Location, location, location!

We’ve all heard the mantra “Location, location, location!” repeated by property moguls and TV presenters, but location is just one aspect that you should be considering when planning your next property investment. There are two others, equally important.

Choosing the location of your next investment property is sound advice. But how sound is that advice when you focus on location alone? Let’s say you go ahead and buy in an area of high tenant demand, near all the local amenities, close to transport links, ticking all the “location” boxes. Only to find a few years later that you had bought at the peak of that local market cycle and the House of Multiple Occupation that you thought was going to be a great little income generator has had a steady decline in occupancy. Mainly due to the bespoke, high spec accommodation built nearby to satisfy the local student or professional market.

You may have heard of the 18 year property cycle. But there are many local property cycles going on in the UK right now. The London market has been declining since 2016. As of April 2017 the rate of decline in this market stands at -5% per year. Manchester & Birmingham are currently appreciating at a rate of +8% per year.

The Welsh market looks like it has finally started moving, slowly, and the market in Aberdeen is still declining at a rate of nearly -9% annually.

There are of course many different reasons for these local rises and falls but the point is to be aware of them and not to consider the whole of the UK as a single market.

The type of property is just as important. Will it be a simple “vanilla” buy to let? An HMO, or serviced accommodation? A one, two or three bed property? House or flat? Again, it is the market that you are buying into that will dictate which is most likely to succeed.

All areas will have property types that are more sought after than others, but this can change over over time depending on external influences and demand. three bed family homes seem to always do well in any market (assuming you also take note of location & market cycle), HMO properties will do well near to universities and serviced accommodation will do well near city centres.

Your competition is a primary factor to consider when choosing which type of property to invest in. What makes your property more desirable than another ? Why would students prefer a room in your HMO rather than one closer to their Uni’? What if the market changes over time, do you have a back up plan? Can the HMO be converted back ? Can the two bed be converted to a three bed? Can the three bed be converted to an HMO? You get the picture.

Only when you consider location along with market cycle and property type can you be confident you have made the best decision. There are no infallible strategies when investing in property due to the considerable variables and external market forces, but success can be achieved by reducing potential downside risk and allowing for upside potential.

One of the most misunderstood concepts in real estate is that the key to success is location location location.

You don’t necessarily need the best location you need the best DEAL.

Donald Trump, (The Art Of The Deal)

Here is a summary of the three main points to consider when choosing your next investment property:

Location:

• Buy in areas of high tenant demand (not in a remote village)
• Buy near local amenities
• Buy within reasonable distance to city centre
• Buy near schools
• Buy near transport links

 Market Cycle

• Is the area in a declining or rising market ? (visit Hometrack)
• At what point in the cycle is the area in ?
• Have prices peaked / bottomed ?
• What are construction companies doing locally ?
• How are other cities nearby performing ? Where is the money flowing ?

Property Type

• What is the local demand ? (Speak to lettings agents)
• Is the area already saturated with this type of property ?
• Is there any restrictive legislation ?
• Can it be resold easily if necessary ?
• What is the competition doing ?