One incredible nugget that can be found in property education is to “find your property investment area”. This useful nugget is essential to be an effective investor. However over the course of my journey I’ve found some investors seem to be paralysed by their inability to find their perfect property investment area. They say things like:
- “I haven’t found my area yet.”
- “I’m still looking for my area.”
- “My area is too far away for me.”
- “I need to research my area better.”
- “My property instructor told me that the area I live is not good so I don’t know where else to invest.”
These replies are so common that I felt I should share my formula to help you “find your area.” But first you should know….
Every area in the UK is a great area
In the UK, practically every area is a great area to invest in. One great area to invest in is the area where you live. You do not need to go past your doorstep. After all, you live in that street and your neighbours live in that street so you’ve already found a great place to live. Seriously! Unless:-
- you are in property full time,
- you have sufficient time bandwidth, or
- your circumstances allow you to invest 3-4 hours away,
don’t even try to invest further afield.
Your travel costs there and back will easily be in the region of £100.00 per round trip. Even if the returns are greater in another area, you will over extend yourself by:
- The constant travelling of trying to get to know your area by walking the streets and chatting with people on the street
- Constantly networking with estate agents
- Wasting time looking around 30-50 properties in that area
- Having to repeatedly check on any renovation and refurbishment project
Another things that’s easy to forget is…
Different types of people live in different types of places
As well as your physical “area” that you’d like to invest in, you also need to decide what “area” of people you’d like to provide a service to. This typically falls under five categories; pensioners, families, students, people on social benefits, and professionals.
My favourite tenants are students; they’re sociable, intelligent, and help keep me young… so I invest in properties that are within walking distance of a university. If you’re more interested in providing housing for families then invest in areas that are close to schools, playgrounds, and parks. If professionals are more your thing, invest in areas that are close to sources of industry, or that have robust transport networks.
Once you’ve decided on your tenant demographic then you’ve immediately focused where you should be looking, as a huge number of properties are no longer viable for what you need them for.
Now you should be able to tell if a property is right for your needs, there’s just one more thing…
Some areas are more likely to increase in value
If you’re investing to rent out the property then thinking about this issue may over-complicate things, but it is worth doing some basic research to see if your area is an “up and comer”. However if you’re investing in property with hopes to renovate and resell then this will be an important factor to you.
Here’s some economics 101: as the demand for something increases so does the thing’s price. So, what you’re on the look out for are areas where housing demand is likely to be on the rise (insert satirical joke about the UK’s lack of housing here). Specifically these are areas that:
- Are receiving investments in infrastructure
- A large business is about to expand to
- Have recently had upmarket shops move in (M&S Food, Starbucks, etc)
- Have increasing prices of local goods
The first three points can be readily researched online, but in order to find out the increasing price of local goods you may need to do some hoofing. You also need to bear in mind that (despite a stubborn belief) house prices can fall just as easily as they rise, and this method of generating income is far more risky than looking for rental based properties.
However the best property investment area is…
The fastest way to find a great area to invest in is…..
is to invest locally.
Being able to invest locally assumes you have the deposit to acquire the property. It may not be the best in terms of price appreciation or rental but you will know the area inside out. On top of that, you’ll be able to easily inspect any renovation projects you have, quickly deal with emergencies (of which there will be many), and spend far less time travelling.
If you cannot buy locally, then your primary property investment area will be one that circumstance has forced you into. If you are forced outside of your area due to lack of finance, then choose a target tenant and see if you can afford to buy a property that that target tenant (student, professional etc) would enjoy.
Conversely you could see what properties, you can afford and then choose your target tenant based on the types of affordable properties in your chosen investment area.
Here are my essential five questions to ask before investing in property:
- How many properties do I want by the end of the year?
- Can I invest in the area I live?
- Does the area support my chosen customers?
- Do I have the deposits for the properties I want in that area?
- How much time do I have to get there and back and still be able to fulfill my family and work responsibilities?
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