Investing in Rental Property in Glasgow or Anywhere: Is it Worth the Risk?

Photo: Byres Road Flats. Investing in buildings split into flats or apartments for the sole purpose of renting them out is a good long-term business and can make money if you do it right. Yes, in the current financial climate it can be a risky venture; but the key is to think long-term - rather than to try to for quick returns. The other key is to buy at the right price; most property experts will tell you that the the money they make in property investments is made at the buying stage and not at the selling stage, i.e., they find properties at prices that make a profit possible.

Blocks of flats or apartment buildings are something that lots of people enjoy living in, because they do not have the responsibility and the headaches of property ownership. When something breaks, they simply call the owner or the designated maintenance company who has to fix it for them. That is a big consideration with many people, even though there is risk of being evicted should the building be sold or if they get behind in rental payments.

Property Management Agents

Not everyone who buys Glasgow property is a Glasgow resident; property investors look for value and if they see it in Glasgow - even if they are from overseas - they will buy. They may not live in them but have them as rentals and city break locations they rent out when they are not occupying the houses or flats themselves. The drawback here is that you won't be there to manage the day to day concerns of the tenants and any repairs needed. You will have to hire a good managing agent to oversee your interests in Glasgow.

If you choose your managing agent correctly, you will be able to have that same managing agent find suitable tenants for your Glasgow property. There will be a good chunk of the rental income that goes to the agent - up to 40% if /he is employed in this capacity - but it might be worth it. If you only hire your managing agent as a maintenance worker, for cleaning and repairs then you will pay considerably less: up to 15% of the rental income. If it is a building with more than one flat or apartment you can offer your managing agent a live in position and the salary will then be less because s/he is there rent-free.

Choosing your Glasgow Property

When you choose the rental property you want to buy in Glsgow, research the area and see how busy it is and how likely the apartments in it will be rented out successfully before you commit to buy. You don't want them standing empty; that will result in a negative cash flow.

If you are investing in single family homes, it is a bit trickier. Unlike with a block of flats, you can't fall back on the income from other residential units when the property is empty for a period.

In addition, another budgetary consideration is how much you will be paying on the rental income for that house? In Scotland, some of the gross income is taxable. So, between the tax, a managing and rental agent's fee of 25 to 40% and local taxes, if you are not careful, most of the rent is eaten up by expenses and that is before any repairs on the house itself. Even for a home bought through auction or tax distress sale you still will have to pay the mortgage. You need to know that your Glasgow investment property is going to be worth your investment and will make you a worthwhile profit.

Investing in three or more flats makes more sense financially. If you buy a three family block of flats you have one flat for the manager/ agent so you only need to pay him/her a small salary since housing is provided. You will still have the other expenses but one apartment's rent should pay them and the third unit will pay the mortgage. What this means is you may not see any profit at least not right off but you won't have any or only minimal out of pocket expense. The bigger the building you can afford, or maybe you can buy a couple of them, the easier this will allow you to invest further in property at a profit.

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Comments

I am in south africa, and I am looking toinvest in rental property in future for now I am still doing reserch, I want to buy a plot and build a block of flats and rent it out but I don't know where to start, but I have already I dentified where I want it can you guy just give me heads up on what to look out for.

ntobeko, johannes | Wed Jun 19 2013

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