Marsaili Macleod, a lettings adviser with Galbraith, says: “In recent years investors have been more interested in the holiday lets sector as these were often considered a more profitable option than residential lets. Now we are talking to more landlords who are interested in the core residential lets market for two reasons.

“Firstly, strong demand from tenants and lack of supply means that rental prices are rising and the landlord can pick and choose from waiting tenants. Secondly the value of the property itself will rise over the term of ownership because property prices have risen considerably in Scotland over the past two years. Many of our clients are planning ahead and investing in a buy-to-let property which will achieve good capital growth and fulfil their financial objectives while offering security.

“These factors, compared with the hassle of managing a holiday let and having to achieve high rates of occupancy all year-round, are enticing landlords back into residential lets as an investment.”

Galbraith reports that a typical two-bedroom apartment in Inverness might sell for £165,000. If the prospective landlord purchased it with a 25 per cent deposit (£41,250) the achievable rent for the property would typically be set between £750 to £775 per calendar month. Lenders are currently offering capital and interest mortgages, or interest-only mortgages, for buy-to-let properties with monthly repayments lower than the likely monthly rental fee. This offers the potential to achieve a return each month even taking into account that a purchase of this kind is subject to the Land and Buildings Transaction Tax at 4 per cent on second homes.

Marsaili Macleod continued: “Although interest rates are rising, the cost of borrowing remains historically low. The potential returns in the buy-to-let sector are good, coupled with the likely significant rise in value of the property itself over the term of ownership. Clients are considering whether to buy a property which can be let now to a tenant and in five or ten years’ time potentially made available to their children as a first home or for when they go to university. Having evaluated the returns from the holiday lets sector and the potential returns from residential tenancies, clients are choosing the residential lets market.”

Galbraith lets over one thousand homes to residential tenants for clients across Scotland and the north of England.