What Are the Benefits of Buying a Property Portfolio in Scotland?

Could it be time to start thinking about taking bigger jumps in property? 

Sometimes we realise the thing we initially thought was out of our reach is actually a lot closer than it first appears… it just means doing things a bit differently than what you’re used to. 

Buying a property portfolio in Scotland might not be something you’ve considered until recently. Maybe an opportunity has recently presented itself and made you wonder whether it’s a good idea. 

Or maybe you’re just looking for a more efficient way of investing, instead of buying your usual 2 – 3 investment properties a year – the way you’ve always done it. 

Whatever the reason, property portfolio purchases are a great way to increase your investment (and your income) fast – and as one half of Portolio, they’re also a passion of mine. 

However, I realise it’s not for everyone. Some landlords simply love buying single properties, taking the time to do them up and getting them tenant-ready, before moving onto the next. 

If it’s all done in one fell swoop, then where’s the fun? 

In this blog, I’m going to explain more about the benefits of buying a property portfolio in Scotland – as well as provide some expert advice to help you get started. 

What are the benefits of buying a property portfolio? 

You may have heard of some of the following advantages of buying a property portfolio already – others may come as more of a surprise. 

1. Multiple dwellings relief and no ADS

Like many, you may feel that having to pay 4% Additional Dwelling Supplement (ADS) on top of your LBTT can feel like a bit of a kick in the teeth when investing in property; but there is a solution which means you don’t have to pay ADS at all.

When you purchase a property portfolio of six or more separate dwellings in one transaction, you not only skip paying ADS, you can also take advantage of multiple dwellings relief, which is a form of partial relief from LBTT. 

Full relief is available on any transaction where section59(8) LBTT(S)A 2013 applies. 

TIP: Learn more on the official Revenue Scotland website. 

2. Save on solicitors’ fees and finance costs

Buying properties as a portfolio means you will make some savings on costs, however due to the inherent nature of portfolio purchases, you will have to pay a bigger bill initially. 

If your deal includes 10 properties, there will be 10 title deeds, 10 warranties, 10 indemnities. It’s not exactly like a bulk buy discount, but think of it like economies of scale; it’s a pain initially, but in the long run you’ll make savings. 

Please also consider that, when buying a property portfolio, you’ll likely have to work with a specialist solicitor and usually a smaller, not-on-the-high-street lender. Check how their fees compare to your usual solicitor to ensure you’re not caught out.

Sometimes your broker will tell you which solicitor to use but often you can use whomever you want. Some situations may require two solicitors (e.g. if finance deals change, or you decide to use one lender for purchasing three properties, and another for purchasing the other four), which is hardly ideal. 

3. Most portfolios are tenanted

It’s very rare for portfolios to be sold that aren’t tenanted (although, perhaps one or two properties may be empty in some cases). Not everyone’s aware of the beauty of buying tenanted properties, but it essentially means instant rental income on Day 1 for you. 

It also means you’re purchasing properties that are already fully-compliant, and of a liveable standard – so you won’t have to worry about paying for expensive renovations or refurbishment, and void periods whilst you wait on finding someone to move in. 

As a caveat to having zero capital expenditure up front, you will want to have a good amount of savings in the bank, just in case anything does go wrong with multiple properties at once – but as a landlord, I’m sure I don’t have to tell you that. 

TIP: Check out my previous blog on the benefits of buying tenanted properties for more information. 

4. Buy at a discount 

It’s common for property portfolios to be sold at a discount. However, it’s got to be a discount that reflects quality, yield and location – the level of discount you can expect will very much depend on these factors. 

Although I don’t want to be quoting percentages, here are a couple of real-life examples to give you an idea of how this can vary: 

A 7-property portfolio in Edinburgh sold to a lucky buyer with a 1% discount.

A portfolio comprising of eight Montrose properties sold to a lucky buyer with an 18% discount.

5. Buy in a block 

Finally, it may not be something that everyone is interested in, but the option to buy a property portfolio in a block or close-knit area can be attractive to some landlords. After all, buying in a block means you have full control over that block. 

You’ll be able to control the entrance, the common stair, and the roof. Maintenance inspections and refurbishments can all be done in one go, which is also attractive – you can probably negotiate on management fees and even have one chosen factor. 

It has to be said that not all lenders like the risk of putting all their eggs in one basket, and prefer to spread their interest around the country. However, if buying in a block will be part of a wider portfolio, you should be fine.

Where can you find property portfolios? 

That’s a very good question. I’d recommend building your contacts; it’s important to make sure you’re speaking to the right people, as many portfolios will be off-market sales. 

Some more traditional estate agents might handle portfolios, but they can’t put them on their website – so speak to them. Make them aware of what you’re looking for, and they’ll notify you when an opportunity arises. Do the same with your current letting agent, solicitors, brokers, estate agents, and sourcers. 

As for us, the number of portfolio sales we’re handling at the moment has really jumped. It might sound strange (due to our name), but when we first started out, we did get involved in portfolio sales a little, but for some reason it didn’t quite click until last year. 

During the pandemic, we were approached by one landlord looking to sell his portfolio, and got him a good result. Another followed, then another – however, it wasn’t until February this year when we introduced our Portfolio page that things really took off. 

We now see it as a cornerstone of Portolio going forward, with landlords trusting us with portfolios worth anywhere from £300k, all the way up to £2million each. 

Advice from the property pros

As a property investor, there are several reasons why buying a property portfolio might appeal. For instance, if you’re an overseas buyer looking to create an income, then what better way than to buy 10 properties? It creates real income, quickly. 

If you’re a British national coming over to Scotland, you may wish to invest with a view to create income right here – regardless of whether that’s with or without finance. In either case, we do have some advice for you, and that’s to create a power team.

If you’ve already got a team who’ve helped you secure single buy-to-lets or investments before, they may be great – however, there aren’t that many solicitors and mortgage brokers with real experience of portfolio purchasing. 

In which case it’s useful to speak to people who really understand and can make it a success for you. 

Do your research, look into what to expect when buying a property portfolio for the first time, and look into finance options with an expert (they may even be able to show you some example portfolios). 

In summary…

Thanks for taking the time to read this blog, and hopefully I’d managed to shed a bit more light on the benefits of buying a property portfolio. 

It’s not necessarily an option that everyone has thought about, but it does come with several advantages – and it’s not as daunting as you might think. It’s simply a different way of doing things.

Got any questions about buying a property portfolio, or tenanted property in general? Don’t be afraid to ask – after all, as Scotland’s only estate agent for landlords, we’re always here to help. 

Well, until next time! 

Written by Chris Wood, MD & Founder of Portolio

Get in touch on 07812 164 842 or email [email protected]

Other blogs you might be interested in: 

• Scottish Property Investors: What Finance Options Are Available Right Now?
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• The Final Stage of Section 24 and What it Means for Landlords
• Should You Buy to Let as a Limited Company? [Pros and Cons]
• Should You Invest In Property During COVID-19?