Thinking of renting out? There is certainly money to be made. However, getting the right advice is important if you are to navigate the pitfalls.
Property leasing has been on my mind – and in the news – for a number of reasons in recent weeks. First, the number of landlords who trust my firm to look after their property hit the 2,000 mark this month.
I can clearly remember the very first landlord client who walked through our door in November 1981. Never in my wildest dreams did I’d think that we’d grow to manage as many properties as we do.
Second, there has been an upsurge in interest from potential investors at the more mature end of the age spectrum following the change in pension regulations – a move which has freed pensioners from the grossly unfair restrictions on the spending or otherwise of their own pension pots.
Investing in buy-to-let property seems to be an option of growing interest. Bear in mind, however, that only part of the pension is tax free and withdrawals over that amount will attract tax at the relevant rate.
And third, there are concerns for the leasing market in the north-east due to the current problems faced by the oil industry.
To deal with this last point first, it seems that there has been what could be seen as a correction to an overheated market where demand has been outstripping supply for a number of years. Having said that, a degree of confidence is returning to the oil industry and our offices, not just in the north-east but throughout Scotland, are all reporting a healthy level of tenant inquiries.
Our online portal reports that average monthly rental figures in Aberdeen have slipped slightly – from £1,110 in Q4 2014, to £1,089 in Q1 2015. Average times to let for the same period have risen from 16 days to 33 days.
But here are some other interesting figures: The Scottish average monthly rental figure is given as £751. Edinburgh is £912. So the rental returns in Aberdeen remain the highest in the land.
The big imponderable, of course, is capital growth (or otherwise). All I can say is that, in my near 40 years’ experience of the Scottish property market, while there have been occasional falls in value, the long-term trend has been one of significant increases.
However, I have some more general comments which may assist in deciding whether or not to invest in this sector.
In recent years, a combination of increased house prices, stricter lending criteria and a lack of social housing have seen more and more people turning to the private rented sector (PRS) for their housing requirements.
According to Aberdeen City Council’s own statistics, the PRS accounts for 17% of housing in Aberdeen and all indicators point to this continuing to increase. It is expected that, eventually, the city’s PRS will surpass the social sector (24%) as the second-largest type of housing provision behind only owner/occupiers, who account for 57%.
The Scottish Government recognises the increased importance of the PRS and, as such, has introduced a number of pieces of legislation in the last few years with the aim of raising standards and improving regulation within the sector – Landlord Registration, The Repairing Standard, Tenancy Deposit Scheme regulations and the creation of the Private Rented Housing Panel, to name but a few. On top of that, there are the regulations introduced by other agencies, for example by the Health and Safety Executive, relating to the provision of smoke alarms, electrical safety checks and even assessing the risk of Legionella disease.
It doesn’t end there. Recently, our Scottish Government concluded its consultation on the proposed Housing (Scotland) Act, which has been billed as the biggest shakeup of the PRS for almost 30 years.
If implemented in its original form, it could see the introduction of a new housing tribunal, regulation of letting agents, changes to the repairing standard and the introduction of a new type of lease which would replace the short assured tenancy plus many more changes. Also, following a trial in the English Midlands, the UK Government appears set to implement the Immigration Act 2014, which will require landlords within the PRS to check the immigration status of potential tenants.
Taken together, the regulatory changes which have taken place have made the sector almost unrecognisable from even 10 years ago.
Landlords need to be careful out there – there are many traps and severe penalties for the unwary. I’ve seen, within my own practice, landlords finding their own tenants and then, after attempting to manage the tenancy themselves, turning to us to pick up the pieces.
The life of a landlord may not always be plain sailing. This has been acutely apparent in the last few months due to a number of high-profile court cases, including the recent decision in the Glasgow Housing Association v Mark Stuart case, whereby the Sheriff ruled that the housing association was not able to evict a tenant, despite the fact he was growing cannabis in the property.
It is therefore very important to ensure that landlords are as protected as they can be. Do not take risks with what may be one of your biggest investments. Hire a professional to look after it, just as you would for your other financial matters.
The great debate
My editor allows me to stray from the paths of commercial law and practice from time to time. Today, I am hoping readers may help me resolve one of life’s great conundrums – is it a rowie or a buttery?
Growing up in Ferryhill, Aberdeen, my Saturday job from the tender age of 12 was working “in the fish” as a dogsbody, fish packer, tea-maker and, most important, rowie-fetcher.
I was the one sent out to buy dozens of rowies as morning “pieces”. They were consumed by all at the teabreak with relish, sitting on upturned fish boxes round the wood-burning stove.
To me, they were always “rowies”
It was in later years that I first heard them referred to as “butteries” and now, perish the thought, it seems that term has become the more popular.
A number of my wife’s uncles and aunts emigrated to Canada in the 50s and, following their occasional trips home, they would buy and vacuum pack vast numbers of “rowies” to freeze and see them through till the next time.
“What relevance has this?” I hear you ask. Only this: it got me to wondering if perhaps the issue is a generational thing? Or is it perhaps geographical? “Rowie” to the fishers; “Buttery” to the farmers?
Any thoughts on this vexing topic would be much appreciated.