Robust BTL Strategy required for £1m investment in Scotland

by Readers Question

11:11 AM, 3rd December 2013
About 7 years ago

Robust BTL Strategy required for £1m investment in Scotland

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Robust BTL Strategy required for £1m investment in Scotland

Hello everyone.

I hope this finds you all well in the run up to the festive period.

My name is Andrew Hayworth. I’m new to the forum and wanted to introduce myself with a question for you all.

I am in the process of setting up a property investment vehicle, focusing on residential buy-to-lets, with initial capital c.£1m.

Target areas are Edinburgh, Aberdeen, Glasgow, Dundee and Inverness. I know these markets and have an existing contact network of tradesmen established in Edinburgh, Aberdeen and Dundee. I also have a large family network in Inverness who can advise on location, tradesmen and the state of play re the local market and new University opening in 2015.

I currently own 3 residential buy-to-lets in Edinburgh (where I live) so have a base working knowledge of property investment. However, I am looking to identify someone who can advise on the development of a robust investment strategy for a larger portfolio and to help mitigate risk where possible.

I would also be interested to hear from any Scottish members who would be willing to open a dialogue. I’m a young businessman (27) who has benefited greatly from mentoring throughout my career to date. Whilst I have worked in property previously (3 BTL’s and a couple of refurb + sales) I feel that building a relationship with someone more experienced would be invaluable over the coming 12-months.

I should note that I’m not looking to steal too much time. Just some feedback and advice from readers or lunch once a month (on me of course) and the occasional email for questions/sense checking.

Many thanks to everyone in advance.

Have a great Christmas when it comes.

Andrewedinburgh



Comments

Neil Patterson

11:24 AM, 3rd December 2013
About 7 years ago

Hi Andrew,

First tip if you haven't already is to contact our friends at the Scottish Association of Landlords (SAL) as this will help provide a network of support. You can use the contact form on the bottom of our latest article for the SAL if you wish >> http://www.property118.com/scottish-letting-agents-support-their-new-council-of-letting-agents-cla/60966/

Also I would recommend reading Mark's series "How to become a Landlord" as he has tried to document the basics of what he has learned over 20 years and it is not specific to area >> http://www.property118.com/how-to-become-a-landlord/60765/

I hope that helps but I am sure you will get some great advice from readers 🙂

11:34 AM, 3rd December 2013
About 7 years ago

Hi Andrew,

I second Neil's tip to join SAL. Really great organisation of committed people who are working for the greater good of all people involved in the Private Rented Sector in Scotland.

You may also like to visit the Scottish Property Tribe on Property Tribes which was set up specifically to help Scottish landlords.

http://www.propertytribes.com/scottish-property-tribe-f-4136.html

Why not post in there and see if that widens your search?

Mark Alexander

11:36 AM, 3rd December 2013
About 7 years ago

Hi Andrew

I'm a long way away and don't know your areas but you seem to have that covered. That aside I will be pleased to assist you as required, no fees, just make a donation for the value you put on the guidance offered - please see >>> http://www.property118.com/donations/43590/

I fully endorse Neil's recommendation of SAL, Neil is half Scots by the way but we work together in Norwich these days.
.

Mike W

12:12 PM, 3rd December 2013
About 7 years ago

Hi Andrew. I admire your enthusiasm.

I guess my first question is why do you want to diversify outside your Edinburgh base? What risks do you see being mitigated by such diversity?

Secondly 'residential' is rather broad. What sectors are you looking for? HMOs? Students? Young mobile professionals? Families? Each sector has its own sub sectors and defines the ideal location in each city.

Having local workmen available (at any time) is great but buying good properties requires a good solicitor who knows the (local) market.......

Who will manage these properties - you or a local agent? Who vets/selects tenants?

Then there is the gearing strategy - what gearing do you expect to achieve - ie what is your total investment pot? That is key to the risk level you (and your lenders) are prepared to take.

I think you need to focus on markets you know in detail rather than the scatter gun your message seems to imply.

All of course in my humble opinion....

If you want to discuss further let me know.

Peter Gulline

12:56 PM, 3rd December 2013
About 7 years ago

Hi Andrew, I also like your attitude to wanting more knowledge and a wall to bounce ideas off.

I have 10 BTLs in Dundee which I rapidly aquired back in 2001 -2005 when I was in my early 30s. I can live off the income from them however have chosen to keep working a 4 day week. I manage them all myself.

Your £1M - is that for a Million pounds worth of property or is it for approx £4M...the reason being there is a big difference between running 8- 10 properties OR 30 -40 properties.

I woulld suggest focusing in 1 or 2 cities that way you get to grips not only with the property market but the tradesmen/ council/ letting agents who you will rely on for common repairs, information and problem neighbouring tenants.

Please get in contact if you want. ...happily show you round Dundee one Friday.

Rgds

Peter

Puzzler

15:52 PM, 3rd December 2013
About 7 years ago

Good advice above, I guess you already know that the legislation differs in Scotland so be aware that this site is primarily used by people in "Englandshire"! Some of the comments may not apply to you and some of the information you need may not be covered.

Andrew H

16:46 PM, 3rd December 2013
About 7 years ago

Reply to the comment left by "Neil Patterson" at "03/12/2013 - 11:24":

Hi Neil,

Many thanks for your comment – greatly appreciated.

I am aware of SAL and plan to contact shortly. Many thanks for the link.

Re Mark’s series, I read this last night and found it very useful (thanks Mark).

All the best,

Andrew

Andrew H

16:47 PM, 3rd December 2013
About 7 years ago

Reply to the comment left by "Vanessa Warwick" at "03/12/2013 - 11:34":

Hi Vanessa,

Many thanks for your response – greatly appreciated.

As I mention in my reply to Neil, I plan to get in touch with SAL shortly. I’ll also check out Property Tribes – thanks for the link.

All the best,

Andrew

Andrew H

16:49 PM, 3rd December 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "03/12/2013 - 11:36":

Hi Mark,

Many thanks for your response – greatly appreciated.

Many thanks also for the offer of any guidance. Very kind and I will of course make a donation.

All the best,

Andrew

Andrew H

16:55 PM, 3rd December 2013
About 7 years ago

Reply to the comment left by "Mike W" at "03/12/2013 - 12:12":

Hi Mike,

Many thanks for your response – greatly appreciated.

Branching outside of Edinburgh is more of a move to widen opportunity rather than mitigate risk. However, your point has given food for thought so thank you.

I am still in the early stages of this venture and plan to spend an appropriate amount of time properly evaluating and considering strategy and locations. This forum is one of my first port of calls (other than my solicitor, accountant and financial adviser) so please forgive any vagueness at this point. I do appreciate that this can makes things awkward for offering sound advice.

Edinburgh is an obvious one for me as I live here and have a good working knowledge of the market.

Aberdeen is an attractive option as I attended University here and so know the (very buoyant) student market well. Aberdeen also benefits from the huge oil industry presence.

A very close family friend of mine (who also lives in Edinburgh) has 24 student lets (HMO) in Aberdeen and does very well from them. I would immediately be able to access his network of estate agents, solicitors, tradesmen etc. and leverage the relationships he has built with them. There is also the added benefit that they are all pre-qualified.

The same friend also has 5 flats in Dundee with the same scenario as above – although perhaps less so.

Inverness is a potentially interesting prospect with the new university opening in 2015 and large amounts of investment coming into the city from HIE (Highlands and Island Enterprise) + EU funding. My large family network up there would manage any day-to-day issues. I also have a family home there which would ease things logistically.

I have no real motivation to invest in Glasgow other than it is a short commute from Edinburgh with a large student population and investment coming in on the back of the Common Wealth Games. I therefore have decided not to discount it at this stage. As I said, I am still in the investigatory stages.

With regard to sector – this is something I’m not fully decided on yet. My 3 BTL’s in Edinburgh cover 3 different sectors. I lease a 2 bed ex. council to 2 Polish workers, a 1 bed in the city centre to a young professional couple and a 3 bed in the Broughton area to students. All do very well.

I would be interested to hear people’s views on the value of sticking to one sector only. I understand that this is likely to bring advantages but would be keen to hear everyone’s thoughts. Is there an argument to evaluate investment opportunities on a case by case basis regardless of sector? If the investment stacks in each case, why not consider it? I’m not leaning either way on this one at the moment. Just looking for any thoughts/advice on the topic.

Gearing strategy is one of the areas I’m seeking to take professional advice on. Total cash capital is £1m so total investment pot with lending could be £3 - £3.5m. Interest rates and the current level of Government debt are areas which concern me and I need to take some sound planning advice before moving forward. I would also like to take advice on implementing an element of defensive investment should things take a turn for the worse. Mark – your comments on liquidity and 20% rule of thumb were well noted in last night’s reading of ‘How to become a Landlord’.

Apologies for the length of this response, Mike. I appreciate your time.

Many thanks,

Andrew

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