How to find a good investment property
Understanding the big picture
If you’ve typed ‘How to find a good investment property’ into your search engine then that’s already a good sign because you clearly understand that property investing is a process.
That process begins and ends with gathering reliable information. To start with, you will need to get an overall picture of the national economy and housing market (assuming you are investing in the UK!). This will affect all aspects of your investing strategy.
For example, when the economy is booming with businesses thriving and unemployment low, there will be more demand for houses. With the UK’s chronic supply shortage, that also translates to increasing house prices. So, you can expect to pay more to acquire your investment property but whether you are following an income or capital growth strategy, there is likely to be a healthy demand and attractive mortgage offers.
Property investing in a recession poses a different puzzle. Houses may be more affordable but there will be fewer mortgage products on the market and demand will be suppressed. There is less room for error in your strategy.
Next, you will need to understand regional trends and work out the reasons for them. Using reputable sources, find the average house price growth rates and affordability ratios for different areas and compare them with the national average. Look at what’s going on in each area of high growth and decide whether there’s room for more growth or if the surge has passed. Low growth areas may indicate an upcoming correction so consider these areas too.
It’s all in the detail so once you’ve got your head around the bigger picture, you can start to drill down into the regional/local specifics.
Local demand and supply
To understand how to find a good investment property in a specific area, you have to approach the process with a business mentality. That is, you need to look at the demand for your product before you focus on supply.
This is so critical that we’re going to repeat it: look at the demand for your product before you focus on supply.
A useful tool that will help property investors understand and assess local demand is the local authority’s development plan. That will detail all upcoming development projects, revealing what’s being built, where and when. For example, if a new local hospital is planned for completion in 2025, you will know that demand for accommodation in that vicinity will increase as the completion date gets closer.
Where there are large existing employers (hospitals, universities, factories, etc.), an experienced property investor will usually speak to the accommodation departments for details about the types of homes that employees tend to rent or buy. Letting agents are also a great source of intel, and it’s worth building connections with these businesses anyway because they are likely to be a handy source of tenants!
With the work from home trend now firmly established, WiFi speed is becoming an important factor for tenants and home buyers. It is wise to find out if there are any areas with particularly good or bad service.
Only when you are confident that the local demand is there should you look into sourcing specific investment properties. Some useful avenues of exploration include:
- Auction sites
- Repossession sites
- HMO registers (if you plan to cater for large numbers of tenants)
- Landlords’ forums (existing landlords are often selling properties)
- Individual homeowners (dropping notes through letterboxes)
How to find a good investment property: top tip
Did you know that there are people out there who specialise in sourcing profitable investment properties for investors? Using sourcing agents can be a great strategy for getting your portfolio up and running if you don’t have the time or inclination to find properties for yourself. Agents usually charge you a percentage of the property value.
What to look for in an investment property
Before buying an investment property, always either view the property yourself, or get someone you trust to do so.
Here is a brief list of what to look for:
- Access to transport links (road, rail, bus stops, etc.)
- Local shops nearby
- Safe area
- Plumbing and electrics that work
- Space (high ceilings, large rooms)
- Logical layout (most people like their home to follow the norm)
Properties which should normally be avoided include those with:
- Structural issues
- Strange smells
- Nuisance neighbours
- Restrictions (e.g., listed buildings)
- Environmental hazards (flood risk, pylons, landfill nearby, etc.)
How to find a good investment property with help from Fielding Financial
Of course, in an article of this size, we can only present the basics. For more detail on how to find a good investment property, we strongly recommend you book a place on one of our fun and insightful free property seminars.
Take a look at our seminar page and either sign up for one today or join our waiting list if there are no convenient locations currently available.