Edinburgh property purchase/letting

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KennyT
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Edinburgh property purchase/letting

Post by KennyT » Fri Sep 21, 2018 2:31 pm

Hello All, looking for some advice on an Edinburgh property purchase and subsequent Airbnb-esque letting.

Scenario is I have three properties in Kirkcaldy all long term let managed through Remax and ticking along nicely.
We don’t live in the UK and have previously stayed with parents or rented a place when we return to the UK occasionally but now we have a baby this is not going to be so easy, my plan is now to buy an Edinburgh apartment which we can use a couple of times a year and let for the remainder of the time.

Criteria has to fit both something we want to live in (occasionally whilst on holiday) and somewhere desirable for tourists, I can’t see beyond New Town stretching from Shandwick Place to York Place and roughly from Rose Street to Moray Place/Royal Circus/London Street. I want to spend £400k, maybe up to £450k, it should be 2+ bed apartment with minimum 1 en-suite in a traditional Georgian style.

Hoping someone on here can help with the few unknowns I have:

Firstly, what is the percentage over the “offers over” price properties are selling for? My previous purchases have been low-ball cash offers but this won’t be the case, can I expect to be closer to the sticker price since I have no chain?

Secondly, is anyone currently an Airbnb host?
Does anyone have experience of host agents who can manage the meet and greet, handover and cleaning etc. of an Airbnb property for hosts who are not and cannot be present? A quick google brings up this site which seems to fit the bill:
https://www.airsorted.uk/edinburgh/about/
Their site is a complete rip-off of the actual Airbnb site which for some reason makes me sceptical!

I’m willing to take a hit and pay somebody the commission to manage the admin since we cannot be around at least until we have found our feet.

Any other advice or suggestions would be much appreciated.

Cheers, Kenny
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ed
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Re: Edinburgh property purchase/letting

Post by ed » Fri Sep 21, 2018 2:44 pm

I have heard that its a fairly saturated market with little demand outwith peak times. (I would say this as I work in long term lettings!) ;)

A couple of our landlords have used the following company with no issues: https://www.airmanaged.uk/

I have heard of big numbers in excess of the O/O - up to 35% over for smaller one beds! In your price bracket though I wouldn't think demand will be as strong.

Best of Luck with it!
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Sanjøy
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Re: Edinburgh property purchase/letting

Post by Sanjøy » Mon Sep 24, 2018 10:18 pm

ed wrote:I have heard that its a fairly saturated market with little demand outwith peak times. (I would say this as I work in long term lettings!) ;)

A couple of our landlords have used the following company with no issues: https://www.airmanaged.uk/

I have heard of big numbers in excess of the O/O - up to 35% over for smaller one beds! In your price bracket though I wouldn't think demand will be as strong.

Best of Luck with it!
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Re: Edinburgh property purchase/letting

Post by IanD » Mon Sep 24, 2018 11:23 pm

ed wrote:
Fri Sep 21, 2018 2:44 pm

I have heard of big numbers in excess of the O/O - up to 35% over for smaller one beds! In your price bracket though I wouldn't think demand will be as strong.

Best of Luck with it!
Ian Boag was mentioned the same a month ago from info provided by friends buying.
1 bed was New Town or Stockbridge area something like o/o £280k, valued £290k, sold for £360k

Hopefully not same for your price range !
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neil
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Re: Edinburgh property purchase/letting

Post by neil » Wed Sep 26, 2018 12:10 pm

I've got a flat in Edinburgh that is rented out through a mixture of Airbnb, Booking.com, and a local agent. I found the agent I use through Airbnb's co-host marketplace which they appear to have now shut down. They've also changed the co-hosting financial side - it used to be that you set the percentage cut the co-host got plus the cleaning fee and who it went to, and Airbnb would split the payments accordingly. They've now stopped this so you'd get the whole payment then have to send the co-host their cut. It's a 2 bed place in Leith I've got and the co-host I use takes 12% on Airbnb bookings plus the £60 cleaning fee. On other bookings she takes 30%, plus the £60 cleaning fee comes out of my cut. For that the place gets scrubbed top to bottom each changeover and she provides all towels, bedding, and consumables, plus does the meet and greeting. So I do better out of longer rentals than short ones and based on the figures so far end up with about 62% of the income which I've then got mortgage, utilities, factors to pay out of.

I'm doing reasonably well with mine but I had it a few years before doing holiday lets and paid considerably less than you're looking at. At £400-450k I think you'll struggle to make it work financially. I had 73% occupancy last year (only started in June) and have had 68% occupancy this year so far but the tail end of the years likely to be quieter so that figure will drop. The market appears to be saturated as Ed said - very few of my bookings have been through Airbnb, it's mainly been Booking.com or the agent. Airbnb seem very keen to encourage you to cut your prices to get the occupancy up.

I don't know how you're planning to finance it but if you're looking at a buy to let mortgage you'll need to stump up a minimum of 25% of valuation so if you end up having to pay 25% over then that's £200k you'll need to find (based on £400k valuation). You're then left with a £300k mortgage so probably £16k in mortgage payments per year. BTL mortgages also don't normally allow you to do holiday lettings so you'd either need to find one that did or demonstrate long term letting income of £1700 a month (property income has to be 125% of the mortgage payments so £20k/year).
Assuming you find a lender who'll do it, based on 67% occupancy and keeping 62% of the income you'd need an average nightly charge of £132 just to
cover the mortgage before you take bills and the £200k you've tied up into account.

If you can't get a BTL mortgage then you're looking at a normal residential mortgage and I think again you run into issues with lenders who'll allow holiday lets. They'd also base the lending on your personal income and expenditure which might not work if you have a mortgage/rent to pay overseas.

There's also LBTT to think about and they might charge you the 3% additional dwelling supplement. There are also rumblings that the council are going to start clamping down on Airbnb's and limit you to 90 days rentals a year so I'm not sure how viable it is long term - https://www.edinburghnews.scotsman.com/ ... -1-4409990

If you do decide to go ahead I can see if my co-host is looking to take on any more properties and put you in touch. But as you may have gathered from above, it's not something I'd recommend getting into at the moment.
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KennyT
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Re: Edinburgh property purchase/letting

Post by KennyT » Wed Sep 26, 2018 4:24 pm

Thanks for the comments so far, appreciate the insights and first-hand experience.

I’m aware it’s a fairly saturated market, having spoken with an agent they advise also 50-75% occupancy is average which is in line with Neil’s place.

One of the main eye-openers has been the rate of tax and number of fees to be levied on such a project, the country is doing very little to entice me to bring my money from overseas and invest it in the UK but that’s a discussion for another day…

Regarding valuations, my target property and pricing is slightly above the most desirable so Offers Over is typically 5-10% over home report value with recent highs of 20% reported, but not common. (although, if I were a solicitor I’d be telling potential clients similar as well so as not to scare them off).

Financing, I have a BTL mortgage promise from my bank, they are fully aware I am an expat and in fact only offer BTL for UK property, the issue with all short term letting is generally BTL mortgages require properties to be let under Assured Shorthold Tenancies (6 months minimum), TBC how this is to be dealt with.
In short it’s a fairly safe financing strategy, my three properties in Kirkcaldy are unencumbered and I will borrow less than the total combined equity, my calculations for a number of scenarios show the income of my KDY properties cover the EDI mortgage repayments and some, meaning any income from Edinburgh is only really needed to cover running costs, the remainder is profit.
Additionally, my cash amount and loan amount have room for movement to benefit from a slightly improved interest rate at LTV <60% Vs the rate for LTV 60-75%.

The co-host/host agent isn’t cheap… I said I don’t mind taking a hit but the one I spoke with charges 15%+VAT, to be fair it seems about average and they do manage a lot for that fee but it’s a bit more than I was expecting. Neil, the details of your co-host could be useful.

It may not be a huge money maker for me but the main intent is to have somewhere to live in Edinburgh for a few weeks a year, to make a little bit of money is a bonus, I’m fairly sure I won’t be losing money.
If the short term letting doesn’t work for me I may get in touch with long term letting guru Ed and go back to staying with parents!

Thanks again
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neil
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Re: Edinburgh property purchase/letting

Post by neil » Thu Nov 22, 2018 10:16 am

So it appears Airbnb will soon be dead in Scotland - https://www.commonspace.scot/articles/1 ... es-through

Once this bill goes through you'll need planning permission if you're letting your place out for holiday lets, which will presumably be refused. Great news if you run a hotel as presumably rates will rocket with less alternatives.
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Re: Edinburgh property purchase/letting

Post by campbell » Thu Nov 22, 2018 10:14 pm

Usual sledgehammer to weed out the nuts. Pathetic. Get ready for the revolution.
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Re: Edinburgh property purchase/letting

Post by j2 lot » Thu Nov 22, 2018 10:37 pm

:withstupid
Destroying the tourist industry in one fell swoop while reducing the spend in all other areas to boot :x
Last edited by j2 lot on Thu Nov 22, 2018 10:40 pm, edited 1 time in total.
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Sanjøy
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Re: Edinburgh property purchase/letting

Post by Sanjøy » Thu Nov 22, 2018 10:39 pm

Good thing the economy is looking rock solid and we don’t have any bumps next year.
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KennyT
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Re: Edinburgh property purchase/letting

Post by KennyT » Fri Nov 23, 2018 11:13 am

neil wrote:
Thu Nov 22, 2018 10:16 am
So it appears Airbnb will soon be dead in Scotland - https://www.commonspace.scot/articles/1 ... es-through

Once this bill goes through you'll need planning permission if you're letting your place out for holiday lets, which will presumably be refused. Great news if you run a hotel as presumably rates will rocket with less alternatives.
Disappointing.

3 weeks today I collect the keys to my 3 bed apartment on Atholl Place :roll:
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