Tuesday, 19 February 2019

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).

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

Tuesday, 12 February 2019

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.

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.

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

Friday, 8 February 2019

Welcome to The Key Place’s blog - Confessions of a 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.

Property inspections – they are certainly not all dull, and this particular one did make me laugh!

One of The Key Place’s newer members of staff went to carry out an inspection at a property where we had long term tenants who had never given us previous cause for concern as a result of inspections. 

The staff member arrived back at the office looking somewhat stunned, to say that the tenants were growing cannabis plants in the bedroom – she saw a number of plants, underneath specialist lights. 

In recent times we have been made increasingly aware of the problems of cannabis farms in rented properties.  Staff have been briefed in being vigilant.

I decided to visit the tenants immediately to see if they could shed some light (no pun intended) on the situation, as this seemed very out of character.  I called and asked if I could pop by and took my office manager with me.  On answering the door, I asked the tenants outright if they were growing cannabis plants.  Amidst much laughter, they explained that it was not a cannabis farm but the tenant’s mother’s tomatoes, which they were looking after while the mother was on holiday.  They invited me in to have a look and sure enough I was able to confirm that those were indeed tomato plants!

This was a good learning curve for The Key Place staff member as we were able to educate her in how to tell a cannabis plant from a tomato plant in the real world!  And on the plus side, I was delighted with her vigilance. 

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

Tuesday, 5 February 2019

The question of the day is …. do you buy or sell in the Edinburgh property market?

I have one of my landlords from Trinity ring me for my advice the other day.  He had been speaking to a couple of friends of his about the Edinburgh property market and they had very different views on whether it was time to either sell or buy property – one though that you should by, the other thought that you should sell and the third thought that you should do nothing!  If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with Brexit, the general uncertainty in the world economic situation, changes in the taxation towards landlords, the increasing legislation affecting the sector etc. 

I would admit, there are certain landlords in Edinburgh who have over exposed themselves in the last few years with high percentage loan to value mortgages. Those mortgages, with their current (yet artificially) low interest rates, will start to suffer, as their modest monthly positive cash flow/profit (ie income (rent) less costs (mortgage, fees, tax)) will become negative when the tax and mortgage rates rise.

It appears to me these landlords seem to have treated the Edinburgh Buy to Let market as a sure bet and have not approached this as a business and, as a result, they will suffer as they thought "Buy a house - rent it out so it covers the mortgage and make a few quid on top".  These are the people who will be thinking twice. I see opportunity everywhere and won't be stopping, I am here to stay. It’s going to be an exciting year.

Gone are the days when you could buy any old house in Edinburgh and it would make money.  Yes, in the past, anything in Edinburgh that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.

True, since September 1998, the average price paid for an Edinburgh flat has risen from £64,755 to today’s current average of £220,584 in the town, an impressive rise of 240.64% and semi-detached houses have risen in the same time frame, from £92,371 to £342,615, an even better rise of 270.9%. 

However, look back to 2008, and in that year, the average flat was selling for £147,125 meaning our Edinburgh landlord would have seen a 49.9% rise and the semi-detached house owner would have seen an increase of 37.1% as they were selling for on average £246,684 .... not bad until you consider inflation.

Since 2008, inflation, ie the cost of living, has increased by 32%. That means to retain its value, a Edinburgh flat bought for £147,125 in 2008 would need to be worth £194,205 today to counter the impact of inflation. Therefore, our flat landlord has only seen an increase of 17.9% (ie 49.9% less 32% inflation) over these 10 years ie 1.79% per annum.

The reality is that in the period since around 2008 we haven’t seen anything like the average capital growth in property we have seen in the past largely as a result of the ongoing effects of the economic crash in 2008 and it’s not predicted to grow at the rates it has previously done either. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise.  You can still make money by buying the right Edinburgh property at the right price and finding the right tenant. However, remember, investing in Edinburgh property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’?

If you would like to talk to me about your balanced property portfolio, please call me on 0131 603 4570 or email me at robert@thekeyplace.co.uk.

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

Tuesday, 29 January 2019

Edinburgh buy to let refurbishment opportunity

Today’s buy to let opportunity from The Edinburgh Property Blog needs refurbishment.
The property is a one-bed flat in Wardlaw Place in Gorgie ..... it’s a traditional Edinburgh stone tenement fairly near the centre of the city. 

It has a lounge with a kitchen off it, a double bedroom and a bathroom.  It is in need of a complete refurbishment (new kitchen, presumably a new bathroom (there is no picture of the shower room), re-decoration and carpets) so it is not a purchase for the inexperienced or faint-hearted landlord.

Looking at the numbers.  The asking price for this property, which is on the market with Your Move, is offers over £90,000 so let’s say it goes for £110,000 as it is priced to sell.  It is difficult to assess the cost of the refurbishment without seeing it so let’s assume it costs £25,000.  That gets you to a ‘cost’ of £135,000.  The flat should let for around £625 pcm once it is refurbishedwith a bit cosmetic work (say £5,000) or £725 (with a complete refurbishment) which get you to a yield of around 5.6% .... not bad for a traditional stone tenement flat in near the centre of the city. 

A wee bit of advice – you need to be very disciplined when buying properties that need refurbished otherwise you end up overpaying and it becomes a bad investment.  I often find that people underestimate the refurbishment costs.  My suggestion with properties that require refurbishment is to prepare a detailed and honest assessment of the cost of the refurbishment and then add a contingency, as often costs are greater than expected, to get to a ‘sensible refurbishment cost’.  Then I would determine the ‘total cost’ you are prepared to spend based on the expected rent level and the yield you are looking for.  I would then deduct the ‘sensible refurbishment cost’ from the ‘total cost’ to arrive at the maximum I am prepared to pay for the property itself and base my offer for the property on this figure.  Apologies if this sounds very simplistic but I have heard of too many people who have had bad experiences with properties needing refurbishment!

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.

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

Friday, 18 January 2019

Today’s Confession, well, where do I even start?

Latest from The Key Place’s ‘Confessions of a ..... Letting Agent’ series which takes a behind the scenes look at the operation of a busy lettings business.

We have a property on our books which we have managed for a long time.  The tenant is a 50 year old man who lives with his mother, and the lease is in his name.  The tenant has a sister who is not on the lease but who has been authorised by the tenant to deal with all property related matters on his behalf.  And so the sister, let’s call her Susan, is who The Key Place has to deal with.

Now I suspect Susan is the older sister.  She works for a public sector body and has the talking style of a 6 page letter without punctuation.  She clearly has too much time on her hands given her level of involvement in the property, and she has read up on every single possible legality with regards to renting in Scotland, England, Ireland, Wales and beyond.  She claims to record every call we have with her.

We wanted to inspect the property but were refused access.  The reason given was that the tenant would be too stressed by the inspection, plus he has allergies which prevents anyone who has gone within an inch of a bar of soap from entering the property.  We gave the required notice as per the lease to gain access to the property to carry out an inspection.  Myself and a manager were on our way to the property when we received a phone call from Susansaying that under no circumstances were we to come to the property and if we did, the police would be called.  The reason given was that we had not sent written confirmation that we accepted their conditions of entry – we hadn’t had this request so couldn’t give written confirmation.  We abandoned the inspection as we knew we could not inspect without approval or a court order.

We refused to give up!  Eventually it was agreed that our Chief Exec could inspect the property as long as he didn’t shower with soap that morning and used no deodorant or aftershave.  He had to agree that the tenant would smell him at the door before he was allowed access (yes really!).  And so the inspection took place.  The property was found to be OK, not in the best condition but not bad.  There were some things needing seen to, however the family were not keen (you can imagine) on work being done in the house, and so we had to negotiate what could be actioned, balancing landlord obligations under repairing standards verses smaller jobs that could be left. 

The main repairs needing attention were a damaged back door, some work to the kitchen and a cracked front door step.  Taking the front step as an example of how difficult this all became - the tenant eventually agreed the step could be fixed but stated the repair could take no more than 1 hour.  Apart from this 1 hour they wanted continuous access to their house.  When we explained that this was impossible and that the tenants were being unreasonable Susan said she would go the police, MP’s, the newspapers.  As we always do when we are threatened by people, we acknowledged that it was Susan’s right to go to the police, MP’s, the newspapers etc. but we suggested that speaking to a lawyer in the first instance might be a better idea from herpoint of view to ensure that her position was sensible.  This surprised Susan who has assumed that her threats of ‘taking things further` would scare us, but, as we were doing things by the book, we had nothing to be concerned about.

And so where are we today?  Well the step has been mended after incredible negotiation, however some of the other repairs have not been dealt with due to tenant refusal.  The property does at least meet the repairing standard.  We have not been allowed to re-inspect yet but we hope to shortly.  The landlord has been kept fully informed at all points and knows exactly what is going on at his property.  We do not believe the tenants are going to intentionally damage the property and they pay their rent every month without fail.  The owner would need to spend money on his property if the tenants were to leave, and so for him, he would rather keep the paying tenants, even although we can’t carry out inspections as regularly as we would like.

This is an on-going difficult situation as we still have a job to do.  We certainly feel that we have earned our management fee on this one!

#bathgate #bonnyrigg #bo’ness #boness #dalkeith #edinburgh #falkirk #grangemouth #kelso #linlithgow #livingston #loanhead #musselburgh #penicuik #stirling #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #privaterentedsector #prs

Tuesday, 15 January 2019

Values of Edinburgh flats smash through the £320/sq ft barrier

As I mentioned in one of my blogs the other week, I was having a cup of tea at Cafe Contini in George Street recently with a landlord.  This landlord already has a couple of residential properties as well as a commercial unit that are doing very well for him and is on the look out for a third residential property.  When we were talking, he asked me a question that made complete sense in terms of commercial property but was as bit ‘left field’ from a residential property point of view – how much he should be paying per square foot?

Well, that was a challenge and you know how I like a challenge!

So I did my research and found out that:
  • The average flat in Edinburgh is currently selling for approximately £323 per square foot costing, on average, £228,110.
  • Terraced houses in the town are currently selling for, on average, £378,876 or £317 per square foot.
  • An average semi in Edinburgh is obtaining for £370,631 and achieving £317 per square foot.
  • Finally, the average detached house in Edinburgh is achieving £334 per square foot and is selling for £565,637 although this selling price is skewed by a relatively small number of high value properties that do not make viable buy to let properties.

Now these are of course averages, but it gives you a good place to start from.

My research reveals that Edinburgh flats tend to generate a better yield than detached, semi-detached or terraced houses (probably because there is greater demand for rented flats than there is for houses in Edinburgh), flats tend to appreciate in value more rapidly than detached, semi-detached or terraced houses (probably for the same reason) and flats may well be easier to sell (remember 65.1% of properties in Edinburgh are flats compared to a national average of 36.4%).

So, flats are the cheapest to buy in absolute £ terms, are not far off the cheapest to buy in per sq ft terms, give the highest rental yield and give the highest capital growth.  

That’s interesting!

If you would like to explore how we can help you with your property investments, or should you require any advice about investing in the Edinburgh property market, wish to enquire about our Investment Analysis Reports, Property Sourcing, Residential Lettings or Property Management services, please do not hesitate to visit The Edinburgh Property Blog (www.theedinburghpropertyblog.co.uk), contact me for a chat (phone me on 0131 603 4570) or email me (robert@thekeyplace.co.uk).

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #firsttimebuyers #brexit #hardbrexit #cliffedge