There is a lot of work to be done from when you first decide to invest in property to when you buy your first investment, and we understand how this can seem very daunting to begin with. Before you begin making any purchases it is key that you decide on your property investment area (Gold Mine).
Finding a Gold Mine area for your portfolio is one of the most important factors of your investment. The wrong area will affect the profitability, cash flow and success of your property or portfolio, which is why researching your area is paramount from the start.
There are many strategies that can be implemented in property. In order to make them a success I am a strong believer that choosing the right area is the foundation of investment.
Here are some points you should be considering when finding your own property investment area:
You need to look for areas with enough supply: For an area to be a Gold Mine area there needs to be enough long term supply. If you want 30-40 deals per month you need to be operating in a substantial area with enough critical mass of properties that you could consider, otherwise you will lack potential deal flow.
Contrary to that, if your Gold Mine area is too big you will stretch yourself too thin. Detailed street-by-street knowledge will be a monumental task and fostering relationships with all the agents will be overwhelming. I believe a balance must be sought. At Embrace Property we are typically looking for at least 15-20% of all properties in an area to suit our own strategy. By way of crude example if there was a population in your area of 200,000 , a rough cut would produce a housing stock of 100,000. We would expect at least 10-15% of those houses to be suitable properties for us to acquire. Rightmove or Zoopla are useful in order to get a feel for how many of those properties are available at any one given time.
Job Growth: Once you have found an area with enough supply you will want to make sure there is a healthy supply of tenants. An area of growing employment is an integral part of healthy tenant supply. The business section in the local and national newspapers is also a good source for finding out about business activity in your area. At Embrace Property we keep a close eye on the large employers and their job growth or announcement cuts as we understand the affect this can have on tenant supply.
Crime rate: Long term tenants are great tenants. If crime is high in an area this will affect the desirability of your particular property. No one wants to live in an area where they do not feel safe. Your local council’s website will provide you with crime statistics in areas. However as we know there are always good street and bad streets and these won’t be covered by their statistics. Try ringing up the local council office and speak to an advisor or call your trusted letting agent as they will have a better feel for what is happening on the ground
Average rent: Your monthly rent is your properties life line, you need to know the average rent in your area and what is likely to affect it. For example future developments in the area may be expected to increase the rent within the next five years or so. These developments could range from new supermarkets, schools, public transport, hospitals or doctors, so make sure you fully research your potential area for any future improvements.
Local facilities: Depending on your strategy and what type of clients you intend to target, you want to make sure your tenant has the amenities they need nearby. These amenities can range from hospitals, doctors, schools, nurseries, universities, shops, supermarkets, bus stops, a nearby train station and even pubs or bars if you are considering student tenants.
Article 4 direction: If you are planning to use a multi-let or HMO strategy for your property portfolio you want to make sure the investment area you are choosing will allow you to do so. If an article 4 direction has been adopted by the local council in your area, you may struggle for planning permission on your property if you are renting it to multiple occupants. To find out if your potential area does have any article 4 directions you can check on your local council’s website.
Natural disasters: One factor that many of us tend to miss off our research list when finding an investment area, is whether the area is prone to any natural disasters, flooding being the most predominant one. Zone 1 and sometimes zone 2 flood risk areas will affect your ability to get a mortgage on a property. Insurance premiums in these areas are also likely to be to be inflated and therefore must be taken into consideration when calculating your costs.
These are only some of the points you should consider when researching for your investment area.
For more information on how you can find your Gold Mine area or if you have any further questions, you can click here for a free consultancy session.