Buy To Let Tips for Scottish Landlords
And landlords need to carefully steer their portfolio around the many potential pitfalls. With this in mind, we have highlighted certain areas that if ignored could mean the failure of a buy-to-let dream.
The first question that a potential landlord should ask is 'Do I really have enough time to own a buy-to-let property?' Unlike many other asset classes where you only need to check your investment every few weeks, property requires constant attention and may get you out of bed in the early hours. Is this something that fits into your life?
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Also, in order to keep costs to a minimum you may find yourself doing much of the DIY work covering anything from full scale decorating to running repairs. If you live in close proximity to the property and have time to spare this should not present too many problems. However, if this is not the case or your life changes significantly, you need to assess the viability of having a buy-to-let property.
Landlords also need to be aware of the regulations governing this sector and comply with them unless they wish to face a fine of up to £5,000. Currently this means registering any property with three or more unrelated tenants as a house of multiple occupancy (HMO) but this is due to become more complex.
From the end of April with the introduction of the Anti-Social Behaviour Act (Scotland) 2004, all landlords will need to be registered with a local authority. In addition, they will be subject to stringent testing criteria to prove that they are fit and proper enough to operate in this sector. Searches will look into their personal histories for violence, dishonesty, fraud and drugs related offences as well as instances of failing to assist the authorities in dealing with anti-social tenants. Landlords who fail to comply with these provisions face hefty fines and the discontinuation of rental payments.
It is never nice to question the integrity of a professional but as we saw with the recent BBC expose on estate agents - not everyone can be trusted so it is important to do your own research. This is one area that some landlords - both novice and seasoned - fall down on and as we know that estate agents can overstate rental yields by up to 25% (Landlord Mortgage Research - 2005), this can cause serious financial problems.
So in addition to talking to estate agents, look around your chosen area carefully and see what types of property are being rented out, and whether there are many vacant rental properties. In this case it may be a sign of high levels of rental void periods - something to be avoided if you intend to make any money out of the investment.
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And finally, don't be afraid of asking as many questions as possible no matter how silly you may feel they are. It is far better to look a little foolish now rather than looking very foolish (and rather broke) after you have ploughed a large chunk of money into a property that you might not have purchased had you asked all those questions.
Purchasing a buy-to-let property is a big investment and needs a great deal of thought. The amount of money you can afford to invest is possibly the simplest choice you will make as you navigate the property investment world. So remember if you look into legislation, consider time costs, profile your potential tenants and nurture a healthy sense of paranoia, you are well on the road to becoming a successful landlord.
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