has the potential to devalue a property by tens of thousands of pounds.

Why should landlords worry about Japanese Knoyweed?

As Japanese Knotweed becomes dormant in winter, the best time to tackle the plant is in spring before it has the opportunity to grow to dangerous heights. Japanese Knotweed often goes undetected as due to its attractive appearance, homeowners tend not to notice the plant at all. This makes the invasive plant even more dangerous as if it remains undetected. Knotweed is capable of causing disastrous consequences to the structural integrity of a building. The plant is even capable of growing through the tiniest holes and gaps in masonry and concrete if given the opportunity. Japanese Knotweed should be of significant interest to any landlords looking to sell their property as an increasing amount of banks are now refusing to provide mortgages on properties affected by the plant.

How to recognise Japanese Knotweed in Spring

Spring is arguably one of the best times to spot Japanese Knotweed as the plant is at its weakest at this time due to it becoming dormant in Winter. Knotweed can become increasingly costly to treat so it is important to treat it as soon as you notice the plant.

Depending on weather conditions, Knotweed will normally first re-emerge in March in the form of pink and red buds shooting up from the ground. The plant grows a dangerous rate of 10cm daily so it is appearance is prone to change. The plant in its early stages is often compared to asparagus spears that will quickly develop into thick and hollow canes. These canes are similar in appearance to bamboo but come with distinctive pattern of purple speckles. As the weeks go by and its appearance continues to change, leaves will gradually begin to unroll from the canes as the plant grows bigger. The green leaves will contain a zig zag pattern on the stems and shaped similar to a heart but with a pointy end. The plant is capable of growing up to 7 metres in any direction so it can soon grow out of control if left untreated.

I’m a landlord with Japanese Knotweed – what’s next?

Japanese Knotweed can cause incredible damage to properties and significantly affect a property’s value but it is important for landlords to remember this damage is completely unavoidable if the plant is treated in time. It is advisable that homeowners do not attempt to treat the plant themselves as incorrect treatment can cause further damage which will result in a more expensive treatment programme in the long run. The longer Knotweed is left untreated, the more expensive it will be to remove from your property.

If you suspect you have Japanese Knotweed on your property then don’t hesitate to have the suspect plant examined by a professionally trained Knotweed surveyor before it grows out of control. Alternatively, upload photos of the suspicious looking plant to Wise Knotweed Solutions today to get a free assessment from one of our expert surveyors who will tell you whether or not the suspect plant is indeed Knotweed.   

By Jake Ryan of Wise Knotweed Solutions

www.thekeyplace.co.uk

Criminal offence ..... call to action for Edinburgh landlords and letting agents

All letting agents are required to be registered with, and regulated by, the Scottish Government.  It has been a criminal (not civil) offence to trade as a letting agent after 1 October 2018 if you are not registered with, and regulated by, the Scottish Government.

Registered letting agents require to adhere to the Scottish Government Letting Agent Code of Practice which means that, amongst other things, they have to have suitable policies and procedures in place, there staff need to be appropriately qualified, and they have to control their clients’ money sensibly and they have to have professional indemnity and client money insurances in place.

Call to action ..... landlords

If they use a letting agent, landlords now have a duty to only use a registered one to ensure that they are legally compliant.  I keep hearing more and more practical reasons why this is the case, for example, did you know that you will be refused a mortgage on a buy-to-let property if you use an agent who is not registered?

Landlords please use a registered letting agent.

Call to action ..... letting agents

There is significant work in getting a letting agent into a good enough shape to be able to be come regulated.  If letting agents who have not registered are looking to sell their business given the hassle involved, get in touch as I know people who are looking to buy such letting agents – they have the resource (both £££ and people) to complete a quick deal.

www.thekeyplace.co.uk

Investment properties in Edinburgh come in all shapes and sizes

I recently attended a local meeting in Edinburgh where I got recognised as being The Edinburgh Property Blog chap (well you have to be recognised for something, why not that!).  A question I was being asked repeatedly was ''What is the ideal property to invest in in Edinburgh?''.  So I thought I would share my thoughts with you.

When considering a buy-to-let purchase what is believed to be a good deal will vary from person to person.  Everyone will have a different budget and varying preferences on location, style of property, condition etc as well as having different financial situations. That isn’t unusual, no different to everyone who has a different taste in music (I’m a 1980’s person myself with love of Abba if you are interested!).

I have always been of the opinion personally that “spreading the risk” is wise if you have a large portfolio.  A couple in the Marchmont, a few in Dalry, some in Newington etc, makes sense. All your eggs in one basket is a risk if something unpredicted were to occur.

I am also of the opinion that buying two properties for £175,000 is better than one at £350,000.  If you choose wisely two properties at £170,000 might rent for £800 a month each, but you’d struggle to find a £375,000 house that would rent for anywhere near £1,600.

Then there is the view that HMO properties cost more and change hands more regularly than non-HMO ones, so going for non-HMO ones might be wiser. But rents are generally higher in HMO properties which may well compensate for this.  The “what if’s” are endless.

Also, you need to be nimble when investing in property and change your investment strategy to take account of market, legislative and tax changes.  Take tax as an example.  The ‘normal’ element of Land & Buildings Transaction Tax (the Scottish stamp duty to you and me) starts being charged at £125,000 and this is meaning that certain buyers buying properties at less than, or as close to, £125,000 to mitigate this tax …. although I would point out that the Additional Dwellings Tax element of LBTT normally applies to the whole cost of a buy to let property.

In addition, there are a number of fairly ‘fixed costs’ associated with renting out a property – for example, registrations and safety certificates – and, given their fixed nature, these are proportionally higher for cheaper properties.

One thing is for certain, demand for one, two and three bedroom properties in the rental sector is high which means that there is room to trial many different stratagies.

We have developed a checklist which guide peoples to work out what sort of property is likely to fit their circumstances.  Please get in touch is you want a copy.

In short, don’t assume.  Feel free to get in touch and ask me what I think about your plans. I would be happy to cast an eye over the property you are considering buying and let you know what I think the pro’s and the con’s of it are – call me on 0131 603 4570 or email me on robert@thekeyplace.co.uk.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edinburgh property market together with regular postings on what I consider the best buy to let deals in Edinburgh out of the many of properties on the market irrespective of which agent is selling it, then visit my blog, The Edinburgh Property Blog, or sign up for our monthly newsletter, the Edinburgh Property News.

www.thekeyplace.co.uk

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #privaterentedsector #prs #firsttimebuyers #lettingagents

Welcome to the latest instalment of our regular blog - Confessions of an Edinburgh Letting Agent.

Landlords often ask us what goes on behind the scenes at The Key Place and so we thought we would share our experiences, and what we have learned from those experiences, with you.

If I had a penny for the number of times that I had rolled my eyes in despair at something a contractor had done, then I’d be a rich man by now (of course that is with the exception of our regular fantastic trades guys and you know who you are!).

We sent Ron the painter to do some work in a property we manage in the borders.  The tenant was able to go and stay with friends for the weekend and so it suited her to have the work done then.  Ron was happy to oblige, even although it was a weekend, and we explicitly explained that he would need to travel each day to the property or find accommodation as he wouldn’t be able to stay in the property.

On Monday morning there was a phone call from the irate tenant, who said that Ron had spent the weekend in her home, and she felt that her personal space had been violated.  On further questioning, we established that a friend of hers had walked past the property over the weekend and had looked in the window.  She quite clearly saw 2 deckchairs, a table and some bedding.  The tenant also claimed that dishes had been used and washed up but not put away.  

Well we spoke to Ron who said that he had taken his wife away for the weekend and that they had both slept in his van.  Now if you could see Ron’s van, you would know that is not possible as it is chocka full of painting stuff.  No self-respecting partner would agree to sleep in there!

Unfortunately the job was not finished and the tenant refused to have Ron back in her home, and so we had to find a different painter to complete the job .... and we never used Ron again!

Over many years of property letting, we have built up a list of reliable, quality contractors but getting to this point has been difficult and we have parted company with many trades’ guys along the way.  There is also the issue of quality versus cost.  Landlords often want the cheapest job possible rather than paying a wee bit more for quality.  Maybe if Ron had quoted higher, then he could have treated his partner to a nice B&B!

For information on all of The Key Place services, please visit our website, www.thekeyplace.co.uk.

A 10.0% Return with a Edinburgh Buy to Let Property well outstrips the modest 1.5% Return with The Post Office

I had an interesting email from someone in Edinburgh a couple of weeks ago, that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in the Trinity, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £160,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could get from a reputable lender was a 2 year bond with the Post Office, which paid 1.5%, meaning he would get £2,400 in interest a year.  One of his other options was to buy a property in Edinburgh to rent out and wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life he was also worried about all the tax changes he had read about in the papers for landlords. 

Notwithstanding the war on Edinburgh landlords being waged by both the UK and Scottish Governments at the moment, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of some Edinburgh landlords. It’s true he would face the extra 4% in Land and Buildings Transactions Tax (the old ‘Stamp Duty’) to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Edinburgh buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £2,400 a year, or as he rightly suggested, invest in property in Edinburgh. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Edinburgh is 5% per annum, meaning our potential F.T.L (First Time Landlord), should be able to, depending on what he bought in the town, earn before costs £8,000 a year. (However, I told him there are plenty of landlords in Edinburgh earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).

The bottom line is this, the success of investing in Edinburgh buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those assets. Unlike a savings accounts, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Edinburgh have risen by 4.98% per annum on average over the last five years, meaning that on top of your £8,000 in rent, but also seen an uplift of £7,968 …meaning his overall return for the year would have been £15,968 (not bad when compared to the Post Office!).

...  but the doom mongers amongst you will say, property values can go down, as they did in 2008 and in 1988 and 1979. Yes, but after 1979, prices had bounced back to their 1979 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped 1988 and did take 13 years to reach back to those 1988 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Registers of Scotland, average property values in Edinburgh currently stand 24.2% above the January 2008 (ie pre crash) level, and anicdotal evidence suggests that in the nicer parts of Edinburgh, we are well above these sorts of levels. Therefore, all this talk of property crashes seems unfounded.

If you would like a chat to find out more about investment property and property management in Edinburgh please pick up the phone (0131 603 4570) or email (robert@thekeyplace.co.uk).

www.thekeyplace.co.uk

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #privaterentedsector #prs #firsttimebuyers #lettingagents

Spacious ex local authority Edinburgh buy to let opportunity

Today’s buy to let opportunity today from The Edinburgh Property Blog is a spacious ex local authority flat in Stenhouse.

The property is a two-bed second/top-floor flat in Stenhouse Avenue West, Stenhouse.  The flat has a large lounge with room for a dining area, a kitchen, two bedrooms and a bathroom with a shower over the bath.  The property has double glazing and gas central heating.  Outside, there is a private area of garden to the rear as well as un-restricted on-street parking.

Interestingly, the flat is being sold fully furnished with all carpets, floor coverings, kitchen appliances and furniture as viewed (excluding sellers personal effects) included in the sale ….. there must be a story behind this one which may help you in the negotiations for the property.

Double click here to get more details of this property

The asking price for this property, which is on the market with Warners, is offers over £135,000 so let’s say it goes for £148,000.  I would expect that the flat will let for around £795 which gives you a gross yield of 6.4%. 

We hope you find our posts useful.  If you would like some advice with your potential investment, please call me on 0131 603 4570 or email me on robert@thekeyplace.co.uk.

www.thekeyplace.co.uk

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs