Seeking expert advice on investing in Buy to Let property in Scotland in 2019 is an essential first step to making a well informed buying decision. Depending on an investors requirements certain property within areas of Scotland will work well for one landlord whilst being wholly unsuitable for another; establishing the purpose of an investment property and an investors priorities are key before a search is begun.
So begs the question; why are you, as a prospective landlord, looking to invest?
Most are likely to respond with the completely legitimate answer ‘to make money’. Of course, why else would you be looking to invest?
Making money through property can come in many different guises and is intrinsically complex.
Yield and capital growth
Most landlords would say that the ideal buy to let property would have a fine combination of high yield and predictions for good capital growth. As ideal as this situation is, finding a property that offers both opportunities at the top end of the scale is incredibly rare.
If a property is likely to make impressive appreciation in the near future, it is often unlikely to achieve an exceptionally high yield immediately. To find a property which will offer the the highest possible yield, the property needs to be in a location which is popular with tenants whilst not having too high a purchase price. It is certainly not my intention to express negativity when it comes to choosing a buy to let property; there is a balance to be found and a property out there to suit each individual investors requirements.
It is crucial for any potential landlord to truly understand what is most important to them in the investment. It might be that an investor is ultimately looking for a long-term acquisition in the best possible location that can be used in trust for future generations, and therefore the month to month income is less a priority, more a valuable advantage. Likewise, an investor might be looking to support themselves in retirement, and therefore every penny of monthly income counts, and is in fact much more important than the longer term advantages.
Having established the underlying drivers behind a landlord’s decision to invest, where in Scotland offers the best buy to let opportunity?
Where to buy investment property in Scotland
If a landlord is yield driven then exciting opportunities can be found in Dundee, where property prices are still significantly more affordable than its larger cousins in Edinburgh and Glasgow. Dundee has two universities; the University of Dundee and Abertay University, which mean that demand for rental accommodation is often high.
On the other end of the spectrum there are areas in Edinburgh, for example, that have been growing exponentially from an appreciation perspective, but the opportunities for overall yield can be lower because of this. This is namely due to a lack of supply in some of the sought-after university areas such as Newington and Marchmont, which is propelling property prices and in some cases prohibiting yields. It could be argued that a lack of supply of properties for sale is encouraging more people to rent which is likely to push rental values up in theory increasing yields – I’m yet to see strong examples of this.
Some might say Glasgow is holding a happy balance between the two growth prospects, with prices still more affordable than Edinburgh and a strong demand from renters. However, there are certain rules at play with buy to let properties in Glasgow currently that prohibit the purchase of HMO (House in Multiple Occupation) licences without the required planning permissions from the council. This has resulted in a dramatic decline of HMO properties being purchased in Glasgow (although this is due to the enormous demand), which likewise restricts landlords looking to buy the best yielding properties.
Buy to let property in Scotland
With this in mind it would be pertinent to mention new buy to let regulations which are unique to Scotland if one has historically bought buy to let properties south of the border, the following information is accurate as per the official guidelines provided by the government at the time of writing this article.
The first of these is namely a change to the traditional Assured Shorthold Tenancy. Scotland’s new version of this comes in the form of a Private Residential Tenancy (PRT) agreement and means that there is no longer a specific term on the length of contract and the landlord must provide a much longer notice period if they wish to end the contact (84 days).
The tenant has a shorter notice period of a month, which they can give at any stage. There has been a lot of negativity surrounding this change from a landlord’s perspective, however, whilst it is clearly the intention to assist the tenant not the landlord, I don’t see the reality of it to be so bleak. Notice can still be given by the landlord, albeit longer and after six months, and there are 18 clauses by which a landlord can give notice before the first six months. The rent can only be increased every 12 months, but I would say most landlords would agree to a tenant paying a set figure for the first year in the previous system.
The tenants can request an appeal, but as long as the rise is in keeping with the marketplace (and comparable evidence can be provided), there is little reason to why this would be an issue.
There are also other regulations that new landlords should be aware of which aren’t UK-wide requirements, such as registering the property as a buy to let with the local council, instructing an electrical installation condition report, including a PAT test on landlord’s electrical appliances and ensuring that no tenancy fees are charged other than rent and a refundable deposit, although the letting agent should take care of this it is ultimately the landlords responsibility to ensure it is done correctly.
In short there are clearly various rules for landlords in Scotland which accrue more hurdles than the system in the rest of the UK. However, it is likely that these requirements will be extending beyond Scotland in the near future, and so long as buyers are aware of these, then attention should instead be paid to the fact that there are many exciting opportunities to be had when investing in Scotland.
Investment property in Scotland
Despite political and economic uncertainties which have been prevalent as of late, the Scottish buy to let marketplace has been exceptionally busy over the past few years, with many of the cities topping the buy to let charts across the UK. This should encourage both current and future landlords that Scotland should be on their radar. To discuss your investment property plans please contact us without obligation.