Our Brian Gilmour has been appearing on the call Kaye programme providing advice on their property surgery. Here are the details of this week’s show.
Kaye: Now Brian Gilmour, our resident property expert from Indigo Square is back with us to answer any property queries that you have. The phone lines are open, pick up the phone, call, and speak to Brian directly on 08085 92 95 00, or you can text on 80295. I see we’ve got lots of texts in actually. Shall we go and get some text questions first of all?
Paul from Edinburgh, “I’m not a homeowner at present, my wife owns two properties. I would like to get my own property to rent out and I’ve read that I would need approximately 25% deposit for a buy-to-let. I’m wondering if it’s possible to look at getting something under the 125,000 mark with a 5 – 10% deposit?”
Brian: No. Buy-to-let mortgages are 25% deposit, that’s where they are at the moment. There are lower buy-to-let products with better rates but 75% loan to value is the highest buy-to-let products that are out there.
Kaye: Right, so that’s it? Simple answer.
Brian: The other thing to bear in mind if he’s buying a buy-to-let property is the 3% LBTT surplus charge now for buying a-
Brian: It’s the replacement of stamp duty.
Kaye: Oh right, okay. Right, okay.. What does that stand for?
Brian: Land and buildings transaction tax. I don’t know why they couldn’t have just kept the name stamp duty, but they do like changing things
Kaye: Right, and how much is that?
Kaye: Right, on the sale price?
Brian: On the sale price.
Kaye: Right, okay. Well there you go, Paul. Pretty direct answer there. Maybe not the one that you wanted, but that’s what it is.
On a text Dave is saying, “I have £70,000 in cash, I’m recently divorced, 33 years of age, no children …” Beginning to sound like a dating agency, this is not, it’s about property, thank you. “I may face possible redundancy in the future. Should I put the lot into a flat in the west end of Glasgow to keep the mortgage payments low, or split the money over several properties to generate some income?”
Brian: Everybody’s individual circumstances will be different, that’s the obvious caveat for this. Most places over the last nine, ten years, have dropped in value and come back up again. We’ve had the last two years in particular of reasonable growth. All it’s done is taken us back to where we were, historically properties doubled in value every 10 years and they haven’t done that. There are exceptional hotspots and the west end of Glasgow is one of those exceptional places that has outperformed the average of the Scottish market. The benefit of that would be that you’ll get capital growth. The benefit of spreading it and maybe buying lower valued stuff is that your rental yield (the return on investment from the rental income) might be slightly better.
Best thing to do would be to look at some examples of both, then look at the track record of the west end property in terms of it’s growth value, and then look at the rental yield that you’re getting on the lower value purchase. In the west end you might buy a property and get 4/5% return on your money every year, but you’ve also got to factor in you’re getting capital growth. Whereas somewhere else where you buy something cheaper, you might act get 9/10% return year on year investment, but your capital growth will be smaller.
Kaye: Yeah, well I go back to Katrina in Aberdeen from last time who I’m absolutely obsessed with and I do apologise for that. I do remember also, she was renting that property out for quite a long time and she was doing perfectly well on that, but actually when it came to selling she wasn’t going to make anything, so I suppose that’s a bit of a trade off isn’t it?
Brian: It’s also the reason why, even if you’re buying for cash, it’s still worthwhile making sure you’ve got the property surveyed and valued because she might have been told about the lack of mortgageability when she acquired it, because she said she bought it for cash at the time.
Kaye: Right, okay. We’ve got Steve on the line, good morning Steve.
Caller: Hi there.
Kaye: Hi, how you doing?
Caller: Living the dream.
Kaye: Lucky you. What do you want to ask Brian?
Caller: Just a quick one. I’m self-employed, I’m a limited company, and I’ve been trying to buy a property. Now the banks are happy to see me pay £650 a month in rent, but they won’t give me a mortgage even though I’ve got two years worth of books, I’ve got a £25,000 deposit. Is there any mortgage companies that can help self-employed kind of people out or not really?
Brian: There are Steve, and it is a common challenge for self-employed people. Actually the tale you’re telling now is one of the reasons why the rental market has gone up in recent years. It’s because since the crash where the lenders have become much more, to put it kindly, prudent in their lending policies. One of the sets of people who’ve suffered most have been people on more variable incomes and self-employed. It has become more difficult for self-employed people and people on more variable incomes to get mortgages, hence the reason why you’re paying £600 a month in rent at the moment. Most lenders are looking for three years accounts, so one way to widen your net of potential mortgage providers is if you could grit your teeth and sit out the rented for another 12 months. Then you’ll have hit the three years of accounts from what you’re saying.
The best thing to do is go to see a mortgage advisor and look into some of the specialist mortgage providers, you just have fewer to choose from. In anything in life, when you have fewer to choose from, you’re not getting access to possibly the best rates and all the best loan to values and all the best arrangement fees. That’s the biggest challenge.
Callers: There should really be a scheme in place to help people like myself, because all you try and do is better yourself, and when you work for someone you make £900 a month and you get nowhere in life. When you work for yourself you try and make constantly £6000 a month, and you can show that and prove it, but the bank still won’t give you a mortgage, even if you want a significant amount like 50,000, you know? It’s crazy. You can take that as a personal loan some people.
Brian: I own my own business myself, so I know the challenges that you are outlining. Many people, self-employed, running their own businesses have got the same challenges. It is one of the downsides that’s happened since the crash with the lenders making the criteria for mortgages far more strict.
Kaye: Obviously Steve can look around and try and find somebody that will give him a mortgage on just two years books, but kind of off the top of your head, would you imagine it’d be better sticking it out for the year when he’s got his three years, and maybe have a bit more choice?
Brian: Yeah, if you stick it out for a year you just got more choice. You’ve got a wider market to choose from.
Callers: Ah right.
Brian: It’s a range. Because lenders will have arrangement fees which can be 1%/2% of the value of the mortgage, or it can be a fixed amount of £1,000/£1,500. They’ll obviously have they’re lending rate, and they will have the loan to value. The safer they feel investing in you, the better rates that they will give you.
Kaye: I mean, kind of good news, Steve, I suppose is there’ll come a point and it’s not too far away, that you’re likely to have a much better choice in terms of getting a mortgage and you can get a property of your own, so it’s not a completely gloomy picture but you might have to wait a while to get what you want, to be living the dream. Steve, thanks very much. Thanks for your call. 08085 92 95 00 if you’d like to speak to our property expert, Brian Gilmour, about anything relating to property then please do get in touch.
I’ve got a list of some of the commonly, frequently asked questions, FAQs here Brian, but I have to say we’re getting so many calls in I’m just going to go with the calls for now. Of course you can text, 80295. Anne’s on the line in Bearsden. Hi Anne, morning.
Callers: Hi there.
Brian: Hi Anne.
Callers: Hi. Just want to find out, I have a two bedroom semi in Bearsden and I’ve got an attic conversion with VELUX window and it’s floored, carpeted, et cetera. We were thinking about putting our house on the markets and we were also thinking if we partitioned our front bedroom off leading to the attic, it’s a Ramsay ladder that’s in there just now. If we got a fixed staircase set and partitioned it off, can we classify that as a three bedroomed house?
Brian: You need planning permission to class it as a three bedroom house.
Brian: So the best thing to do would be to speak to an architect, initially informally, just to find out whether what you are thinking of doing would conform to building control regulations.
Brian: From what you’re describing it probably will, but obviously I’d need to see it in person. If it did, if you’ve already got the attic converted so this is really just a staircase going in. It should add value. Even if you don’t, purchasers will see the value in the attic being converted. For random figures, say your property’s worth £100,000, you do the attic conversion, it’s worth £130,000. It’s not going to be that they’ll suddenly pay the £130,000 but they might think and look at it and say, “Yes, but this is a bit more so I’m happy to pay £110 – £115. That sort of thing.
Callers: Is there sort of an average price adding an extra bedroom onto your property?
Brian: Every single area’s different. If I give an example of one where I was speaking to someone just last week, it was a mid terrace property in Rutherglen in Glasgow. A two bedroom had sold for £100,000, they converted the attic and it was £130,000. That’s why I used those figures as an example. That attic conversion had added £30,000 onto the value for those people.
Callers: Oh okay, that’s fantastic. That’s good news.
Kaye: Good luck with that, Anne. Good to give good news on that. Just picking up though on something that you were saying to Anne there. I mean obviously there is a cost involved in making a major change like that and there’s a hassle involved and all of these kind of things. Whereas what you were saying there is that you could perhaps point out to perspective buyers the potential. It’s always good to have a property with potential.
Brian: Accentuate the positives.
Kaye: Yes. Does it carry a value in itself just the potential?
Brian: Most of the time yes it does. If you look at properties with a bigger garden people will pay more, and a lot of the time that will be for the potential that they could develop out. You got to be careful, because sometimes the potential’s always been in the property. I’ve often heard people talk about, “Well I paid this for it, but look at the view in my home.” Yeah, but you paid a premium price because it still had the view when you bought it. So sometimes the potential has always been priced into that particular property.
Kaye: Good point, absolutely. Yeah. It’s not that you just invented the potential, it comes built in. Yes, absolutely. Jan in Sterling says she’s wanting to downsize, cash poor but property rich. She wants to buy first because, “We’ve got four dogs and renting temporarily isn’t possible. How can we borrow temporarily if necessarily? No one seems to think it’s possible.”
Brian: Bridging finance, which is very expensive. Bridging finance will be invariably somewhere between 1%-2% per month. You borrow £200,000, you’re paying £2000 a month. Bridging finance is the way to do it. Bridging finance is historically there for that type of scenario where perhaps you have sold your property, your sale’s not completed, the purchase date of your new property has already arrived, and you need to bridge that time scale. It’s not really something you should be doing for a long time. Bridging finance is normally two, three months. That sort of thing.
Kaye: Yeah. We’ve got loads of texts here still to go through. Obviously lots of them are very specific and that’s great. Brian happy to take very specific questions, 80295. Or as I say, pick up the phone to speak to him, 08085 92 95 00. There are also those questions aren’t there that you get asked time and time again. Here’s one of them.
Speaker 4: What about pets?
Kaye: Yes, what about pets? This is when you’re selling a property.
Kaye: Put them in the kennels.
Brian: Yes, actually. A dog’s a man’s best friend. I’ve got a dog. There are some houses you go into and the minute you set foot through the door you know they’ve got a dog. Some you don’t. Not everybody likes dogs, not everybody likes pets, some people could have an allergy, they’ve had a bad experience in life. I always remember going out to a property I was valuing when inn estate agency, the person said, “Are you okay with pets?” “Yeah, yeah, I’ve got a dog, I’ve got a cat, I’m fine with pets.” “That’s fine.” Then opened this bedroom door, they didn’t fully open it, it had the bars of a cage that were about an inch thick and this thing came flying at me. I jumped out of my skin and wanted to leave that house pretty quickly.
Even for someone like me who grew up with hamsters, guinea pigs, dogs, cats, that wasn’t the best thing. If you got pets, it’d be nice if someone could take the dog round the block while people are viewing it. Cats are less controllable. Make sure the budgie’s maybe not flying about the room at the time. Do your best to minimise the pets.
Kaye: Yeah, you really have to get your head around that, because of course most pet owners love their pets to distraction and just cannot imagine that somebody wouldn’t also love their pet, but as you point out that’s clearly not the case. You want them to be spending as long as possible in your home don’t you really?
Kaye: Falling in love with it.
Brian: Yeah, if somebody’s got an allergy and you’ve got a dog or a cat and they’re allergic to dog or cat hair, and the dog’s trying to jump up on them, they might not hang around the house too long.
Kaye: What about the other thing?
Speaker 4: What about the kid’s rooms?
Kaye: If you’re selling a house, and you’ve got two mucky teenagers, and the rooms are a disaster, what do you do? Just say, “Take us as we are?”
Brian: Well fortunately this is on the radio and people can’t see my face going scarlet when I think back to my poor parents selling the house when I was a teenager, because I took that attitude of, “What does it matter? People can see the house for what it is.” Left my stuff everywhere. That’s not the best. I remember being a teenager having clothes piled everywhere. If you can, make sure the teenager’s room is ventilated, aired, hoovered, cleaned, dusted, and tidy. Because actually people do have difficulty seeing passed things.
Kaye: Well gosh, I was just about to say, but surely people can-
Brian: No, people can’t see passed things. I don’t know if you’ve been there yourself, you just feel uncomfortable in a messy environment sometimes. I suppose the teenage room extends to the whole house and it could be toddlers as well with toys lying about the floor. Just make the house neat, tidy, presentable, and allow people to see what they could be in, how they could live in that property themselves.
Brian: If you can maybe send the teenager out for a walk with the dog, and then you kill two birds with one stone.
Kaye: Would you say that that would get you a better price or help you sell more quickly?
Brian: Help you sell more quickly, because it just gets back to people feel uncomfortable in an uncomfortable environment. They might feel like they’re treading on somebody’s toes, they’re imposing because the house doesn’t look like it’s been ready for them, “I shouldn’t be here, I should get out quickly, they’re not ready for me, they’re obviously not that comfortable about me being here.” So they don’t take the time to go around the property.
Kaye: What about the old thing about have some coffee on the stove and some bread in the oven, does that kind of stuff work?
Brian: That’s actually just about making the house smell nice, and warm, and inviting. If you make it too obvious or-
Kaye: What are they hiding?
Brian: Yeah, what are they hiding? I remember once going around a property and every time I went out to it the windows were all wide open. It was the days before the home report and it just made me start to look out for things like damp in the house.
Kaye: You’ve got a suspicious mind you have, but I guess you have to know all these things, you have to be alert to them. Let me run through some of the questions we’ve got. Lots of people getting in touch with questions and would love to get your advice on them, Brian.
Alison says on text, “I’m thinking of renting a room to a lodger. Any advice or tips would be appreciated.”
Brian: Thoroughly vet the lodger as well as possible. Try and use even a reference agency if you can, but the most important thing would be to get two or three personal references from them, an employer, a friend, former place that they’ve stayed, that type of information.
Kaye: Right. Do you issue them a contract, just a lodger? Or I mean is it once you’ve done the vetting procedure is it pretty informal?
Brian: I’ve dealt with two bedroom rented flats with two friends, not necessarily a lodger. What sometimes can then happen, because no ground rules have been set out, at the very least I would set out ground rules although you don’t want to be completely prohibitive. If you don’t have the ground rules, I’ve known situations where one of the tenants has then reverted to they just stay in their room because they’re so fed up with the messiness in the kitchen or the communal areas and they don’t want to be confrontational. Actually what happens is the relationship breaks down with one person stuck in the room and unhappy. Set out ground rules in the beginning.
Kaye: Do you write them down?
Brian: I would.
Brian: Yeah, and then there’s no ambiguity, there’s no, “I don’t remember you saying that at the time.”
Kaye: Yeah, I think if you do that when you don’t know each other so well, then it’s easier to refer back to it, isn’t it? It’s a difficult conversation to have once a relationship-
Brian: Yeah, don’t be too prohibitive, but write them down. Probably best for you both to sign and date it. Again the rules are going to come up in a situation where the relationship’s broken down and there’s perhaps some monetary issue over, “I’m not paying because you’re not doing X, Y, Z.” In those types of situations you probably want to get out of it as amicably as possible, and you’re cutting down the chances of an argument if you’re then able to reference back to something.
Kaye: Okay. Flip side of that from Norman, “What rights do you have if you’re made homeless after a private landlord wants to terminate your lease?”
Brian: Well provided the private landlord has fulfilled all their obligations then you’ve not really got many. That is an interesting one because that is changing in Scotland at the beginning of 2018. At the moment we have short assured tenancies which tend to be six or 12 months. Most landlords want a tenant in for a period of time. It’s a long-term investment. If the tenant is to go it’s usually under prescriptive circumstances such as the landlord needs to sell, financial reasons, perhaps he’s been repossessed, he wants to move back in if he used to live there, the tenant’s being antisocial, or a relative who used to live there wants to move back in.
At the moment however, at the end of the six months or the 12 months, the landlord is within his rights to say, “I just want my property back, cheerio.” And put somebody else in. That will be changing. The future doesn’t solve this particular issue. If he’s reached the end of the lease and the landlord just decides he doesn’t want him in, unfortunately that’s the landlord’s prerogative, that’s the nature of the short assured tenancy which is described in an AT5 which he should have got before he got the short assured tenancy. That will be changing in the new year where it is just permanently a two month rolling contract where the two month’s notice comes from the tenant or the landlord on the prescribed reasons that I just set out.
Kaye: Right, okay. Brilliant. Brian, thank you very much indeed, very clear. Brian Gilmour there from Indigo Square who will be back in a fortnight, if that’s all right, Brian? If you’re not away to Barbados for the summer or something like that?
Brian: Enjoying the grey skies of Glasgow.
Kaye: The grey skies of Glasgow. So any questions do get them in and you can always pop them up on our Facebook page for the next time Brian’s in, we can run them by them, just search for the Kaye Adams programme and thanks for all your calls and questions for now.