5 important things to consider with a Buy to Let in Scotland.
A smart investment involves loads of upfront planning and research. You need to choose the right structure for your purchase (Personal or Ltd company), and this is dependent on your personal income. You’ll also need to understand the tax implications, and have sufficient funding, in the form of cash or taking out a mortgage if required.
Then, decide on the area you’d like to invest in and speak to a trusted local agent in order to gain an understanding of the market. For first time investors, it can be an overwhelming process. Letting agents are a hive of useful information – use them and their input to make an informed decision. Taking notes and doing your homework adds that extra peace of mind you’re going to need on your buying journey.
If you purchase a Buy to Let property personally, the income tax payable will be based on your current personal tax rate. It’s imperative that Scottish landlords familiarise themselves with the regulations and property tax in order to become successful Buy to Let investors.
When you purchase a property in Scotland, Land and Buildings Transaction Tax (LBTT) is payable, instead of Stamp Duty.
Before you get started:
Planning is key, and a bespoke plan will be required to suit your personal and financial circumstances. Working alongside a trusted financial advisor or mortgage broker if required and a local letting agent will enable you to make informed decisions. You need to set your budget, target yield whilst factoring in purchase costs such as LBTT, Legal fees, Compliance costs and furnishing costs.
We have also created a list of Frequently asked questions relating to property investment.
It is recommended you consider the following before venturing out into the world of Buy to Let:
- Are you looking for additional cash flow to supplement earned income?
- Do you want to retain the profit and expand your property portfolio?
- What yield do you have your eye on?
- Do you prefer being a hands-off investor?
At Yates Hellier, we provide a full letting service. Once your property purchase is completed, we’d be delighted to assist you in renting out your property and finding you quality tenants.
The benefit of using our property sourcing service is that we are on the pulse with the transaction, so can line up pre-screened tenants for the property in advance of completion. This minimises your void period liability and ensures that your investment is generating rental income immediately after completion.
Void periods can be costly, so minimising these ensures your investment is performing to its full potential.
Company Buy to Let mortgages generally attract higher interest rates, and you’ll need to hire an accountant to handle your annual accounts and obligations to Companies House.
So, should you invest in property in Glasgow?
The short answer is: YES!
Glasgow boasts some of the best rental returns in the UK. It’s Scotland’s largest city (fifth largest city in the UK), with Glasgow City’s population at just over 600,000.
A good way to locate potential investment areas is to keep an eye out for new developments, corporate companies opening headquarters and any new public transport links coming to Glasgow. This will give you good insight into areas within Glasgow that may offer good Buy to Let investment opportunities. We have listed a few districts in Glasgow that Buy to Let investors.
G3 – Garnethill and Yorkhill both of which are located on the outskirts of the West End offer more reasonable purchase prices for property investors. These areas have also proven to be extremely popular for renters due to the more affordable rents, whilst still being within a close proximity to the West End. Average rental yield in these areas is around 5-6%.
G31 – Dennistoun is undergoing regeneration, and is within walking distance to the City Centre and ideally located for the motorway network. Average rental yields here are around 6%.
G41 – Kinning Park has been increasing in popularity, with new corporate developments promising further rental demand.
An example would be Barclays’ new Clydeside Headquarters that has spiked investment in the area. It’s estimated to generate 2500 jobs in the area and has generated widespread interest for property investors.
Another G41 area, Shawlands, has steadily grown in popularity, offering many trendy coffee shops and cafes, whilst being right on Queen’s Park. Average rental yields here are around 4-5%.
There’s a wide variety to suit all preferences; from traditional Glasgow tenements to modern city-centre developments. It ultimately boils down to what your end goal is with your investment property.
We’ve listed some current average rental returns below:
- Glasgow: 5.8%
- Scotland: 5.2%
- Edinburgh: 5%
- London: 3.8%
This is dependent on the purchase price, area, your aversion to risk, and also your future intentions with the property. You could be a professional landlord who’s building a large portfolio, and yield is your main driver; or you could be retired, considering downsizing from your family home in a few years, and buying a high-end property in the West End of Glasgow, whilst renting it out in the interim.
Generally, rental yields can vary in the region of 5% to 10%, depending on the above conditions. Agents often sell a property based on gross rental yield, but how is it calculated?
- Monthly rent multiplied by 12 Months (£1500 x 12) = £18,000
- Divide the Annual Rental income by Purchase Price (£18,000/£300,000) = 6%
There are many important factors to consider when buying an investment property in Glasgow. Checking up on all the NB’s will ensure that you don’t get any nasty surprises further down the line. There are two main elements you need to factor and consider – buying costs and property-specific details.
- Land and Buildings Transactions Tax (LBTT)
- Professional fees
- Initial property compliance costs
- Furnishing costs
- Is the building factored? If so, do the factor bills include buildings insurance?
- How are the communal areas kept?
- Are there any outstanding maintenance liabilities?
- Planned maintenance allowances
Having a full understanding of your liabilities as a landlord is crucial in determining your net yield (final income after all mandatory costs are deducted):
Payable by you (the landlord)
- Factor Fees
- Buildings Insurance
- Management fees
- Property Maintenance
The Tenant will be responsible for:
- Council Tax
- Contents insurance
Venturing out into the Buy to Let world can be exciting as well as stressful, however, our team of experienced property management agents at Yates Hellier are on-hand to ensure your Buy to Let journey is as seamless as possible.