EDINBURGH's biggest industry isn't financial services, but property management, says Ken McEwan. What's more, this is the right time to be buying to let.
Not one to go along with the standard view of things, Mr McEwan insists this is the time for serious investors to look into buying property, just as the "amateur" buy-to-letters are getting the frights and pulling out.

Mr McEwan set up property investment company McEwan Fraser in January with friend and colleague Scott Fraser. Since then they have bought and sold £12 million worth of property for clients in the Capital, as well as managing their own substantial property portfolios.

The two have worked together for years, as sales training manager (Mr McEwan) and corporate account manager (Mr Fraser) at Edinburgh office supplies company Capital Solutions. While working there, both had been dealing in property. "We were both well paid at Capital but it reached a stage where we were making more money from property than from our salaries," Mr McEwan says. Between them, they have personal property portfolios worth an estimated £11m.

"It reached a point where we had to make a decision. We both had good contacts with surveyors and lawyers and all sorts of people through our work at Capital Solutions and so there was a lot of opportunity. We were doing it part-time, but we needed to spend time on it properly," he says.

So the two decided to use what they had learned over the years and go into business, with financial backing from the Clydesdale Bank and the Royal Bank of Scotland.

McEwan Fraser now offers a service to help people keen to move into property but who are too busy to do their own research and who lack expertise in what is a good investment and what to avoid. The company's clients range from advocates to professional football players.

"They put their confidence in us. We can give them access to about 40 properties at a time, all at a fixed price. That's quite a unique proposition," Mr McEwan says.

The properties will all be in established rental areas in the centre of Edinburgh. Mr McEwan says the company avoids property in less stable areas, including Leith, because it doesn't see the rental market there as stable.

"We stay in the traditional areas where you'll always get a tenant," he says.

McEwan Fraser also bucks the property sale trend by focusing on already-tenanted property. Traditionally, landlords have waited until a property is untenanted before putting it on the market, but McEwan Fraser lets them put flats on the market straight away. A tenant in place, with the immediate income stream that promises, and a proven rental track record can make a property very attractive to buyers, the company says.

Many of the flats are let to students, who make good tenants because they are less sophisticated than professional renters, Mr McEwan says. "They tend to stay there longer, they're less demanding and you get the rent no problem."

McEwan Fraser also recommend another less popular purchase prospect: four and five-bedroom houses. Most buyers shy away from these, Mr McEwan says, because of the perceived hassle of managing them and the need for House in Multiple Occupance licences. In fact, he says, they are a good reliable source of student rentals. Once a property has been granted an HMO licence it is easy to pass it on to the next owner, he says.

Fundamentally, Mr McEwan's advice is to go against the flow. Where the amateur investors are buying one and two-bedroom flats, you get an oversupply and rents come under attack. It is better to go for the larger properties, which are less in demand but bring in good money, he says.

McEwan Fraser charges a £280 annual fee to become a client, which gives access to a website listing all available properties, and also takes two per cent of the property price. "It's not a big fee. You're getting a range of good quality property, at valuation price or below, and there's no 'offers-over' scenario," he says.

Buyers are mostly from Edinburgh, although the company has had some requests from Ireland and London.

Cash flow isn't too much of an issue, because the company doesn't actually own the majority of the property it offers. "A lot of developers will come to us when they start a project, when they're doing up some flats, and we'll have a small window to move them before they go on the open market. If we think they're very good, then we will buy them in, but we'll charge a higher fee," he says.

McEwan Fraser has also bought properties that it thought were just too good to miss. "There was one in Gilmour Place recently. It was on at £143,000 but we couldn't find anyone who wanted it. We could see it was worthwhile, so we bought it and put it on the open market. We got £155,000," Mr McEwan says.

McEwan Fraser does not offer property management services but will recommend property management companies which it partners with. Buyers can choose to have the property fully managed, or to simply get the property management company to find tenants.

In most cases the tenants won't even know the flat has changed owner because they'll continue to deal with the same property manager.

The company has sold some properties in the Borders and Dunfermline, and has now hired consultants to look after East and West Lothian, but growth outside Edinburgh is low "because we like to know the areas where we're selling," McEwan says.

As for the recent comments from Bank of England governor Mervyn King, warning UK buyers about the dangers of investing in property at such an unstable time, "we think it's brilliant," Mr McEwan says.

"It's great for us. We're long-term investors and we'll do better if people get a bit jittery. There'll be more fixed prices on the market for a start. Increases in interest rates are good for us because we can buy better and smarter," he says.

Buyers have to look at property as a long-term investment, Mr McEwan says. The rental they receive from a property is likely to stay constant even if its value drops. "The market does slide a bit, but in the right areas rent values won't go down," he says.

In Edinburgh, Mr McEwan is convinced, there are more people involved in property trading and management than in the financial service business. "You just don't see it, because there are a lot of amateur people buying property."

But those amateurs are now starting to turn tail, listening to the likes of Mervyn King and selling their investments, which is good news for his business.

"When the amateurs pull out of the market, the professionals take over. Buy at the bottom of the cycle," Mr McEwan says.

The full article contains 1198 words and appears in Edinburgh Evening News newspaper.

Last Updated: 17 June 2004 10:50 AM
Source: Edinburgh Evening News
Location: Edinburgh