Bring Home the Bacon: A guide to buy-to-let investments
By Craig Barrie.
Getting on the property market as an investor is becoming increasingly difficult in the Edinburgh market, so it’s important to be advised correctly on where your money should be going in order to maximise your return. With that in mind, here are some things to take into consideration when planning a buy-to-let investment and some handy hints to make sure you make the correct choice.
The increase in Additional Dwelling Supplement tax (ADS) has obviously had an impact on the way investors are thinking. Since January this year, the tax on purchases of additional properties in Scotland has jumped from 3% to 4% and has no doubt had an effect on the appeal in the market for investments. This, combined with the standard LBTT (Lands and Buildings Transaction Tax), means that the costs are stacking up if you are wanting to get onto the property ladder. It’s important that these costs are factored into your offer prior to taking the plunge, as it all adds up and many purchases get caught in difficult situations as a result.
It’s not all doom and gloom however, and the Edinburgh property market remains a great place to put your money. With the average gross rental yield on the rise and selling prices increasing, I am very positive about the market and where it is heading. The average gross yield across the board is around 5.6% (5.4% this time last year) with the best performing areas including Leith, Newington, South Gyle, Stockbridge, Gorgie and Dalry. This, combined with an average increase of just over 2.5% in selling prices, makes for positive reading and for obvious reasons still attracts foreign investors.
Everyone’s criteria are obviously different, however from experience I would advise against having an emotional attachment to your investment property. We all hope that the tenant we choose will treat the property like their own. And we have all heard the horror stories which some landlords have had to deal with. This is made even more difficult when the property has some sentimental value to you. My advice would be to avoid having this attachment to your income generator, there is a great deal of stress involved in this process and it is something that can make it even worse. Remember that at the end of the day this is a business investment and should be treated as such.
To summarise, even though there are additional obstacles for investors in Edinburgh, there is still very much a positive outlook on the way the market is performing – done correctly property investment is a great way to grow your money. Make sure you are up to speed with all taxes and costs involved before making your decision and always seek professional advice on the matter.