Our Brian Gilmour had his fortnightly surgery on the BBC Radio Scotland Call Kaye show. Stephen Jardine was sitting in for Kaye and holiday rentals were discussed. There was also a return of Katriona from Aberdeen whom, 4 weeks ago, Brian had broken the news to that her rental investment was not quite worth what she’d hoped. Had Brian’s advice been proven correct…?
CALL KAYE
Stephen Jardine: Now, a couple of weeks ago, Kaye started a property item when we were talking to our resident property guru Brian Gilmour from Indigo Square Property. He’s with us this morning again. Brian, good to see you, thanks for joining us.
Brian Gilmour: Morning, Stephen.
Stephen Jardine: Our phone lines are open to any questions, so this can be about buying, it can be about selling, it can be about renting properties, the search for that dream home … its 08285 92 95 00. E2295 to text. Now, the last time we spoke to you Brian, you gave an estimate to how much money you thought one of our callers might get for their house. To give you some context, they were hoping for £100,000 but we consider offers of £82,000 and above.
Katriona: I have been renting out for nearly 11 years to the same tenant, and was getting £600.
Brian Gilmour: That’s £7,000 a year. Somebody’s buying that for cash, they’re wanting a decent return on their investment, so they are looking to get somewhere in the region of 10, 11, 12% return on their investment. Based on that, you’re looking at in the 60s, would be in the top end of what somebody would probably pay.
Stephen Jardine: Mm, it’s quite a tricky question that one, wasn’t it?
Brian Gilmour: Yeah, and it was the … the challenge was Katriona finding out that her property couldn’t get a mortgage on it. And so that moved it to being a cash buyer.
Stephen Jardine: That was shocking. I was really surprised by that. We will find out if you were right a little bit later in the show. I hope you are, because you’re our property expert, so you’d better be. But first, holiday time of course this time of the year, Brian. Holiday lets- short-term lets, they’re kind of a big thing now, a big option for people. Would you recommend renting out your home? We’ve got Airbnb and lots of other platforms as well. What are the pros and cons about renting out your home for short-term lets?
Brian Gilmour: People have always been doing it this time of year. You’ve got the Edinburgh festival coming up, so it’s always been a popular thing in Edinburgh. Those places … Parts of Fife, people have often done it say, holiday homes in Fife and other parts of Scotland. The Open Championships just happened, so when the Open’s out touring, people will often rent out their homes. And it’s that combination of people who’ve got a second home that they rent out, and commercially they make most of their money in the summer months, and then there’s those people who maybe just up sticks and flit for a period of time to allow them to take advantage of some show coming to town. There’s pros and cons, big bit of it is as I just said, you can get some additional revenue, you can use it to pay for your own holiday while you go elsewhere … The cons are obviously, there’s a complete stranger going into the property.
Stephen Jardine: A couple of years ago, I interviewed a well-known singer-songwriter who was at the Edinburgh festival, and I got to know him, and we became pals, and we suggested last year that we should swap houses. He lives in the States, and he suggested I should swap and he could come and stay in my place during the Edinburgh Festival. Then I discovered he had a monkey and three snakes at home! I was still up for it, my wife was less keen.
Brian Gilmour: That’s the reason why you should always set down ground rules before you start.
Stephen Jardine: Imagine if he hadn’t told me!
Brian Gilmour: Yes, exactly.
Stephen Jardine: We’d got there and found that …
Brian Gilmour: May have thought it was a strangely dressed butler in a monkey suit!!
Stephen Jardine: Now, you don’t have to rent the whole house nowadays, I mean some of these rental platforms, you can just do a room as well, Brian, but of course then you’re taking a stranger into your home, and you’re there as well.
Brian Gilmour: Yeah, and that’s what I touched on just now, you really need to have ground rules, set down in writing. But that’s got to be a balance- I read somewhere where someone had ground rules and it was, you weren’t allowed to have alcohol in your room, it was X number of visitors per year, I was like if you were staying at home with your parents.
Stephen Jardine: Come on!
Brian Gilmour: Yeah, so there’s got to be a balance. You want ground rules because if the relationship breaks down, you want to be able to have a set of rules where you can point to something and say, “Well, we did set this out at the beginning, and that’s the reason why I have not been happy with XYZ happening.” Equally, you don’t want to be so overly prescriptive that you’re not going to get anybody coming through your door.
Stephen Jardine: It is a holiday after all, isn’t it.
Brian Gilmour: Exactly.
Stephen Jardine: I guess you probably need to check your insurance for some of this stuff, as well, just to see that you are covered, if you’ve got people staying in your house, on that basis.
Brian Gilmour: Oh, absolutely. Insurance companies will always be looking for ways to minimise their losses, and one way of minimising your losses is to turn round and say, “I’m sorry, but you’re not covered.”
Stephen Jardine: Loopholes. What about buying a home specifically to be a holiday let. Is that a better investment than a traditional buy-to-let?
Brian Gilmour: It’s like all things in life, do your research. Make sure that you know what you’re going to get. If you’ve got a particularly seasonal location, then you might have long periods of time when it’s empty, again back to your comment just there Stephen about insurance, lots of insurance policies don’t allow a property to be empty for more 28 consecutive days. So, if you’re going to do a holiday let, check how easy it is to get it let, even if it’s reducing rates in low seasons and putting them up in high seasons to balance that out. At the end of the day, it’s just like, do your sums.
Stephen Jardine: And where are the places, in terms of a buy-to-let for the holiday market, that would work, do you think, in your view, in Scotland here.
Brian Gilmour: In Scotland, you’ve always got around Fife, around St. Andrews, that’s always popular, because you’ve always got a high level of tourists. I know around that coast, places like [inaudible 00:05:21], very picturesque. On the other side of Scotland, along the west coast, places like Lochgilphead, Lochgoilhead, all around there, are always very popular locations. Much more seasonal on the west coast with the traffic routes being more of a challenge in the winter months, so getting back to the point of me [inaudible 00:05:40] about having your assessment done to get into account, it may not be accessible during a period of time. Even places like Aviemore are now turning into an all year round holiday destination, so it’s not just about perhaps people going up for the winter skiing period, it’s now an outdoor sport destination.
Stephen Jardine: And you’ve got to factor in as well though, Brian, the marketing costs of this. It’s all very well buying it, and then fire extinguishers and all the stuff that you have to do. But then, you’ve got to think about how you actually take it to market and find your audience, and the costs associated with that as well.
Brian Gilmour: Absolutely. I think with the internet, a lot of people think, everything’s free. I’ve created a Facebook page, I’ve got a Twitter account, and I’ve got an internet account, and web page. But, people need to be pointed to it. People need to know it exists. So you then need to go on various platforms, you mentioned Airbnb, which is obviously the most high-profile at the moment, you need to go on various platforms so that people know your holiday home exists, all well and good. You don’t want to have the best-kept secret in Scotland. So, those will have costs and there’ll be commissions to pay for that.
Stephen Jardine: So, Property Surgery is open now. 08285 92 95 00. Any questions really, Brian, we’re happy to help with …
Brian Gilmour: Absolutely. From factoring, letting, sales, holiday homes, whatever.
Stephen Jardine: And one of the things we’re going to take about a little later is about doing your place up. If you are looking to sell, a lot of people choose to sell in the autumn, so if you’re going to do it up, what are the things you need to do, you know, wear and tear things that you really need to take care of, but maybe some bigger investments that might reap returns and rewards for you. We’ll talk about that too.
Stephen Jardine: 10:40 on a Tuesday, on BBC Radio Scotland. Brian Gilmour, our resident property expert is back with us to answer all your questions. Phone lines open now, any questions about buying, selling, renovating, renting your properties, 08285 92 95 00. Want to know when is the best time in the year to sell, or maybe what to try and do to improve your property before you put it on the market? 08285 92 95 00. E2295 if you want to text us as well. Brian, we ready?
Brian Gilmour: Ready!
Stephen Jardine: Let’s do this thing then. We’re going to chew through some of the big property stories with you as well. And, in the news over the course of the last 24 hours or so, house prices continue to grow in this country, but a little bit more slowly than they have been to date.
Brian Gilmour: Yeah, I’m always wary of extrapolating figures about average house prices, because what we’ve seen pre-crash in Scotland, there was about 160,000 properties a year sold. And, last year was the most number of properties since the crash, and it was 100,000. So that’s a 40% drop. In fact, the lowest point post-crash was 60,000 properties in a year. So, when you have much great reduced numbers of properties selling, there’s more volatility in average house prices. So, when people pick a particular quarter, or a particular month, it can be affected by just a peak in the number of higher propriety values, so it’s always good to look at a range.
And, one of the really interesting things about this period post-crash has been in general, properties double in value every 10 years. That was the saying since the war. You pick any period since the war, properties doubled in value every ten years. In ten years, properties have pretty much gone down and back up to where they were since the crash. So you’ve got places like Edinburgh, where we are 4% higher today than we were immediately pre-crash in 2007. East Renfrewshire is probably one of the better ones at 13% growth. Places like Aberdeen and Fife have been static, and North Ayrshire, it’s actually down … It’s average house price in North Ayrshire’s down on where it was pre-crash. So what we’ve seen is very slow growth, partly determined by the [inaudible 00:09:21] economy.
Scotland’s got quite a reasonable number of people in the public sector, and the public sector as we know had low pay increases, so that impacts on the values that people can get out of mortgages. And what of the other changes that … And all of these statistics, it was a PWC report that was talking about it, and one thing that I thought was quite absent from the discussion was in that period, was also the change over to the Home Report system, where valuations were done before a property came onto the market. So, what you’ve actually got is surveyors setting the value of a property before the marketing campaign has started, and not the market of the day driving the prices forward.
Stephen Jardine: So, average house price growth, and average is the key thing here, 3.5% across Scotland to 143,000, but some real hot spots, as you say, and some cold places as well, in the property market. What does this mean to people if they’re buying or selling a house? What does the house price growth statistic actually … How should it affect the way that we approach buying or selling, Brian?
Brian Gilmour: Well, one of the interesting things about that change in numbers of volume that I talked about, is I think we’ve moved back to a culture that we did have, that we sort of got carried away with, at the turn of the century there, which is your home is the place that you want to live in. It is not a form of overdraft facility, to then start spending cash left, right, and centre. And I think we’ve slightly forgotten that, so the most important is: buy a home that suits you, that is in the right place for you, whether it be because it’s to do with the right schooling for your kids, or whether it’s because you’re looking for somewhere comfortable to retire to, pick the home that suits you. And if you don’t see yourself having to make that move in the next immediate future, don’t get your knickers in a twist too much about what are the prices doing in the last five minutes, because its about your home.
But, at the same time, you don’t want to be stuck somewhere because it does matter. Even if you’re not thinking of moving, how much more comfortable do you feel, if you’re coming up to retirement, and the value of your home is, or the mortgage you’ve got on your home is 25% of the value, or 30% of the value, as opposed to 60% or 70%. You just feel slightly more comfortable in your home, that it’s not too bad if the worst happens.
Stephen Jardine: And we’ll speak to somebody in a minute who was caught in that trap of feeling stuck, but it is that issue of people not seeing their house as a home, but seeing it as an investment opportunity.
Brian Gilmour: Yeah, and that’s why we’ve become so obsessed with property numbers, because it’s an investment opportunity, and particularly with the change of culture to do with pensions, I think a lot of people are looking at, “Can I have paid off my mortgage by the time I retire, so that that’s a cost that reduces in my outgoings, once my income changes?” But also, with the challenges of young people getting on the property ladder, you’re also seeing parents who’re then looking at equity in their own home, that they may be able to release through taking out some load further down the line, to be able to assist their children to get on the property ladder. So, the home to date ratio is a very important consideration for people.
Stephen Jardine: It’s our Property Surgery with Brian Gilmour, any questions that you have for Brian about selling, about buying, about renting, or maybe about searching for that dream home, or when’s a good time to buy where you are? 08285 92 95 00. E2295 to text us on this as well. When’s a good time to buy, and when’s a good time to sell in Scotland, Brian?
Brian Gilmour: A good time to buy is the opposite of when it’s a good time to sell. Good time to buy is right about the winter time, because there are fewer other buyers out there on the market, and prices are driven in general by demand and supply. Those people who are looking to sell in the wintertime, when I talk winter I’m talking really November, December, January, February, will [inaudible 00:13:19] people who need to sell. So as a buyer, you’ll have, to use a euphemism, a ‘motivated seller,’ so you may be able to drive a good bargain.
As a seller, therefore it’s the opposite. You want springtime. Lots of people look to move in the springtime …
Stephen Jardine: After a cramped Christmas at home, thinking we can’t do this again with all these relatives! We need more space.
Brian Gilmour: Yes, in fact one of the slight downsides of that aspect is also people who’ve been forced together over Christmas and family break-ups then happen.
Stephen Jardine: Divorce statistics, that’s true.
Brian Gilmour: Yeah, so, springtime and then autumn time’s also another period. Those places where you’ve got high student population are also driven by end of summer/beginning of autumn markets, with parents buying for their children going to university.
Stephen Jardine: Okay, first question for you comes from Sam today. “Regarding buying your first house, do you know how much it is for a first-time buyer cost as in buyer fees, estate agent fees, and stuff like that. Obviously, a total I’m after, minus the mortgage.” So just in terms of the costs that go around for a first time buyer, apart from the mortgage, of actually making the purchase. What kind of figure is Sam looking at?
Brian Gilmour: Sam, you don’t have any estate agents to pay for, that will be the seller who’s got that, and your costs are really down to your lawyer and you can shop around, and you’ll get a lawyer somewhere between 500 and 900 pounds once all the various fees are chucked into the mix.
Stephen Jardine: So it should be a set fee, it’s not a percentage or anything like that, Brian. So you should know exactly how much you’re going to shell out.
Brian Gilmour: Yeah, it will only be if it becomes a particularly complicated acquisition, and there’s issues that arise with title problems that lawyers then have to overcome. Actually times that you’ll have a problem coming along, the Home Report now has the seller also paying for the surveyor up front, so you shouldn’t have to pay for that either, that’s also dropped out of things. So, it’s really just your lawyer.
Stephen Jardine: Any questions you’ve got on property for Brian, it’s E2295 to get in touch by text, or 08285 92 95 00. About buying, about selling, about renting, or about doing up your house, which we’re going to talk about in just a second. Next question for you is from Margarite in Edinburgh, and it’s a comprehensive question, so good luck with this.
“We’re considering renting out our home in Edinburgh as we are mainly staying abroad at the moment. Do we need to fill in a tax form if our income from renting out is below 7000 pounds? Does it make any difference my husband is a pensioner? It’s his house. If renting out for maybe one to three months at a time, do we need to get registered as landlords? And, where can I find a checklist of all the things that we need to do.”
Phew. Thanks for that, Margarite. Over to you, Brian.
Brian Gilmour: Right, oh. Okay. Let’s start with the tax, always declare it to the Inland Revenue. Always declare your total income, it’s up then for the Inland Revenue to tell you what impact, if any, that has because it really depends on what your other sources of income are. Always declare it, because you don’t want some point down the line the HMRC coming and knocking on your door and saying, “You should’ve declared that income.” So go and declare it, you may not, based on what you’re saying, you may not have additional tax to pay if your husband’s retired, it’s in his name, and his total earnings take him below any tax requirement. But go and speak to them, and if you then need to go and speak to an accountant … But you probably should be able to do that yourself, it’s really simple.
Stephen Jardine: And if it’s just for one, two months, three months tops, do you have to register as a landlord for that short period of time?
Brian Gilmour: No, because that sounds like you’re doing some sort of holiday let Airbnb. At present in Scotland, if you’re doing a full rental, it’s a short assured tenancy, which the minimum period of time is six months, at present in Scotland, so if you’re not doing holiday lets and it’s people … if you’re doing holiday lets, rather, and it’s people turning over, shorter period of time. If it’s longer tenant, short [inaudible 00:17:19] tenancy, you do need to register with Landlord Registration. It’s, again, a fairly straight-forward form, go online, Landlord Registration. If you want to know the checklist of things you need such as smoke alarms, heat alarms, carbon monoxide testers, the ICR, which is electrical safety certification, if you’ve got gas you need gas safety certification, you need to potable appliance testing for electrical things … Go to the Scottish Association of Landlords website, and they will have all of that, and it’s free. They will give you that information for free.
Stephen Jardine: Good advice. All answered. Thank you very much indeed Brian for that. Right, we were talking about when is the best time to sell best time to sell your home, when’s the right time to sell your home. But what should you do to your home before you sell it? Is it worthwhile, doing work on a house before you’re selling? Will it make any difference really to the price you can ask, Brian?
Brian Gilmour: It really does make a difference. Buyers like … The inclination in the imagination, sometimes to see past things. I’ve known properties, two identical properties, getting 20% difference just because one’s decorated better, nevermind larger extensions. And I have heard people say, “I’m not going to change it, because whoever comes in is going to make the change anyway.” And sometimes that does have merit, if the whole needs gutted, then yeah, you may not want to start on a 50,000 pound refit. But, most people, there’s value to be added. First of all, just do up the paintwork. Freshen it up. Paint the woodwork white, they’re supposed to be white, not that off yellow that it’s maybe faded into.
Do things like that, I mean the analogy I would use is, if someone was going for a job interview, you wouldn’t just get out of your bed, walk out of the door in your pyjamas, jump down and go and meet the guy with a coffee in front of you or the lady, because well, they’re going to get to meet you at your worst times anyway … You would go in, you’d have a shirt, if you’re a man, you’d have a shave, you’d put on your best gear, you’d clean your teeth, you’d go in, and you would present as best as possible. Your home’s going in for an interview, it’s being interviewed by the potential new buyers. If it’s a house, give it curb appeal so that when somebody’s driving past, they might’ve seen it online and they might just go to drive past your home, make sure the garden’s in decent condition, the hedge is cut, the grass is trimmed, the wall is painted. If you live in a flat, even if it’s factored, make sure the communal entrance door is painted and nice and fresh, you can do that yourself.
So these are the minimum things and then you start moving into the, “Do I replace the avocado bathroom suite?” Well again, people are looking at your photographs online, on the various websites, and …
Stephen Jardine: Listen, that’s coming back into fashion. I’m just waiting for it eventually. What about the old chestnuts about, they’re coming round to do a viewing today, get the coffee on, vase of flowers on the kitchen table, that sort of stuff. Does that make any difference.
Brian Gilmour: It’s all about making the home seem welcoming, so you declutter, you take away too much personalised rubbish, you accentuate the amount of floor space you’ve got, that’ll make the rooms look bigger. Don’t have, this is another thing for people, perhaps a family have moved out and they’re downsizing, and there’ll be a bedroom where you need to step into Doctor Who’s tardis to go back in time, it’s not changed since the eldest child moved out in 1984. Maybe decorate that room, maybe people don’t want to feel like they’ve stepped back in time. It’s that underlying aspect of, “Well, if they haven’t decorated this room, does it need to be rewired, re plumbed, what’s underlying all of this? So you just want to make it look as clean and fresh as possible.
But things can add value. If you’ve got a two bedroom home, it’s patently aimed at some sort of family, if you could convert the attic into a third bedroom, most times that will add more value than the cost of doing the changeover and adding on the bedroom, it will add more value, you’ll get more too, because you’re making it a proper full family home that people can use.
Stephen Jardine: I went to look at flat in the West End of Glasgow years ago, and it had a railway line at the bottom of the garden, and it was mum and a wee girl showing us around the flat, and I said to her, “Are you ever bothered by the noise from the trains?” And she said, “Not at all. Hardly hear them.” And the little girl looked at her mum and said, “It makes you cry sometimes Mummy.”
Brian Gilmour: Yeah, maybe get the child out for a walk with someone.
Stephen Jardine: Suspect she wasn’t at the next viewing of the property. Right, back to a story we were talking about a couple of weeks ago, with you Brian, Katriona called in, because she had an issue with her property and you gave her some advice. Katriona’s back with us today, good morning Katriona!
Katriona: Good morning.
Stephen Jardine: Thanks for your time, joining us again. Just remind us what the situation was with your flat. It was on the market, what was going on.
Katriona: Okay. I bought a flat in a high rise building 30 years ago, and I’ve been renting it out ever since. The tenant left last October and I decided that I would put it on the market, and I’ve had four people have wanted to buy it. They all had mortgages in principal, but when their mortgage provider discovered it was an 11th floor in a high rise flat, none of them actually got a mortgage. So really, these flats can only be sold to cash buyers.
Stephen Jardine: Now you wanted, originally Katriona, when you went to market, you’d hoped for about 100,000 for the flat, didn’t you?
Katriona: That’s right, yes.
Stephen Jardine: And the Home Report valued it at 85,000?
Katriona: That’s right, yeah.
Stephen Jardine: Right okay, now Brian, the last that you spoke to Katriona, remind us what you thought the flat might get, because of that problem that she had.
Brian Gilmour: Yeah, I checked with Katriona because, as a cash buyer, they’re an investor, principally, who’s looking at it. She was getting 600 pounds a month, 7200 pounds a year, so looked at the yield an investor would be looking at, and said it’s high 60s, it’s in that ballpark, that a cash buyer, for a return investment, because they want roughly 10% back on their money.
Stephen Jardine: High 60’s. Okay.
Brian Gilmour: I’m getting quite nervous here…
Stephen Jardine: Katriona, we’ve got a drum roll ready here, and the flat is sold for … Drum roll …
Katriona: 65
Stephen Jardine: WOAH, AND THAT’S WHY YOU’RE THE EXPERT. BOOM. Well done.
Katriona: This couple were going to pay 72 if they could’ve got their mortgage, and they tried everything, I mean one guy who wanted to buy it went to three different mortgage providers. Nope. This couple have tried various ones, had another surveyor out, and there’s nothing room with the flat. The building has been standing there for over 50 years, and the people who live there, who were originally council tenants, and bought it from the council, they’re as happy as Larry with it. They think it’s great, and yet no one will give a mortgage.
Stephen Jardine: So you’ll be happy you’ve sold Katriona, but 65,000, I’m not great at maths, but 65,000’s not 100,000.
Katriona: It’s not. I know, but in the end I was glad to sell because I thought, well, what happens if you can’t, I’m not going to live forever.
Stephen Jardine: Well, hopefully not, we’re really glad you’ve managed to get your sale there, thanks for that Katriona, what’s the lesson about … from her situation, for us all?
Brian Gilmour: Lesson is, if you’re buying something as an investment, still get your own … Get a survey done on it, I was very disappointed that Katriona wasn’t notified when she got the Home Report that the property wouldn’t be mortgageable. I think the surveyor should’ve told her that. That should’ve been highlighted. But take advice, because back to the point we discussed earlier about holiday lets, is always do your sums, do your homework, don’t buy on a whim, do your research.
Stephen Jardine: Buyer beware, as they always say, don’t they. More calls and texts for you, we’ll pass those on, and we’ll keep some of them going for the next time you’re in. Brian, thank you so much for you time this morning, really appreciate it.
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