I often speak to investors looking to invest in the property market but who are unsure where to start. Before advising these would-be landlords it’s important to get an understanding of how much they have to spend, their attitude towards risk and how long they intend to hold the property for.
The recent budget is likely to have an effect on the number of buy to let landlords in the market. The chancellor has just announced that he plans to scrap the requirement for those with defined contribution pensions to buy an annuity. Instead they will get free advice to decide what is best for them with regards to their pension pot……one option being investing in a buy to let property.
Edinburgh is a great place to invest in residential property. Yesterday’s Sunday Times highlighted Edinburgh as one of the ‘Best places to live in the UK’ (pipped at the post by Bristol but awarded ‘best views’ and highly commended). Edinburgh boasts one of the most robust property markets in the UK. The City has a thriving student and professional tenant population, a good quality stock of traditional property and relatively strong capital growth over the past decade.
My advice to investors is normally to invest in good quality properties in areas which have typically avoided fluctuations in the property market while delivering a good monthly rental return. I am a huge fan of Polwarth and Fountainbridge if you have around £100-110k to spend. These areas deliver a great return (5-7%). They are extremely popular with young professionals and with Napier University students due to their central location. Properties in these areas were affected by the recent downturn of the property market, specifically as first time buyers were unable to secure deposits and mortgages. As such, there is an opportunity for investors to purchase these properties at a time when values are lower than we would traditionally expect. In January we purchased a 1 bedroom flat in Polwarth for £101k and within 2 weeks a tenant moved in, paying £550pcm to give our client a gross return of 6.5% which they are delighted with.
If an investor is able to push their budget towards the £300k mark, my advice is usually to concentrate on Marchmont and Newington where returns of 6.5-8% can be achieved. These properties are in the prime location for Edinburgh University students and retain many attractive period features (high ceilings, large floorprints, original cornicing and fireplaces) while lending themselves well for conversion to HMO (Houses of Multiple Occupants, ie 3 or more people) standards. We have just bought a 3 bedroom flat on Marchmont Road for a client for £300k. We’ll be spending £5k refurbishing the property via our sister maintenance company, Letfix to upgrade the property to HMO standards and will be renting it out for £1,700pcm from July, providing the landlord with a 6.7% gross return and a great chance of future capital growth.
Umega Lettings offer an Investment and Acquisition Service to source properties on our clients’ behalves. We will advise you on the best area to invest your money then will go on to short list, inspect, assess rent, advise on purchase price and any refurbishment required and will deal with solicitors to submit offers on your behalf. We have a team of experienced staff who have been buying, selling and letting properties throughout the city for a number of years and we have the experience and tools to offer excellent advice on a property’s target letting market, predicted rental income and to highlight the properties with the best investment value. For more information on our service please contact me on 0131 221 8281.