This month we thought it would be interesting to delve into the knowledge which underpins success in the buy-to-let market.

What matters and what doesn’t? How do you ensure you have the best chance of creating a successful business in property?

While we have our own views on this subject, we also thought you’d like to hear from some of the friends and colleagues we deal with on a regular basis, as everyone has a slightly different view, and a different approach.

So, we’re going to take all of this accumulated experience and knowledge to offer you an overview of the secrets of buy-to-let – what you should do, and by implication, what you shouldn’t!

Tim Visser

Tim is a well established property developer with extensive interests in the UK and beyond. His advice was direct and to the point:

Get yourself a good management agent

Fortunately, Tim didn’t leave it quite so blunt.

“Ensuring regulatory compliance is an ever-increasing challenge, and therefore time consuming. Additionally a good agent will ensure that you suffer fewer voids, lower tenant turnover and therefore maintain a solid income. Being primarily a property developer, I haven’t the time to attend to the day-to-day management.

“While it’s true that a management company will cost you, I regard that as worth every penny as it frees me to pursue broader business aims and not get bogged down in the minutiae of running rental properties.”

Tim expects agents to look after his assets, his properties and his tenants. “Don’t lose sight of the fact that you have a responsibility to provide high quality homes for your tenants”

Tim’s final point regarding agents is also highly relevant, “Increasingly lenders are making it a condition of providing finance that there is a professional management agent in place to handle properties.”

In addition to extolling the virtues of high quality agents, Tim offered a few other thoughts;

“As with so much else in life, if it looks too good to be true, it almost certainly is.” This applies especially to online ‘property gurus’, with whom it would be fair to say Tim has no truck, suggesting that those who can, do, those who can’t, teach.

These days, and to avoid maligning teachers, that might be better expressed as ‘those who can, do. Those who can’t create content!’

Take the long view

This is something Tim was insistent about was that in relation to the property market. If you hadn’t already assumed this, the rollercoaster of the past few years should convince you of the importance of this.

From spiralling mortgage rates to lockdowns, the market has been battered and yet, just a few years later is once again looking positive again.

We spoke more broadly about the market in Scotland, and touched upon the threats of rent control and increased regulation. Tim’s view was phlegmatic; increased regulation affects smaller investors rather than large ones.

This is simply because larger concerns are better able to manage change when it comes, a sole trader faces disproportionately more work as a result of any changes and is more likely to quit the market.

Tim’s final thought however could be a rallying cry for property investors and those contemplating becoming involved, “don’t let it scare you!”

Steven Clark, property developer, consultant and co-host of Scottish Property Podcast

Steve was good enough to share his thoughts with us, and you. He broke his advice down into some very concise bullet points for your benefit.

Start with the end in mind

What is your goal for your property portfolio? Is it to replace your income, a retirement plan or legacy to leave your kids. Be very clear on the purpose of it.

Ask yourself some vital questions first

These include:

• What is the right structure for you and your portfolio? – Is it to be owned in a personal name, limited company or even group of companies?
• What will be your role in the property business? – Do you have a skillset or something you particularly enjoy doing?
• What is your starting point? – Do you have a specific skill set that can be translated into property? What capital and resources do you have? What can you access in your current network?

Get educated!

“How do you find the right deals for you to grow your portfolio? How do you raise the finance to grow your portfolio? Don’t be limited by your current mindset and available funds. Raising finance is a skillset like anything else that can be learnt.”

Get in touch with people doing what you want to do

Grow your network. It is crucial when growing your buy-to-let portfolio to get the right brokers, solicitors, builders, and accountants to name a few.

Do it. Once you have a plan and know what you are doing, get on with it. Nothing beats taking action.

Make sure all the properties stack up to your criteria

Whether it be return on cash invested, money left in the deal after refinance, yield or monthly cash flow. Whatever your important criteria are, make sure they fit it.

Select the right agent

If your portfolio is going to be managed by an agent, make sure you find the right one. Make sure the agent is proactive with keeping on top of maintenance.

Steve’s overriding priority is key; “We are here to provide good quality homes for people, make sure this is the forefront of their culture. These are your assets; your retirement fund and someone’s home – make sure they are well looked after.”

Getting out

What is your exit plan for the buy-to-let portfolio? This should form part of your initial planning – don’t leave it as an afterthought.

Final thought – “Get your first handful of properties under your belt to cut your teeth and learn the craft then if you desire scale look to add tenanted portfolio purchases to the portfolio.”

Sally Beard, SLM Property Ltd.

We caught up with Sally as she dashed through another busy day, and as ever, her view was worth getting.

Know your market!

Sally says: “Don’t buy a third-floor flat expecting that it’s an ideal property for a family – trust me – it isn’t.”

Target your refurb spend to your market

“If you’re refurbishing a one-bed flat that would suit a single person or a student, don’t spend thousands on handmade porcelain tiles when wet wall will do just fine.

“I see a lot of BTL investors who spend more than they need to. It’s not about being cheap, it’s about being appropriate.”

Know your figures

According to Sally: “Although this is obvious, do your research to ensure that the rent you think you’re going to get for a property, is actually what you’ll get. Estate agents are not necessarily the best informed in this area – ask those who know.”

Buy at the best price for you

“When deciding whether to buy a property be clear what you are looking to achieve. If it’s cashflow, then you may have to spend a bit more to get a high-rental property.

If you are taking a longer-term investment approach, then a cheaper property with lower monthly rental may make more sense. Know this and tweak your shopping list accordingly.”

Don’t get emotional about a purchase

“Neither you, nor probably your family will ever live in it – honestly!”

Sally’s final comment reflects something Tim Visser said: “Beware off-market or below-market-value (BMV) deals. Noone out there is offering you a sneaky wee gift. There is always a reason – poor condition or bad tenants perhaps. If it looks too good to be true it probably is.”

Our thoughts on the Secrets of buy-to-let

Here are our thoughts on this subject, judging by the input from our guest contributors, these are not so much ‘secret’ as sensible.

• Purchase without emotion. It’s not a property you are going to live in yourself, so different criteria apply.
• Consider properties outwith your “normal areas”. As our recent piece on where rents are rising fastest in Scotland suggests, you may find your perfect investment elsewhere.
• Do your due diligence – not only on the property itself, but also comparable sale prices, and likely rental and yield.
• Know what to look for in the Home Report – There is a lot of information in a home report; learn how to use it to your advantage.
• Consider a tenanted property – There should be no work required, you’ll get cash flow on day one, it’ll be fully compliant, and the price includes all inventory items.
• Find a good team – a good mortgage broker, good solicitor, good letting agent (if using one), and a good accountant. These people are experts in their field for a reason and it’s nearly impossible to do everything yourself.
• Speak to those who have already done it – find out what issues they had and how they overcame them. Given time, you’ll gain your own experience, but until then don’t be afraid to ask questions. Everyone started somewhere.

Advice from the property pros

It’s interesting, but probably not surprising just how close all the advice from our contributors is. We’re not going to say that there are no secrets in the property market, but the basics are well understood.

Planning matters, a point we have made many times in previous blogs. We understand that some landlords come to the market accidentally, or through circumstance, but knowing what you want to achieve is still critical.

Understanding what you’re doing. Yes, you’re hoping to make money, maybe secure your retirement, but you are also providing homes to people like you, and it’s important not to forget that.

Looking after your tenants is, as Tim Visser and Steve Clark mention, ultimately looking after your own interests.

Property investment is a team game, and even if you’re not a fan of ‘networking’ , establishing relationships with the other professionals who are key to your success will pay dividends. Embrace your specialists and look after them.

Tim’s comment about taking the long view is also important. Yes you might make some short-term gains through canny deals, but the property sector has a history of weathering both good and bad times over the years.

In summary…

So – secrets of buy-to-let? Maybe there aren’t that many secrets, but there are some basic tenets which will stand you in good stead.

We’re really grateful to our contributors, Tim, Steve and Sally for sharing their time and experience with us, and with you.

If you’re new to the property investment market and you’d like to learn more, or to discover where to start, pick up the phone or drop us an email and we can discuss how you can best start your next adventure.

Many thanks for reading!

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]