Your property investments and associated returns are as good as the strength of property investment area you choose.
One may say, just pick up the area you live or within 10 to 30 minutes of your reach and invest in such an area.
It’s not that simple.
There are many factors that one has to consider choosing a property investment area. With some degree of confidence, I can tell you that atleast 60% of investors approximately change their investment area.
About 40% of those investors change or opt for multiple areas, because they haven’t done their due diligence.
They never thought about what is going to come in future in terms of them scaling up their investments.
This post will provide an insight into 10 powerful factors that one needs to firm up evidences on, to ensure the location being chosen to invest indeed is the right one.
1) Have A Strategy
Many of us just go ahead and select a property investment area without thinking it through on what we want to do as part of our property investments.
This results in change of plan in less than a year.
Predictable, isn’t it?
One may want to invest in single buy-to-let’s to start with, but would not be happy with cashflow that comes in at later point.
This results in investing in other high cashflow yielding strategies like HMO (houses in multiple occupation) or Serviced accommodation or rent to rents.
Here is a light bulb question…..
Does your investment area support so many strategies?
If not, are you back to square one to select another property investment area?
Your time now is torn between multiple investment areas.
Bottom line is:
Have a long term visualization of your investment strategy and what you want to do as per your cash and cashflow requirements.
This will ensure you choose an area dependant on investment strategies you have in mind.
2) Assess Demand and Supply
In an ideal business sense, one would like to have a situation where there is high demand but limited supply. That’s pretty much a scenario where one would want to get into such business.
With property investment, you want to be careful and ensure you have enough stock available to buy along with higher demand, unless you are able to develop yourself.
80% of property investors rely on buying existing houses than developing projects themselves.
In such a case, ensure you assess the demand and supply of properties in the property investment area. This can be as simple as checking for property numbers on Rightmove and Zoopla like
- Number of properties on the market both sold and unsold together
- Number of properties that have been sold compared against overall availability
- Number of properties available for rent
- Number of properties that have been let compared against overall availability
Above number can be achieved by applying filters within property listing websites. Such information will give you a fair idea of percentage properties sold against available or rented out against available.
Anything above 35% to 45% sold/rented rates within north and central part of England, I would add this area to my short-list.
If it’s London you would want to achieve at least 60% sold/rented rates given the high amounts of money that will be locked in within the investment.
3) Work Out Your Budget
Knowing your ideal deal profile for your investment strategies is essential. This does not mean you cannot invest outside of what you think is an ideal deal.
As an instance, my deal profile looks like below for single buy-to-let:
- Purchase at less £55K to £60K
- Refurbishment less than £12K
- Revaluation post refurb is greater than £80K
- Return on investment atleast 20%
- Cashflow of atleast £150
Now clearly, I cannot have London as my property investment area with above deal profile. So I know for my budget, I need to go elsewhere.
My budget, if I have to buy a single buy-to-let is £55K. This will eliminate most of south of England and more or less looking to move towards north of England where property prices are affordable.
I can now start to short-list areas where average house prices range between £35K to £75K based on condition of the house.
4) Explore Planned Regeneration
If you are looking for a mix of both cashflow and cash strategies then knowledge of what regeneration is planned within the investment areas is key.
Council websites will give all the information on regeneration planned around the area. Some council websites give away very structured information like Croydon which is a happening place with allocation of £1.4 billion to make it a smart city.
Few other councils will have the information but you may need to spend some quality time to search for information.
Regeneration in Stratford during Olympics, Croydon high street regeneration to build Westfield shopping complex, Cross rail line, Manchester media city are few examples that have raised property prices by almost 10% in few areas across years.
5) Transport & Infrastructure
Infrastructure and transport links are key for people to rent houses irrespective of how costly or cheaper the house prices are.
A sound infrastructure and transport facilities drives house prices up at any given point.
Proximity to public transport from areas you are planning to invest is key including bus/trains/trams or even simplicity of car navigation/parking.
6) Look Out For Near By Areas
Imagine you chose a property investment area and you have been viewing about 15 properties a week.
How many weeks can you last at this rate?
You probably can go with a push to about 3 months and after that you will not have enough properties to view.
Here is the deal!
You will need to scale your reach to ensure you have enough stock to view and offer on.
You will need upcoming surrounding locations around your property investment area say up to 10 miles.
Often you will find that you get properties in areas around your area which are cheaper than what you buy within your investment areas and not much difference in cashflow.
The ability of people to pay rents can be judged by number of people on employment within an area.
Its essential that the investment area is having multiple streams of employment and are populated with multiple employers.
You can validate following to assess if you want to invest in an area.
- Number jobs on offer across few years and if they are increasing year on year.
- Number of people employed full time/part time, with mixed skills, high and low paid ratios.
- Finding major employment streams like distribution, retail, technology, consultancy, finance and others.
- Unemployment rate within the area is another factor to consider.
You can get all such details from websites like streetcheck.
One would definitely want to assess how is it to live in an area, if a person wants to stay as a bachelor, a couple or a family with children.
This should help an investor assess his target market should he choose an area to invest.
Factors listed below would be great to start with assessing lifestyle within an investment area.
- High street, shopping area, pubs, cinema, leisure centres, public parks, restaurants
- Crime rate, Health facilities, Community gatherings, multi cultural population
- Good schools, kids entertainment and more….
9) Investor Focus
Check where is rest of the investor community investing in the country. Clearly there are reasons why such areas are being picked by investors.
Network with property investors and gather information on why investors are investing in a particular area.
It will also be interesting to keep an eye on where investors are selling their properties and why, to understand if there are any areas to avoid investing in.
10) Property Investment Area Reports and Indices
Property index reports are maintained by few leading financial institutions and land registry dating back to 1950’s with in UK.
This data within house price index helps to assess price movements on properties (including seasonal adjustments) in a region. This includes both sales and rental changes occurring within the industry.
The property index reports that one may use for their research are as given below.
- Halifax House Price Index
- Nationwide’s House Price Index
- Land Registry House Price Index
- Office for National Statistics
- HomeLet Rental Index
Your Go Now…………
If you think there are other powerful checks, add your thoughts to the comments section and if you are a beginner…..Happy investment journey. Hope you nailed your investment area.