BUYING TO LET IN AND AROUND FIFE

The rate of return
The return will depend on the type of property you buy. Two-bedroomed flats may, for example, yield a gross income of around 8%. Factoring expenses, insurance and maintenance costs will reduce your return by 2-3% There is a risk that a house might be empty between lets. There may be capital appreciation over the period of ownership, so this type of investment may compare favourably with bank deposits or the stock market, and is a worthwhile diversification.

What's best to buy
Our recommended buys to obtain the best rate of return are:
• Unattractive looking on the outside, but comfortable inside
• 1 or 2 bedrooms
• No garden
• Up a lane in the town centre, and/or
• Flats

Returns can be higher if you take on an older property and take the chance that you may have more than average repair expenses to meet. The availability of government grants for repairs to older town-centre properties is a bit of a lottery at present.

Prices commanded by modern, nice-looking suburban houses with 3 or more bedrooms, gardens and off-street parking tend to reflect their desirability for owner-occupiers and the rate of return from letting will be lower.

Properties which are to be occupied by more than two unrelated persons require an HMO (House in Multiple Occupancy) licence from the local council. This may only be available after alterations are made. Some alterations, such as fire doors, might make the property less attractive to a family buyer later.

Mortgages
Buy-to-let mortgages are typically for up to 80% of the valuation. More may be available, but a high loan-to-value loan tends to cost more. Remember also that, as a buy-to-let borrower, you do not have the same customer protection framework as someone borrowing to buy their own house.

Remember that any loan over a property is expressed as a percentage of the valuation or the price you pay, whichever is the lower The lender has the right to sell your house (and put out the tenants) if you fail to keep up repayments on the loan.

Tax
If you are married or in a long-term relationship and one of you has little or no other source of income, it makes sense to put the property in that person's name. It may also be worth putting the house in one spouse's name alone if the other has a lot of capital in a business or other property.

Capital Gains Tax will be chargeable on the gain on the sale of properties which have never been your main residence. It may be chargeable on a former main residence which has been let for some time.

If you are abroad, but have retained UK domicile, you will be entitled to a personal tax allowance against UK income which may exceed your net rental income. If your tax affairs are in order we can arrange for rental to be received without an immediate tax deduction.

Finding your property
Don't miss out on houses that aren't advertised in the press! Some are now sold after being advertised on web sites only. A good starting point is to look at www.fifespc.co.uk. We can give you the details of other relevant web sites.

If you instruct us in the purchase, we will be pleased to give you our opinion, based on our experience as "Lawyers Who Let" on the suitability of properties for letting out and the likely rental

Once you have bought, we can advise on the standard of decoration, whether to offer it unfurnished or furnished (or both) and, if furnished, what furnishings would be appropriate. We expect clients to offer properties of a good standard, but it is best to relate expenditure to the likely rate of return.

Prices
In Central Fife, house prices are among the lowest in Scotland while in St. Andrews they are among the highest. Houses advertised at "offers over" a certain figure may go for less, or much more. It depends on the interest from purchasers at the time, the state of the local market, and the seller's personal circumstances. A fixed price may be the cue for a quick bargain. Sometimes, carefully quizzing the seller can help you find out what price may be acceptable

One cannot bid '£1000 more than the highest offer the Seller has received'. Once an acceptable written offer has been received, perhaps after a closing date for offers has passed, it is usual to inform the solicitor for the parties whose offer is to be accepted that they have been successful. After that, Law Society rules do not allow solicitors to negotiate with other prospective purchasers until negotiations with the "successful"party have broken down.

Where the price is over £60,000, it should be split between the building and the contents, since only the former bears stamp duty.

Title conditions
There may be conditions attached to titles, restricting what you can do. If we act for you in the purchase we will keep you informed.

With flats, know what your share is of the cost of maintaining common parts and the roof.

Help in the purchase
You need a solicitor. Most solicitors will give you a free interview to discuss your requirements for house purchase.

Ask a solicitor to "note interest" to help ensure the house is not sold before you can bid. BENNETTS make no charge for this. A quotation for our fees is available on request.

Don't offer without a survey, unless the house is new or nearly new and you don't need a mortgage, or unless you or friends have the experience and knowledge to assess the fabric of the building and its value. Don't skimp on surveys. Remember how much money you are thinking of committing for a purchase. If an estate agent offers to arrange the survey for you, decline. Because of the conflict of interest, it is safer for your solicitor to instruct a surveyor

Remember, too, that it has become mandatory for any house occupied by three or more persons not living as a family to be licensed as an HMO (House in Multiple Occupation), which may mean additional expenditure. When the property is surveyed, we can ask the surveyor to give an opinion on what may need to be done, if anything, to bring the property up to the fairly high and rigid standards which are set for HMOs. Obtaining a licence can take time, so it is best to think of starting procedures as soon as you buy.

Valuations can be at variance with what people are willing to pay.

Once missives (the offer, acceptance and further formal letters) have been concluded by the solicitors, both you and the sellers are locked into a contract and risk substantial penalties on default, even though you have signed nothing.

Letting out the property
We will be happy to look after your property once you have bought it. A description of our services and details of our charges are to be found in our leaflet Letting out your house.

In St Andrews and the East Neuk, it is possible to maximise income by combining lets to students during the University session (September to May) with summer lets to holiday-makers. This means using specialist letting agencies which can handle both types of let.

Back to Top