Whether you’re an aspiring landlord trying to decide where to invest, or an existing landlord thinking about expanding into a different location, you need to know how to research and assess an area’s investment potential.
Capital growth and rental yield and profit can be quite different even from one street to the next, so you’ve got to make sure that whatever property you buy is highly likely to:
- Rent well from the outset
- Be in high demand from tenants, now and in the future
- Achieve the level of rental income that gives you the return you’re looking for
- Grow in capital value at least in line with, and ideally above, inflation
And all of that is dependent on buying the right property, in the right location – one that should support a strong rental market, both today and into the future.
So, here are some of the key things to consider:
1. Invest close to home
It’s very helpful if your investment property is within striking distance of where you live.
If you’ve lived in the same place yourself for a while, you’ll probably have a feel for the local market.
You’ll be aware if certain streets or neighbourhoods have good or bad reputations, and you might even have a feel for property prices.
All of that should make it much easier to choose a property, rather than investing somewhere you don’t know well or possibly have never been before.
2. What about ‘hotspots’?
Every few months, there are reports in the media about property ‘hotspots’, and you might be wondering whether it’s worth chasing any of those.
Well, the first thing to know is that there are good deals to be found all over the UK, so you should be able to secure a sound investment in a town or city near to where you live.
The vast majority of the time, there’s simply no reason to chase supposedly great returns in a town or city you know nothing about.
And, secondly, by the time a ‘hotspot’ has been declared, regeneration is often well underway and the best investment returns - particularly in terms of capital growth – and may have already been made.
Whether you invest locally or far away, success in Buy to Let means making sure your investment performs consistently well over the medium to long term.
3. Take advice from local property experts
Local qualified sales and lettings agents that are well established in the area, like Your Move, should know how different types of rental property in different locations have performed over time.
So, discuss your objectives and tap into their local expertise. Bear in mind that demand from different types of tenants often depends on what’s within easy striking distance, so not every type of let will be successful in the same location.
Agents should also be aware of things like planned housing developments and infrastructure changes. These are essential to factor into your research, as they can significantly affect supply and demand in certain areas.
4. Check local council plans
Agents might not always know the detail of what’s in the pipeline for the next 5-10 years, in terms of infrastructure improvements and new housebuilding projects.
So it’s well worth liaising with your local council planning department - typically they will have the information in an online portal.
If there’s going to be investment, that suggests a healthy and expanding local economy, and that’s a good sign that rents and prices are likely to rise.
And if there are new housing projects, discuss with local agents what kind of impact they expect that to have on the immediate area - good and bad.
5. Are there any local licensing schemes? (England)
If you’re planning to invest in Houses in Multiple Occupancy (HMOs), any HMO housing 5 or more people falls under mandatory licensing rules.
But every local authority has the power to extend licensing to smaller HMOs and also to introduce licensing schemes for any privately rented property, so do check this first.
These schemes can apply to anything from part of one street to the whole council area, and there may be several different schemes running at once.
And it’s important to know that if a council feels one particular area has too many tenants or rented properties, they may limit the number of tenants you’re allowed to house and could even refuse a licence altogether.
All these things could negatively affect the profitability of any rental property, so it’s essential to find out what the council’s policies are for the area you’re looking at before you buy. The last thing you want is to end up with a property you can’t let as you’d planned – or can’t let at all!
6. Carry out your own online research
Even if you’ve taken advice from qualified agents, it’s important to be able to check out and understand the market yourself so you’ll be able to assess it more easily in the future.
Trends and markets change over time, and you’ve got to be able to track how well your investment is performing.
Your Move sold prices and the Land Registry all have online search functions that let you see sold house prices – and the Land Registry lets you refine your search right down to different types of properties within a certain postcode.
It’s also worth looking at what’s currently for rent in the area and tracking how quickly those properties let.
7. Engage with a local surveyor
When you buy a property to let it’s essential to understand not just the changes you need to make to let the property now, but what the likely maintenance requirements are into the future.
Upgrading boilers, changing the windows, a new roof are all likely to be required if you are investing for 10-20 years and will cost thousands of pounds.
So having an expert to advise on a property’s condition can enable you to renegotiate the price and ensure the future profitability of your investment.
Taking all this research into account, you should then have a very good idea of the capital growth and rental income levels that certain properties in certain areas can achieve, and the likely future supply and demand. You can then decide which location and property is most likely to deliver on your own investment objectives.
You may also want to check out our article, ‘Your property pension - is your Buy to Let investment on track to deliver what you need?’
At Your Move, we’re always here to help landlords, so get in touch with us at any time if you’d like to discuss your investment plans.
We can help you identify the areas and types of property that are most likely to deliver on your goals and give advice on the kind of research you can do yourself. You can find the details for your local Your Move branch here.
The Your Move Content Marketing Team
