Landlords are adapting to tighter rules and lower yields with smarter strategies
Scotland’s buy-to-let sector isn’t shrinking – it’s being recalibrated. The traditional model of relying on price growth, minimal tax friction and light regulation is being replaced by something more deliberate. A new class of landlord is emerging, one that treats property investment more like a business than a sideline.
“There’s a wave of new investors coming in, accepting the current landscape and treating property more like a business,” said Kessar Salimi (pictured), a mortgage broker and investor based in Scotland. “They’re not relying on market growth alone – they’re focused on structure, planning, and sustainability.”
New strategies and structures
The shift isn’t just generational – it’s structural. Many experienced landlords, particularly those who entered the market when leverage was cheap and capital gains plentiful, are now exiting; unable or unwilling to adapt to new conditions. But their portfolios aren’t being left vacant.
“Many are scaling up rapidly, buying portfolios from retiring landlords,” said Salimi. “They’re coming in with a long-term strategy and more resilience to changing regulation.”
One of the first changes many new landlords make is to invest through a limited company structure. What was once an option for landlords looking to scale is now a default for many at entry. “Most people now start by discussing the best investment structure, and many are choosing to invest through a company,” Salimi said.
Even landlords with just a single property are increasingly looking to transfer it into a company setup, often to reduce personal tax liabilities or improve financing terms. “There’s a cost, including capital gains tax and potentially higher borrowing costs,” he said, “but for those whose property was once a main residence, the equation can work.”
Investor strategies are also shifting when it comes to property types. In areas where short-term lets are permitted and demand is strong; holiday lets are outperforming traditional buy-to-lets. HMOs remain viable in student-heavy cities.
“Holiday lets in certain areas are more profitable than buy-to-lets – especially in the Highlands and Islands, city centres, or areas with lots of contractors,” Salimi said. “It’s a reshuffle that reflects the uneven terrain of the market.”
Geography is playing a defining role. Edinburgh has seen investor demand slow as yields decline, while Glasgow remains robust. The Highlands and Islands are outperforming even their own home report values thanks to strong tourist and contractor activity. Aberdeen, however, continues to lag, still feeling the effects of the oil price collapse.
Exit for some, evolution for others
Not all landlords are repositioning – some are exiting. Accidental landlords, in particular, are struggling to make the numbers work.
“The second home tax now means someone buying a new property while keeping their current one might have to pay 8% tax,” Salimi said. “With higher interest rates and lower returns, many accidental landlords have decided to sell up.”
Others are getting creative. Salimi shared an example where a client was able to avoid a full second home tax hit by restructuring. “We helped him move the existing property into a limited company. He paid less tax on the lower-value property and took out a mortgage on it to fund the deposit for his new home,” he said. “It preserved liquidity and reduced personal tax exposure.”
For smaller landlords, similar strategies are becoming more common. Some are using a hybrid approach – keeping legacy assets in personal names while acquiring new ones through a company. But the days of passive ownership are largely over. “It’s no longer just about buying and holding – it’s about financial structure,” Salimi said.
The rent cap conundrum
Scotland’s rent control measures, introduced to protect tenants, have added another layer of complexity for landlords. Many are now compelled to raise rents annually just to maintain refinancing eligibility.
“Many landlords used to avoid raising rent mid-tenancy, but due to rent caps, they now have to increase it annually just to keep up,” said Salimi. “If you don’t, you could be stuck with below-market rents and unable to refinance.”
Some are being forced to sell, even at a discount. “The rent cap has backfired – keeping rent low for some but significantly increasing it for new tenants,” he said.
The policy, aimed at protecting tenants, is in practice creating two classes of renters: those on legacy rents and those paying market-adjusted rates. “It’s made tenants stay longer in the same property,” said Salimi. “That might offer them stability, but for landlords, it’s another layer of inflexibility.”
Despite these challenges, Salimi sees positives. “Yields in Scotland are strong compared to other parts of the UK,” he said. The post-COVID buying frenzy has calmed, and investors are no longer forced to pay significantly over value. “It’s a more sustainable market now.”
The shift in regulation has also introduced a new standard of professionalism. “It’s definitely better for tenants. They have more protections. Landlords can’t evict on a whim, which I think is fair,” he said.
A broker’s perspective from both sides
Salimi’s own entry into the property sector mirrors that of many clients he now advises. “I had a young family and was working in the family business, struggling to see them because I was always working evenings, weekends, and holidays,” he said. His hospitality background gave him a frontline view of the work-life imbalance many seek to solve through property. “I started investing in property myself back in 2010... I retrained, became a mortgage broker in 2016, and have been doing it ever since.”
That dual identity – broker and landlord – gives him a vantage point many others lack. “Because I wear both hats... I can offer insights from both sides,” he said. “I enjoy structuring deals for clients and suggesting ways to save on tax or interest.”
The market may no longer be as forgiving as it once was. But for those willing to adapt – and prepared to think like business owners – opportunity remains. The old playbook is gone. The new one is already in motion.
