Overseas Scottish property investment has been booming of late.
After all, many investors are being put off buying in London – with its high values and low yields no longer a safe bet – in favour of looking further afield.
As an overseas investor, you might consider Scotland (where you’ll find affordable properties, good capital growth and high rental demand) as an attractive place to invest in property, with huge potential for returns.
And you’d be right. As co-founder of Portolio, the Scotland-based Estate Agent for Landlords, it’s my job to help landlords buy and sell properties – and there are plenty of great opportunities at the moment, if you know where to look.
But where do you start if you’re looking to invest in Scottish property from overseas? Well, I’m glad you asked.
Whether you’re an expat (and already know Scotland is a great place to invest) or it’s your first time considering overseas property investment in Scotland, I’ve provided you with some tips on overseas Scottish property investment, below.
1. Build a team of professionals you trust
If you want to successfully invest in Scottish property – or any property – from overseas, you first need to establish good relationships with a team of professionals you trust. You’ll need a solicitor, an expert estate agent, a letting agency, a mortgage broker (if you’re not a cash buyer), and probably an accountant.
Make sure they have good reviews on unbiased sites such as Google, TrustPilot or social media – as well as a proven track record of dealing with overseas buyers. They should testimonials to show how they’ve helped overseas clients invest in Scottish property.
2. Understand what you’ll get for your money
It’s essential to understand that in the UK, our property market varies widely between cities. For example, £50,000 in one city can mean something very different in another, in terms of the property you’ll be able to buy.
The extremely regional nature of UK property can be a bit confusing for someone who’s never experienced it before – and to make matters worse, it can be even more granular based on different areas of any particular city.
This is why you’ll need a property expert who really knows the best cities and the best areas to buy in – especially if you’re not going to be visiting the property physically yourself.
TIP: I also highly recommend doing your own research on Google Streetview and checking out what’s in the surrounding area of any property you’re looking at. Are there any new developments in the area? What about transport links? What else is in the area?
3. Look carefully at your return on investment
Yields differ from city to city, and property to property – which means doing a bit of research on what you should be expecting for each city. Find out the optimum yield, and what’s going to be achievable for you.
For example, in Edinburgh, you’re unlikely to get a gross yield of 8%, unless you’re looking at an area like Sighthill in which case it’s a possibility. Remember, where there’s high demand for property, capital appreciation is likely to be stronger.
TIP: There is a way you can know exactly what yield you’ll achieve on a property before you buy, which I’ve mentioned below – so keep reading!
4. Be mindful of your overall investment strategy
Always have a strategy in place when buying property – overseas or otherwise. Will the property be a one-off purchase, or the start of multiple purchases? If it’s the latter, how will these purchases align with each other?
If you’re not sure, this is when you should consult an experienced property professional, who can help advise you on strategy and what you should ultimately be looking to work towards for your own, unique situation.
5. Assess your attitude to risk/comfort zone
Very close to my last point, is your attitude to risk. If you’re looking for a property with a good yield, you may want to consider some properties where there’s less of a demand. But if you’re looking for considerate tenants and nice properties in nice locations, you need to find a balance.
Think about the specific type of tenant you’re looking for, and what will minimise the risk for you as an overseas investor? To get the type of tenant you want, what kind of property will you need? What sort of job do they have – what else will affect their ability to pay rent?
Instead of venturing into the complete unknown, you may choose to stick to your comfort zone – especially if you’ve stayed in one city, or are an expat and know an area particularly well. The unknown can seem risky, but getting the right people on your side helps mitigate that risk.
And just because you have made this far and you deserve it, here is your extra tip!
Extra tip! Be aware of all your setup costs
The purchase of any buy-to-let or investment property usually comes with its fair share of setup costs. These can include anything from renovation/redecoration, to refurbishment costs, appliances, safety certifications, a new boiler, and more.
All of these costs can seem quite overwhelming and may take you around three months before the property is finally ready for tenants to move in – not to mention the wait whilst you find the right tenants. All of this is made all the more difficult when you’re not in the country.
But there is an easier way that could save you up to £31k when purchasing a new buy-to-let, and one that I’ve gone into detail about below.
An easier way to try overseas Scottish property investment
Overseas Scottish property investment (just like any overseas investment) isn’t easy, with lots of moving parts to consider. You’ll need to ensure the property has sound electrics and safety certificates, is fully-compliant, and that there will be no nasty surprises down the line.
Then there’s making sure you have a reputable letting agent to help manage the property, and to find the right tenant who will take good care of the property whilst you are out of the country. There’s all the refurbishment/renovation involved, which can be tricky when you’re not there.
But there is a way to bypass much of the costs and hassle of purchasing a buy-to-let; buying a fully-compliant, fully-furnished property with the tenants still inside.
Buying tenanted property means receiving instant rental income on Day 1, and you’ll even be able to see your exact yield, and have peace of mind knowing you have a tenant with a good track record. You’ll most likely even be able to keep the same letting agent!
Within our database, and from the clients we’ve helped to buy Scottish properties, we have a firm belief that buying property with instant rental income is the way forward when working with international (and otherwise) clients.
TIP: For a fuller picture of all the benefits of buying tenanted property, check out our recent blog post on the subject.
Advice from the property pros
Overall, the property market in Scotland has stayed strong, and despite Brexit, it’s still as hospitable to overseas investors as ever. In fact, quite a few of our own clients here at Portolio have bought from outside the UK.
One client was based in Hong Kong, and actually travelled to Edinburgh to look at properties. As a cash buyer, he bought two investment properties, and loved the benefits of having a tenant already in place.
He’s now looking at purchasing some more properties here, and says he wouldn’t go back to purchasing the traditional way, as there’s so much less hassle with tenanted property.
If you’re a foreign national new to buying in the UK, and need to leverage funds to do so (as opposed to being a cash buyer), this can sometimes be a little tricky to begin with – as the interest rates you’ll be having to pay on a mortgage will be quite high.
This means seeking an investment property with a high yield, maybe a minimum of 10% and a rental income that by far exceeds your rental payments, to allow for affordability and comfort. Once you’ve got your first property, and credibility in the eyes of lenders, you’ll have access to better mortgage products with lower interest rates.
If you’re an expat with ties to the UK, and have held your existing UK bank accounts for a long period of time, this won’t be as much of an issue. Same if you’re a cash buyer.
Remember: it’s essential that you know the process and learn how things work with overseas Scottish property investment; any good specialist estate agent should be able to help advise you on this.
Thanks for reading. There are a few very important considerations when you’re thinking about overseas Scottish property investment, but the biggest is to make sure you have a team of professionals behind you that you can trust.
In terms of limiting your expenses and the amount of effort required (some of which can be difficult from overseas), investing in tenanted property can be a smart move, and enables you to start receiving rental income on Day 1.
If you’d like to learn more about investing in tenanted property, or how we can help, feel free to get in touch with us today for a no-strings chat and to explore your options.
We’re always happy to help!
Written by Chris Wood, MD & Founder of Portolio
Get in touch on 07812 164 842 or email firstname.lastname@example.org