Karl Griggs, one of our directors, was asked to write an article for Today’s Landlord highlighting the main points to consider when investing in property. Today’s Landlord is a key industry publication, and asked Karl because of his extensive experience in property investments, and raising funds for them. You can see the original article here.
When investing in property, location is often one of the most important elements to take into account. The right location can lead to a strong monthly rental yield. However, investors should look into the long term and consider the appreciation in value of a property as well, as an overreliance on yield ultimately could make for a bad investment. Both considerations can be affected by the location of a property.
Here is our advice on factors to consider when planning where to purchase your next property, and some of the up and coming property hot spots tipped to give the best return on your investment.
1) Current transport links
For investors looking to target professionals, commuter hubs can be a good place to start. Luton, Southampton, Basildon, Reading and Brighton are some of the towns currently experiencing huge increases in demand as commuter towns.
Outlying cities or towns can be closer than you think; Luton to London only takes 29 minutes by train, Reading is 31 minutes by train, Basildon is a 33-minute commute into London, and Brighton and Southampton are just under an hour away. Therefore it is not surprising that buyers are heading to these towns in search of an alternative to prime London property prices.
Other popular commuter towns include Harlow, Braintree, Gravesend, Crawley, Stevenage, Southend and Hatfield – all under an hour’s commute from London.
Lower house prices could mean higher monthly yield on your investment. Lower cash input for your property enables you to spread your risk through a larger portfolio. If you are able to buy several properties at lower prices, this will help you cover any losses through void periods. For example, if you own one high-value property and it is left void, you will lose more than if a lower value property was left void and you had other properties to provide alternative revenue. It is advisable to have three or four small properties to one large property in your portfolio. However, keep in mind the additional complexity of managing multiple properties. Additionally, if you can buy a less expensive property, it could enable you to spend some extra money renovating the place to a higher quality. The property will therefore attract a better class of tenant, resulting in a higher monthly yield.
However, you need to be careful because lower or stagnating house prices in the area might mean that over the long term you might not see the percentage increase in value of the property you might want.
3) Local amenities
Know who your tenant audience is and make sure that the area has the right amenities to fit. For example, properties on the coast are usually in high demand amongst families and older tenants looking for a retirement home. A burgeoning night life and leisure facilities such as cinemas and shopping centres will appeal more to young professionals or the student population.
If you are purchasing the property with an intention to convert into an HMO, choosing the right location for your target market is important to ensure high occupancy levels. For example, prime locations for HMOs include near universities for student lets or near airports for professional travellers and airline staff. However, an HMO investment is not to be taken lightly, and is more appropriate for the experienced investor.
4) Investment in local economy
Government investment means cities like Manchester, Birmingham and Liverpool may experience an increase in demand in the future, as they become economic hubs of the North. Consequently, these cities and their surrounding towns are ones to watch.
The government has pledged £13bn of investment in transport to close the economic gap between the North and South. This involves improving transport links throughout the North of England, strengthening connections between Liverpool and Hull, the North West to Yorkshire, and between the North East and the Midlands.
In general, for those looking for strong yield with lower risk, it is advisable to make your next property investment outside of Central London. This is because the price of property tends to be lower, resulting in a yield just as good as prime London purchases. Remember that as you lower your cash input, you lower your risk. Good areas to consider include Manchester, Liverpool and Birmingham. Ultimately, the location of the property needs to fit your business model and fulfil your financial needs, so do your research, wherever you decide to buy.
If you have an interest in investing in property, then do contact our experts at CPC Finance.