When sourcing an investment property, whether you are looking to get great returns by way of quick capital growth, or high yielding rents, the ultimate goal for most investors is to source a property, or development opportunity in an area which is on the cusp of becoming a ‘property hotspot’ and anticipate the market trend before prices increase.
While, to some degree, this can be a game of chance, there are some indicators of imminent value increases which the best investors seem to sense to make the best returns on their portfolio.
For these successful investors, the balance of good research and risk analysis ensures that they get better returns on their investment – here are some tips to help you join their ranks.
Research Transport Links to Spot the Next Big Property Price Upsurge
While it is obvious that any property within walking distance of a local station with direct links to business centres is going to be the most desirable, the chances are that prices are already high in these areas.
Towns and stations along the Crossrail route, which will link London and Reading have already seen increases, with boosts in 60% of areas along the line. While it may be too late for those looking to benefit from increased property prices on that specific route, there is still an opportunity for potential landlords, as the effects on increased demand for tenancies in these areas is likely to appear once the route is actually up and running.
But better than to jump on the bandwagon, it’s best to anticipate where rail routes, new roads, and stations are likely to be built. While this can be a difficult proposition, as routes change and planning interruptions can delay the process, if successful, this is strategy that can reap large capital rewards.
Conversely, a dip in the reliability of transport can be a worry to investors, affecting prices, demand and growth. The recent issues with Southern Rail strikes, which affected parts of South East England had a ripple effect on the property market – with areas serviced by the train provider seeing up to 50% less growth in price than average.
Monitor New Employment Opportunities to Make Great Investments
An experienced investor will scan the business news and keep an eye on commercial goings on in their area of choice.
Large-scale businesses coming to an area – or the building of an industrial park can be a sign of a forthcoming demand within a specific town or city. If thousands of new employees are going to be coming to an area, it stands to reason that a good percentage of them are going to require convenient housing.
It is also worth analysing the type of employment that a new venture is going to bring to an area to maximise your investment potential. Is it likely to attract low skilled, low wage worker? If so, rental investments may be a good option here or even HMO’s to cater for this audience.
If a large scale law or financial institution is moving in, you can expect that there will be more buyers on the market as employees seek homes to accommodate their families on a permanent basis.
When the BBC came to Salford, property prices jumped by around 12% over average, although prices were still more affordable than the City centre – making it an investors dream.
How To Spot That An Area Is Creeping Into Gentrification
So how do you spot gentrification before it happens? While it may sound trite, the little signs are always there – a sudden outbreak of delicatessens, vegan bakeries, and boutique fashion outlets are sure signs that growth is on the way.
The trick to this strategy is getting ahead of the national chains – once Costa turns up on the High Street, the chances are that the area is already seeing signs of house price growth and you’ve missed the early opportunity!
Use Age Demographics to Get the Most out of Your Property Portfolio
Areas can go through stages of having populations of a specific age – while this can be at a micro- level, it can make a difference to the popularity of these areas. For example, a specific housing area which was once full of families can see that demographic start to change to an older population as homeowners stay in their houses for longer. Prices are driven high by the low supply and high demand. However, a tipping point must be reached at some stage where a number of properties will come to market without the demand to replace them.
This is the best time to invest, but does take some expertise, or excellent local knowledge – that’s why having someone like Benoit properties on board can help you predict these micro trends.
The Law Of Supply and Demand In Property Investment
Tied in some ways to employment, but not always, an upsurge in the population of an area, be it caused by employment opportunities, immigration or positive ‘PR’ can signify that the area is about to boom. Looking beyond just those who are moving in, think about the opportunities afforded by their families growing up and wanting to stay in the area who are likely to provide good long-term returns on investing in a specific area. If you’re in it for the long haul, calculating the likelihood of longer-term demands can be a great way to predict growth.
Research Local Schools
Like the transport tip – areas which are already within the catchment of a popular school will always be at a premium. However, what does offer more opportunity is having the foresight to understand which schools may be gaining in popularity and likely to become a school of choice in the future. Keep an eye on Ofsted reports of schools in the area you are looking to invest in.
Make the Most of Large Scale Regeneration:
This can be difficult to master, as the oversupply caused by a large development can impact on the ability to either let or sell your investment, however, implemented correctly, this strategy can see very quick term gains. Areas which were once considered ‘no go’ or deprived can be completely re-invigorated by a well-designed large development. As part of local authority agreements, large scale developments often come with a plethora of local facilities which will attract buyers and tenants alike. Investing in land or property close by (or of course within) these developments can offer investors sharply rising property prices.
However, as we saw during, and for a long time after the Financial Crisis when this strategy goes wrong, it can be disastrous, creating ‘ghost estates’ with few residents.
Again, speak to an expert who can undertake due diligence and a risk analysis to help you with this sometimes difficult but often rewarding strategy. We can assist with in-depth research to make sure that you invest in the right area at the right time.
If you would like any advice on how to spot an emerging trend, or want to find out where the best investment opportunities are afforded – get in touch with us!