Letting the landlords make the most of their time

The theory was backed last week by the latest set of figures from the Edinburgh Solicitors Property Centre. They showed house prices in the Capital continued to defy the doom merchants who had bought into the view that the heady days of double-figure yearly price rises were over and that the market was about to go pear-shaped.

Paul Dickens bought the lettings for 130 Edinburgh flats just a few weeks ago - but won’t say what he paid for them, other than it was "a significant six-figure sum".

The property portfolio came in the shape of Greyfriars Property, one of the city’s prominent residential letting agencies.

It was the first acquisition the former joiner from Leith’s property operation Alba Residential had undertaken, four years after the launch of the business in 1999. But he doesn’t intend to make it the only one.

"Greyfriars was an opportunity that came along at the right time," Mr Dickens says.

And, given that he views the student market as a good, reliable earner, he adds: "I couldn’t resist the location", referring to the George 1V Bridge site of Greyfriars and its proximity to the University of Edinburgh.

"I’m very much interested in the student market," he says. "It’s far less volatile and vulnerable to recession, and there’s in excess of 35,000 students in Edinburgh."

The takeover of Greyfriars took Alba’s portfolio of managed properties - some owned personally by Mr Dickens - to 600 in number and "in excess of 100 million" in value. That gives it a sizeable presence in the city’s busy letting market.

Alba’s core rental market is one- and two-bedroom flats in areas such as Morningside, the Southside, Grange, Leith, Gorgie and Polwarth - areas Mr Dickens sees as among the city’s principal rental locations.

"The most rentable properties in my opinion are traditional, well-presented tenement flats. If I had the choice between 400 tenement flats or 400 new-build flats, I’d take the tenements," he says.

While homeowners may be sitting pretty, the soaring values of Edinburgh properties over the past few years has taken them outwith the buying power of average or below-average earners. And with virtually all new developments having a minimum of two bedrooms, the stock of one-bedroom flats will become scarcer and potentially more in demand from cash-strapped tenants, Mr Dickens believes.

The ESPC figures revealed the average selling price for a home in Edinburgh was now 149,273, up from 125,897 last year.

And with average salaries about 23,000, that means borrowing almost six times a salary, compared to a historical lending maximum of about 3.5 times earnings just ten years ago.

"There’s also a huge change in choice of place to live by the likes of students and graduates," says Mr Dickens.

Rather than pay, for example, 300 a month in a five-bedroomed flat in multiple occupancy, many students - some with help from parents - are opting to rent traditional two-bedroom tenement properties with a friend where the rent is, say, 650 a month, but the standard of accommodation higher and quality of life better.

While buyers may struggle to cut a deal, Mr Dickens, a qualified quantity surveyor, says: "It’s still a tenants’ market. If you were looking to rent at 650 a month, chances are that most landlords would negotiate if someone said they’d only pay 600."

Changes in the law over the past few years have also put a lot of "houses in multiple occupancy" (HMO) out of the rental game. The new rules demanded far higher standards - on things such as fire precautions, cooking facilities, storage - being set for rented accommodation where unrelated people shared a property.

"The HMO rules were a wake-up call to landlords. It wasn’t the landlords or the letting agencies that were deciding the standard of accommodation, it was statute," says Mr Dickens. Many property professionals say the changes have made their job easier, as they have a better standard of let on their books.

Recent trends have also seen new-build flats snapped up off the plans by new and existing landlords seeking a quick capital gain or good rents from tenants with deeper pockets.

But Mr Dickens warns against blind faith in the market. However, were you to go ahead with a buy-to-let on a new-build, he suggests borrowings should not exceed 60-65 per cent of the asking price.

"I think banks are becoming more wary about lending here [Edinburgh], given the price premium on new flats, which is something that has to be reflected in any rent you charge. Gaps in tenancies can mean difficulty paying the mortgage if the borrowing is high and the flat is empty for periods," he says.

Signs over the last 18 months suggest that improvements in rents are coming from the bottom end of the market.

"We’re seeing signs that rents in the lower-to-medium end of the market are rising slightly, with the top end (above about 750 a month) very much dropping," Mr Dickens says.

Having successfully taken the first stage in its expansion plans, Alba, which was originally just a property development operation called New Alba, is looking to continue the trend.

But further expansion in Scotland is ruled out, with Mr Dickens saying "there’s still work to do in Edinburgh", part of which involves the rebranding of Greyfriars under the Alba name. But by the end of the year, operations in both Newcastle and Bristol should be running. Not to mention further possible takeovers in Edinburgh.

Alba’s turnover of about 8.5m is split fairly evenly between the development and letting sides of the business. With Newcastle and Bristol on the horizon, turnover is seen up by about 25 per cent in the first full year of operations.

Having been an amateur landlord for more than ten years prior to launching Alba, Mr Dickens was well acquainted with the way the city’s property market was heading. Having begun the business with 20 flats and with the aim of developing the flats for sale, Mr Dickens says it quickly became obvious that it was property investors that were snapping up bargain buildings.

But many of them were asking for recommendation on letting agents. "That highlighted another opportunity, as well as bringing an element of stability to the business," says Mr Dickens.

With Alba’s latest strategic plan now rolling out, Mr Dickens believes the business is now "full circle".

The package involves selling ready-made investment packages to landlords, where Alba buys property, develops it to rental standard, sells it at a fixed price and guarantees rental income for one year. And just weeks in to the venture, it’s proving a hit with both existing and neophyte landlords.

Mr Dickens says: "There are many people out there who want to be landlords but don’t have the time to look around and do the work required. We’re selling the opportunity of a refurbished and tenanted property with the investment potential that goes with it. It’s full circle."

With low interest rates making savings returns hardly worthwhile for almost all without a mountain of cash, and punch drunk pension plans reeling from the impact of future payout liabilities, both Alba and an army of landlords are betting that property will be the odds-on favourite in the current investment race.

Agency boss becoming king of all he surveys

PAUL Dickens launched Alba in 1999 after tiring of the "big, bad corporate world".

Having traded in his joiner’s tools to become a quantity surveyor, he went on to become a regional director for Scotland for consultancy giant Faithful & Gould. But then he became fed up with this.

"With a big company, I just found it difficult to keep channelling my energy in the right place. I wanted to build things, to knock on doors and try to pull a deal together," he says.

So he started New Alba as a property development company, later adding the residential letting aspect to the business.

Having been an amateur landlord with about 20 properties for more than ten years while he was working with F&G, he says: "I wasn’t exactly unfamiliar with the business."

Now, with 20 staff and more than 100 million worth of properties under management, he has become a leading figure on the Edinburgh property scene.

He says: "The advice I give to anyone considering renting their property is that if you give someone a property in good, clean condition they will generally recognise the effort you’ve made and chances are they will keep it that way."