Ah the golden ticket! The panacea of the property investment world.
This is probably the most common question I get asked by investors. It’s usually a telephone enquiry from someone we don’t know who has found us on google. They want short cuts and they want it fast.
Whilst it’s great for me to engage with new people, this is a question that can frustrate me on multiple levels.
Firstly, there is no right or wrong answer. It entirely depends what you are trying to achieve. Each area has its specific pros and cons. Some areas are better for capital growth, some for cash flow.
Which is most important to you?
Some areas attract professionals, some families, some students. What kind of tenant are you looking for? Are you looking for high yields, or is a long term pension pot more important to you? What is your risk profile?
Not only that, what works now in one location might not work in the same location in 2 years time.
Let me give you an example. 2 years ago there were virtually no HMO’s in Bramley, LS13. Now there are lots! Many investors have spotted an opportunity here (often outside the Article 4 area) and converted family houses to higher yielding shared houses here.
More competition leads to harder market, higher voids, or higher standards of presentation/finish. An area can lead to saturation point, or at least it can become much more competitive in a surprisingly short period of time as markets and demographics change.
Personal liability also springs to mind for me. I might recommend to you one area and let’s say it’s great for the first few years, then things change and you can’t get a return here any more. Will you say “It was Jon’s fault, he told me to buy here!”? Heaven forbid.
I might also tell every investor that calls to buy in the same location I tell you to buy in, regardless of their individual circumstances. If I have advised you of the same, I don’t think you would be pleased if I did that. This may contribute towards saturation levels. What then?
Whilst I appreciate calling the local agents is a diligent part of the process, which I would most certainly encourage – it should be part of a wider program of education and research that you must carry out before diving in.
First establish what your motivations and goals are for investing.
You then need to link your goals to the strategy that will deliver them. This leads to a property (type, size, price) and a location that matches your strategy.
Research is the key. Take your time, don’t jump in. Property is a risky and quite possibly very expensive strategy if your knowledge doesn’t match your enthusiasm!
Unfortunately we come across too many people that have bought the wrong property in the wrong area without doing any real research, and it just doesn’t work. Not enough quality tenant demand, low returns, poor layout, bad tenants, poor presentation, undesirable location – the list of possibilities for getting it wrong goes on. Ouch that can be expensive!
The flip side is investing with knowledge and skill can lead to freedom of time and money when done correctly. I highly recommend reading extensively, seeking out books, podcasts, online groups/forums, local networking events, good agents, training courses. There are loads of these available for you to learn from nowadays. Do this before you buy a property, please! As they say, ‘you don’t know what you don’t know’. Most people think that buy to let is as vanilla as it gets, but it would surprise them to learn there are many strategies that are working very well for the well-informed property investors. There are many ways to skin a cat so they say!
Once I have explained this to the investor that called me 10 minutes ago, I sometimes get the impression he or she feels they are now more frustrated than I was when the call begin! They now know there is no quick and easy answer here. But, I may just have also saved them a small fortune with my 2 cents worth…Who knows, it’s also possible that I may have also given them a very early step towards starting a profitable and rewarding property enterprise..
Let me know where you are in property investing journey in the comments below