OK, so we know we want to buy a property investment and we have our funds lined up ready to go...so the next question is: where should we invest? We could start by undertaking some simple desktop property research.
One way to do this is to start at a more macro-level with our property research and whittle down suitable areas within striking distance of home.
Here's a quick list of property research steps to follow to help select a potential rental area near home:
- Start by selecting the major towns/cities within say, a 45 minute drive from home (adjust to suit) - this will give us our 'long list'
- Next narrow down the list by choosing areas with a minimum population size of say, 100k people (again amend to fit your criteria) - this will probably knock out some places...I have nothing against smaller towns and villages, it's just that major urban areas usually offer stronger rental fundamentals. This will get us a handful of good-sized population target areas to look at
- Next, assuming we are targeting working tenants (if not, then we should do the opposite!) find out the average unemployment rate for these areas and pick ones below (or at least close to) the national average, using sites like PropertyWizza and Nomisweb - low unemployment is a demand driver. That should leave a handful of areas to drill into deeper...our 'short list' of areas
- Then we need to dive into the property portals like Rightmove & Zoopla selecting the types of property we are looking for and the price we want to pay. We can use Zoopla's discounted property selector to see some with the biggest price reductions or sites like White Hot Property as well...these show potential 'below market value' opportunities.
- Equally, adding value is another way to bag a bargain and so we can check out sites like Unmodernised or Property to Renovate to look for 'doer upper' potential
- Then it's a case of a bit of hard graft to compare an individual opportunity against recent sold comparisons within close proximity, again using the portals to check against our investment criteria
- Next, we can look more closely into rental supply & demand and rental returns - again the portals are our friend here; check the rents for similar properties and calculate the gross yields - do they get over our bar? Then check rental supply & demand loosely by alternating searches using exclude / include 'let agreed' properties - we are looking for areas where the % of available properties excluding let agreed is low compared with the total including let agreed properties - we can only really judge this when comparing different areas. The idea of this is to show a general picture of rental demand, as high rental demand is our aim
- We can also look at average time to let for the same area as another indicator of the market strength for a rental investment - the shorter the better
Once we have followed these steps and if we still have a few properties on our list, then it's time to drill deeper, wear down the shoe leather & transfer the desktop exercise to the reality of viewings and offers...
There is far more to doing property research and due diligence than these steps, which I have commented on several times, for example here & here, although this desktop property research exercise should be enough to get an idea of whether our local area is likely to generate good rental investment opportunities.