Scotland the Brave?

Hi Rod after giving it some thought I agree, there can be no "work around" a fundamental of a piece of legislation. The irony is the Scottish Government has legislated for everything they were legislating against. More available property ?I don't think so, there was a recent survey indicating 30% of landlords are looking to get out. Cheaper rents - I don't think so - I am already contemplating rent increase to cover my mortgage costs of expected void periods. Spacious and generous accommodation - don't think so. I am going to convert my 2 beds to 3 and 3 beds to 4 . Maintaining a high standard of property - don't think so. With section 24 and this - its survival mode !

Some lateral thinking: university halls of residence deal with their loss of revenue during holiday periods by renting out their rooms as effectively holiday lets: rooms for conference delegates, postgraduate student on short summer courses, and for tourists. Why not do the same?

i.e. charge the higher rent to your ordinary students (maybe not 12 months in 9, but 10 or 10.5 months in 9, to test the market, and increase it in later years if the students prove willing to pay), then switch to "AirBnB/Holiday Lettings" mode in the summer. Edinburgh is a very popular destination for tourists and festival-goers, so adjust your offering so you can tap into that lucrative market instead with relatively little work, e.g. if your HMO/houseshare rooms don't already have locks with internal thumb-turns, add these so the rooms can easily be converted to AirBnB format. You would obviously have to research how to market the rooms effectively too.

Operating as part-holiday lettings would also allow you to deduct a good proportion of your mortgage interest from their profits, and you could deduct your new furniture and other capital costs too. I'm assuming here the the SNP hasn't tampered with the taxation treatment of holiday lettings as well.

Some undergraduate and definitely postgraduate students actually want to stay in Edinburgh all year round, or most of it. If you recruit one of these as your "house mother/father", they could administer and monitor the holiday lettings for you, say in exchange for a reduced rent, which would help you manage the business more efficiently. The rent reduction might also be chargeable as a business cost, creating another saving.

For myself, this 12 months in 9 arrangement sounds overly complicated: just charge a higher rent and see what other landlords do and how students respond. The holiday lettings income may give you a buffer while you work out how best to position yourself in the market; you may also need to look at what facilities you offer and whether you need to improve it in certain areas, though without pricing yourself too high. A lower rent in exchange for fuller occupancy is usually a less risky strategy compared with always pushing hard on the rent button.

My understanding of the Edinburgh student market is that it currently operates on the basis described above. The problem with the new PRT is that the landlord has no control over when the student leaves. The tenant may opt to stay for the summer or perhaps a month into the new term so the landlord is unable to plan for holiday let's over the summer or may miss the busy period for returning students and so lose out for the next year. A lose lose situation!

Regards,

Rod.

Reply to the comment left by Tony Atkins at 20/11/2017 - 16:44
Hi Tony -Thanks for your thoughts and advice. All very much appreciated and all for serious consideration and adoption as I move forward.

Short Lets and Air B n B are a planning permission change of use issue. This has already been raised very recently and Edinburgh are now most likely looking to enforce this existing measure.
Complaints from residents regarding the number of this type of business has focused the attention of the local authority. This arrangement would also breach lenders criteria and the type of insurance in place. But as Rod states, without a defined exit date for the landlord the solution can only be to make the residency as uncomfortable as possible (price wise) that you take as much income as possible ( risk is the tenant seeks a property cheaper elsewhere) and incentivises the tenant to move sooner rather than later.

Reply to the comment left by Rod Adams at 20/11/2017 - 17:24
I take your point Rod, but how likely is it that a student would stay only one month into the new university year? If they've stay on over the preceding summer, then isn't that a good thing (better occupancy)? And if they do leave one month in, there's always "churn" in the market as other students elsewhere realise they can't stand their housemates, and as non-students come and go with new jobs etc, so there must be a chance that someone else will jump at the chance to take over the room that comes available in November. Are the student and non-student markets in Edinburgh really so separate?

Asif - I agree planning and mortgage T&Cs and insurance are all potential killer problems. I suppose another option to cut this particular Gordian Knot is just to abandon the whole notion of "student housing" altogether. It's always been an artificial construct anyway, driven by council tax rules (the arbitrary 100% deduction for students, which surely needs repealing now that almost all other deductions have been abolished) and to suit the convenience of students with their ultra-long holidays. If the long-standing market mediator represented by the AST has been abolished, then perhaps it's time that the favoured status of "student housing" should be abolished too.

In south-east England, where I operate, specialised student housing is an increasing rarity: there are still some houses let en bloc to groups of students in the traditional way, but most shared houses are now just that - a shared house/HMO, taking undergraduate students, postgraduates who live there all year round, and young working people on group or single AST contracts. I don't know all the details of the new PRT, but ultimately students have to live somewhere, and if they want to penny-pinch and give up their rooms in June or July, perhaps that will prove to be just fine from your perspective: if you give up the notion of only serving the student market, you can simply find another non-student tenant to replace them. (I assume here that Edinburgh has a ready supply of recent graduates taking up their first or second job who are also looking for houseshares).

Since the Scottish government has insisted on this freedom of tenants to control completely their move-out date, perhaps students will have to learn that this isn't an unrelieved good thing: landlords can respond to the increased risk by ending the perk represented by so-called student housing, and students will find themselves in competition with everyone else for the available rooms. Students will have to face the risk that if they give up their rooms in June, there will be fewer rooms available for them in September, and then they will be in a "mixed" house where everyone is liable to pay council tax. This might incline them to give up their short-term cash saving at the landlord's expense and keep their rooms all year after all, especially if they can negotiate a small reduction in rent over the summer with their kindly landlord . . .

Hi Tony, that's a fair evaluation of market circumstances as they could prevail, however it can also be the reaction which drives the outcome. So far I suspect the negative landlord reaction to the new PRT will result in situations I have described. As you know business has no place for complacency and a position has to be postured in readiness for a change.

Reply to the comment left by Neil Patterson at 15/11/2017 - 14:18
As a student hmo house provider i am absolutely disgusted by the SNPs change in the leasing laws. We are being ruled by a lunatic leftwing fringe. Remember who is bringing in this lunatic legislation next time you vote.
Its along the same idiotic legislation left wing nonsense they've inflicted on all small business owners in scotland with massive increases in business rates. I personally know 2 small businesses whos rates have gone from a few thousand a year to around 20k!!! People have already been paid off at the companies. Thats only 2 small conpanies i know. Can you imagine the damage across the country? SNP see all business as evil and something to be taxed/legislated out of business.
If you want to look after your family and not live off the state Scotland is not the country for you. Stay away!! We are on target to emulate Venezula.

Reply to the comment left by Donald Tramp at 09/12/2017 - 20:05
How do you propose to deal with this legislation ?

Reply to the comment left by Asif Ahmed at 10/12/2017 - 12:01
Really struggling to find any way of dealing with the legislation. Ive been speaking to a couple of agents who are currently speaking with their lawyers. So no way forward that ive seen yet.
So frustrating. I took part in all the consultations on this. All points totally ignored by the SNP.
Watch what happens at the scottish budget this thursday. Tax rises for all workers? Sick of the SNP.
Short of selling everything up and moving to a non communist country i dont have a solution.

Reply to the comment left by Donald Tramp at 10/12/2017 - 19:38
Yes its a tough one. Tony has suggested some ideas but deep down I think these will work on the margin. I have made some previous comments of how to possibly get around the legislation but as we speak all the landlords are akin to a herd of anxious wildebeest waiting to see which ones run first and in which direction.

Options suggested such as short-lets and air bnb are with high risk. You have no idea who you are taking on board and how many. I recall 10 people waiting outside to be given access to a 2 bed with lounge apartment - short let. Granted they are spacious apartments but never in a month of Sundays suitable for 10. Maybe 5.

And I know landlords to have made serious money during the festival in a few consecutive years only to lose it all in one year as the property has been trashed completely.

And of course the councils are looking to enforce the planning permission regulations as short-lets and air bnb are seen as a business and so a change of use application has to be in place.

All the politicians have done is pandered to a contemporary populist myth. You can sit back and watch it come back to bite them as supply dries up with demand overwhelming available properties, credit and referencing become tighter etc.

Its that or the big players move in and we get pushed out.