As most of you will be aware the Chancellor recently announced a 3% hike in stamp duty for buy to let properties etc and as with politicians everywhere Mr Swinney decided
As most of you will be aware the Chancellor recently announced a 3% hike in stamp duty for buy to let properties etc and as with politicians everywhere Mr Swinney decided that if they can wring some money out of an unpopular body of voters in one country then he could do it just as well in Scotland.
As a result of this and other government measures various trade bodies, journalists and associated talking heads are either predicting the end of buy to let or a mad rush of people buying/selling rental properties depending which article you read.
Frankly most of the articles I’ve seen would serve a much more useful and environmentally friendly use as toilet paper.
The reality is that there remains and for the foreseeable future will remain, a strong private rented sector in this country. That is not going to change unless the government sorts out the housing crisis e.g. by building a lot more housing where its needed and at reasonable prices, hands up all those who think that’s likely anytime soon?
Have they made it more difficult? Yes, is it more ringed with legislation than it’s ever been? Yes, is that going to get any easier or less likely in coming years? No, because landlords and letting agents are never going to win a popularity contest and are an easy/popular target for the press, politicians and the chattering classes.
So the key question is can you still make money doing buy to let and the answer is absolutely. In fact there does seem to be an increase in people buying property now in order to beat the deadline. However you do need to be even more careful in how you go about it than you were before, this stuff isn’t rocket science but (and I hate use these little sayings) “failure to plan is to plan for failure” or as we used to say in the military remember the 7 P’s, Prior Planning and Preparation Prevents P**s Poor Performance.
- Choose Your Property Type wisely. Sounds obvious but you want as little maintenance as possible and the best return possible whether it’s Capital Return, Rental Yield or a combination of the two. Do your research, what properties are in demand one bed, two bed, flats or houses. If you are letting through an agent what are their costs, are they reputable, check the reviews. If you buy a newer apartment, there may be high maintenance charges to be aware of. It all hits your overall rental yield.
- Location Location Location. Again sounds an obvious one but think about where your rental property is. If it’s an apartment block, how many others are on the market within a few hundred yards? If there are a lot, it can drive monthly rental down through over demand. A recent survey reported that the things people look for when deciding what property to rent is whether there is ample parking nearby for friends and family, is it close to a train station and close to a supermarket. If you can get these three things right, you could be onto a winner.
- Know Your Tenants. Who are you targeting for tenants and be prepared for it. For example, if you are targeting students, do not be surprised if more maintenance is needed on the property that if you rent to a professional couple. Again, if you are going to allow pets with your tenants, do not be surprised if furniture might need to be replaced. Knowing the tenants you want will help your property search easier and make sure you do your research with a local agent and if you call one for a bit of pre buying advice and they wont talk to you then go somewhere else. If they can’t find the time to spare a few minutes for a prospective client then what will they be like when they have you signed up?
- Don’t buy on emotion. Remember you are buying for an investment, nothing else, so make sure you are not letting your emotions get in the way, something that is easier said than done. If you need to refit a bathroom, it does not need to be the best shower, the best suite, it needs to be something that keeps the costs low and the effect high. Remember this is about profit and yields, not gadgets and comforts YOU would want. Think about the tenants and just as importantly think about your pocket and your profit.
- To furnish or not to furnish? It’s an important thing to decide when looking at properties. If you are going to rent a one bedroom apartment, you are most likely going to be targeting a younger age range who are unlikely to have their on furniture so furnished or part furnish might be the deal breaker for a prospective tenant. If you buy a 3 bedroom house and you are targeting families, they will most likely have their own furniture so having it non furnished might be best. If you are furnishing the property (and there might be very good reasons to do so), you must be prepared for some replacement costs at some point.
A lot of this stuff is common sense but the biggest point is planning, do your research, talk to a friendly agent, if your in the area visit the street the property is on, read things that deal with the local market like The Dundee Property Blog
But fundamentally do your research.