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Here we go again with another property core skill, looking at research and analysis.
We break the topic down into three parts: area, property, and service providers. We will consider the main things to look into before deciding to proceed in each of these elements.
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Transcription of the show
Here we go again with another property core skill, looking at research and analysis.
We break the topic down into three parts: area, property and service providers. We will consider the main things to look into before deciding to proceed in each of these elements.
Enjoy!
Property Chatter
Welcome to the property voice podcast helping you to navigate safely through the world of property investing, get the lowdown and updates, insights, and outcomes on all matters property with a splash of entertainment along the way, the property voice or voice to trust among the crowd. Now, let's get started with your host, Richard Brown.
Hello, and welcome to another episode of the property voice podcast. My name is Richard Brown. And as always, it's a pleasure to have you join me on the show today, we continue our series on property core skills. And we're working our way through those core skills now. And today is another content week. So it's just me today and next week, we'll have a panel discussion on the same topic. And this week's thing is research and analysis. And in terms of research and analysis, what I'm really talking about here is, is assessing an area for investment or development, assessing a property, for rental or for sale, or indeed for assessing suppliers and business partners who we might engage within that local area with that particular property. So they're the three elements that we're going to cover off, I'm just going to go through some of the key points. And obviously, we'll have a further conversation about it with the panel next week. So let's start with the area, first of all. So I think a lot of people when they talk about investing in property, they one of the very first questions is where should I invest? And that's one of the most obvious things to consider, of course, and I guess, location is there's no coincidence that location, location location is seems to be one of the most important considerations. Indeed it is. And it's sometimes difficult to pick a location, especially if we're, you know, perhaps based in a certain place. So proximity to where we live, or where we work, where we have the existing Connections is obviously is an obvious place to start. Now, if we find out that the rental performance or the ability to flip on a property in those areas, is not quite as good as we'd hoped or their yields aren't quite as high as we hoped, then it might encourage us to look further afield. But it makes more sense really, to try and invest close to home somewhere where you can actually get out to the property if you need to, or at least be able to get out in a reasonable period of time. So where you live, where you work, or where you have some existing connections, so that might be friends or family, for example. The second consideration is investment fundamentals as they're known. And that's it's funny, because when we get into the panel discussion, when asked about investment fundamentals, one of the responses was about you know, your metrics, your KPIs, your financial performance. But actually, there's something even more foundational, when I'm talking about investment fundamentals, is what underpins that an area, what makes it you know, good for investment, generally. And there are some key characteristics which we should always look out for those our population in the local demographics, supply, and demand of housing or rental property, transport links, and transport links to get into town center transport links to get out of town as well. And of course, that also needs to be an appropriate transport link. So it's appropriate, obviously, to our occupant profile, let's just say that, but it could be a bus, it could be a psychopath, it could be a train, it could be a car, etc, you get the picture, there are things to look out for is an inward investment. inward investment can come in the form of private or public money being invested into that local area. So it could be a town center regeneration, it could be a transport infrastructure investment, we should both examples primarily of public sector investment, but could also be private sector investment in the form of new jobs going into an area, for example, or lots of new developments. And if you see a lot of cranes and that sort of thing, examples of inward investment into the local area. And then the next consideration would be industry and jobs. So people need, you know, to have an income. And that usually boils down to having a job. Well, I've talked about the industry as well. So it's important to look at the industry, how diverse is the local economy? Is there a concentration of employers, for example, is the industry or the industries, the top industries in the location that is either in decline or they're actually growing? Are there opportunities actually for jobs in the future? So these are the considerations that you might have them
And the final one in this category of fundamentals is, is education. And so I have a mnemonic, I call it the star mnemonic. And the s in Star stands for schools, but really, we're talking about educational establishments. So it could be nurseries and crushes. If you're talking about renting to say preschool children, it could be obviously, good quality primary and secondary schools. So the league tables come into play there, then you've got sort of tertiary education, like colleges or further education and universities, of course, for the post, you know, post-secondary education comes into play. And then, of course, you've got the opposite to that. So imagine that you're renting to singles or to young couples, maybe you know, the academic or educational elements are not quite so important. In fact, there may be one to avoid certain areas altogether. So they're the key fundamentals really to look at. And don't forget to look at the trends either. Are these things trending up, down? Or are they flat, so we take population, for example, it could be a reasonable size area, but if the population is trending down, and maybe the demographic is changing in a certain way, lots of older people, lots of younger people, it's going to change the mix in the area, it's going to change the profile of people who be looking for property in the area as well? So look at trends and trends spotting is pretty good, actually, because that this is the thing that can really help you to future proof your investment. So in addition to the fundamentals themselves, as they are today, also look at the trends, look at historic trends, and look, try and get a handle on the future trends as well. The next area is really considered under the consideration of area is house prices and affordability. Now there's no point picking an area I want to invest in London, one, actually, in some parts of London, you know, you'd be upwards of a million pounds on a property. So there's that affordable. Bearing in mind, you might need something like a 25% deposit plus a bunch of stamp duty and by the way, on a million-pound property, that's going to be a fair chunk of cash to put into the deal. So is it easily affordable? And indeed, what's then would be the rental values and the yields and the overall returns of that property. So it's all very well trying to get into high ticket areas where you know, there are really strong fundamentals in central London, but it's not necessarily an accessible market for everybody. And what you will find is that yields generally are very, very low. So in that location, so if you're looking for income, then maybe London is not the place for you. If you've got a limited entry budget, maybe London is not the place for you. So you need to look further afield. And then you start to see how these things start to trade-off. So you know, proximity trades off with affordability, the trade-off with fundamentals, for example. Of course, if you're thinking about flipping rather than renting your property out, then you'd be looking at, you know, house prices, house price growth, and lots of mentioned much growth, because you'd be in the flip project for you know, maybe six, six or 12 months that type of window. So fairly short term, but you will be looking for some of the characteristics in the local area. And one of the characteristics I tend to look ask people to look out for suggest rather people account for is the average time on the market, the average time to market sell a property every time the market to rent a property and give you a bit of an indication of the turnover in the area, the relative competitiveness of a particular area. You know, supply and demand is sort of a clue to supply and demand as well. So did I mention supply and demand I should have done? If I didn't I definitely should have mentioned supply and demand in terms of investment fundamentals. And then the fourth category, really in terms of area is what I'm calling desirability factors. Do people want to live in the area and the things that might encourage them to live in that area? Is that work for them to do other local services or amenities? leisure facilities for them to enjoy? Is it close to places of interest with that somewhere to work or somewhere to go out for the day? transport hubs, attractions, etc?
What's the crime rate like in the local area? And what kind of crime is crime everywhere pretty much. So you're looking at what the severity of the crime and also the frequency of the crime. And there are some decent crime stats you can get out as well. You might want to consider the economic health or relative deprivation of the area to determine how desirable it is. And drilling down a little bit there that you might want to look at individual neighborhoods because not all but all parts of town are the same. So it might be worth looking at different neighborhoods, which sort of attracts you and could make quite a lot of difference and various environmental factors as well. are chatting the other day, I was just going for lunch over the weekend. And we're chatting about an area that we knew. And he was notorious for, when the winds blow in the wrong direction, you can smell the waste disposal plant over the motorway. Yeah, drifting into that particular location. So perhaps if you did a viewing on that property, and the wind was blowing the opposite direction, you wouldn't notice that. But it's always worth, you know, checking out these things, you know, waste disposal plants, refuse recycling, those sort of things, you know, which are perhaps going to put certain people off. And of course, this is harder if you don't know the area so well. So that's another reason why proximity to where you weren't live or have existing connections comes into play. And then you've got other things like how easy or convenient is it going to be to us as investors and developers, and that inevitably causes us to look at things like the local planning, and licensing rules and guidelines and any restrictions that may be placed on us from a development point of view, such as an article for or conservation area, or those sorts of things. So those are the main things to look at when it comes to area search. And, you know, it's a constant dilemma, there is, I think, a common visit number of weeks about 200 large towns and cities in the UK, large B and A probably above 75,000, in terms of the local population of an area. So there's quite a lot to choose from. And therefore Actually, that's good news, because there's quite a lot to choose from. So I think I was my wife is from Brazil, and she often comments that she's amazed that you can go from town to town to town in the UK, and have the infrastructure, and you know, services in every single area was, for example, in her home country of Brazil, you find that in the major cities, but as you start to get out to the sort of smaller cities, towns and local connotations, as it were, there's not so much available and the roads are pretty rubbish, and there's got cables hanging off, lampposts and stuff like that. So, it's, you know, we do take it for granted a little bit actually in the UK, but these things are important. So, that was the area. So, the next thing to consider is the property itself. So, now in terms of research and analysis, what we want to do is just check out a few elements. So, the first thing is really the general condition, what's the general condition of the property? Does it need a so-called liquor paint or a complete refurbishment? So, what kind of work might it new do? Is it ready to let pretty much does it need a refurbishment or would it benefit from some kind of you know, greater scale development we can assess the condition of you know, the sort of the main components of the property so that would be the electric the plumbing and heating, the windows that are doors, the roof and the guttering those are you know, these are the things that kind of there are functioning parts of the property, what conditioner and because everything has a useful life and will need to be repaired and ultimately replaced. So it's good to get an idea of the condition because otherwise you could get caught out with quite an expensive refurbishment or replacement bill if these things start to go wrong and needs to be replaced. And similarly, we should look at the structure of the building itself. So these are the internals or the the the kind of moving parts really or the replaceable parts, but we should look at the structure the bricks and the mortar itself as there any signs of any any cracks. What is the roof conditioner looking like? Does any additional work need to be done? Would it be advisable to get a full survey undertaken particularly if there's something unusual, like alternative materials that are being used, for example, evidence of subsidence strange-looking plants in the garden
those sorts of things so you know so full survey like that identify that but if there are any issues that you know, identified as you walk in or you know, just smell of damp, for example, it's worth getting maybe a specialist dump survey undertaken so that we know that we're getting a very sound property investment and we look at the layout of the property How is it organized? Is it optimized for the best value? Could we add a bedroom perhaps could relocate the the the downstairs bathrooms and put it upstairs? That's often the case in a lot of Victorian properties. That's one common refurbishment, but then the challenges if you put it upstairs, do you lose a bedroom upstairs? So it's a classic dilemma. Lose the bathroom downstairs to extend out the kitchen, put the bathroom upstairs, you'll lose that sort of small, possibly third, or even sometimes second bedroom as a result. Is there opportunities to extend or to develop or even change the use of the property? Whether it's now whether it's in the future? And then we need to consider the outside and the outbuildings you know, look at the garden garage the parking the local street scene as it were. consider things like the sheds and the outhouses as well. So These are all things that we should take into consideration and work out if there's any additional cost and expense or maintenance that's required.
Then we got things that people don't always consider, particularly broadband. It's very common these days that people are relying on fast, fast broadband speeds. And it's very important for them sometimes, especially in these days where people are working from home and doing zoom calls and things like that. And we need to check on things like broadband speeds, but equally don't overlook utilities. And this is something I bought a property once and I really paid that much attention to, you know, the utilities, I just thought, everybody, 's got Gas and Electric and water. Heavenly, heavenly. No, not everybody does have gas electricity, and, and when I say water, I'm really talking about waste disposal. So I bought properties, which have got oil heating, there's no gas supply. And so you have to go and get oil, we fill in all tank up now and again, and then burn that oil and then do the same thing. Again, sometimes it could be liquid petroleum, petroleum gas, instead, if these more remote locations and waste or connections to waste services, and nothing that could be could actually be, you know, waste into the garden is supposed to be rather than mains connection. I'm losing my thinking I can't think of the terminology right now. But you know, it's not connected to the waste disposal is something there to also consider. So the utilities, side of things. And I think the other thing to consider is the ability to undertake work on site. I'll go back to utilities. So just going back to that, if you happen to be doing a block new build development, then, you know, how can you get the local utility connection to your property? And it's not necessarily as easy as you might think. One is the capacity to how far away is it? And three, what will it cost you to actually install those utilities onto your property or your site. Sorry, I was going to say that the ability to undertake work on-site is also relevant. Think about things like access, availability of local tradespeople, and indeed, local support from letting state agents because you know, in smaller locations, these things are not necessarily so prevalent. And just to highlight the point about access, I bought a property, which is, it's in a sort of fairly central in a town, it doesn't have you seen drive, or dedicated parking, and it's in a 20-minute parking zone. So that's not necessarily great for the tenants. But it's certainly not very attractive to the tradespeople. And they noticed these things because they want someone to park their van, where they can just get in and out and get the tools and leave it all day, etc. So they probably have to park it away, which makes them less inclined to want to come and work on our property. So those are some of the key considerations from a research and analysis point of view, as regards the property. And then the third category really is suppliers and business partners. So the people we need around us really ensure that our property is either rented or sold in the most optimized way. or indeed, if there's any work undertaken. It's done that way, too. So we're talking here primarily about agents and brokers, builders, and trades, professionals and advisors. And if you haven't heard it already, I'm going to repeat it now. But the key phrase is trust, but verify, or as, as has been spoken about in previous panel discussions, is not trust, but verify but suspect and still verify. So, yeah, but just check things out, check people out. So in terms of doing research and analysis on those sorts of people, what can we do? Well, the most obvious thing is referral and recommendation, of course. So make sure the person referring or recommending is someone you trust yourself. That's the first thing to say. So that you can go and refer a recommendation, perhaps someone who's done it, you know, work with that particular party in the past, can refer you to other people can refer them to other people. And just do still do, do still do your checks. However, you ask for perhaps references from existing or recent customers to speak to them, and you get different insight. And check out the review sites as well. Bearing in mind, you know, reviews can be you know, a little bit suspect at times. Either way, if glowing, it can be overly inflated. And if they're really harsh, maybe there's somebody out to get them. But who knows.
I mean, Google's your friend. So do a Google search on an individual company that you thinking of doing business with. And don't forget to do a search on fellow directors and business partners to, you know, pick up the sort of reputational elements of everybody that's involved in the organization that you're potentially going to engage with. I suggest you do a Google search and put the company name or the individual's name and then put the word scam or put the Word review, or put both word scan and review and just see what pops up in the search terms. But make sure you know, just have a look beyond the first page, don't just stick with the first page goes, you know, at least three, maybe five pages in. Because some people who have got a bad reputation are pretty good at, you know, creating news about them to kind of bury that bad news as it were sort of 567 pages deep, well, maybe not 567. But you know, certainly a few pages deep. So don't just look at the first page and look at the world's glowing reports and reviews dig a bit deeper. And you can use services like do dell.com you can even look on Companies House for free information. And you can see the company's current trading position, sometimes you can, you can see their credit information, you can see what other companies people are officers of or associated with sometimes, other directorships, for example. And especially lookout for patterns of corporate failure, corporate failure, that, you know, there could be literal insolvency. But other types of corporate failure, which are a little bit more subtle. Companies have been struck off, but they've got no financial records. So that's quite a neat little trick actually to try it set up a company trade for plant and over 18 months or something, maybe two years at a push, get yourself struck off without finding any accounts. And no one's any of the wiser about What on earth happened in that period of time. So watch out for that. patterns of corporate failure. And then check on property forums, property tribes actually have got a really good section, which is reserved for trying to think what they call it now. But basically, it's, it's kind of a Rhodes corner. So you can kind of just go into properties rise and do a bit of a search on people that you're perhaps thinking of engaging with him, you know, you might see them pop up on property tribes, rogues core, and it's not called that, but it's my name for it. And, and that will give you some insights there. And, you know, look for, you know, good and bad news. Bear in mind, you know, not ever, you can't please all the people all the time. So, you know, just as with reviews, you might get the odd bad review, I've got a bad review for one of my books, for example, and you know, they've got lots of good ones, but I've got one bad one. But there is that one bad one-minute's bad book. No, it doesn't. So in the same way, you know, people, frankly, some people clash, some people perhaps made a mistake. Now, and I think, you know, it's sometimes worth digging into situations where there's negative press or reviews, sometimes, not always, sometimes, and, and do that. So. And you know, that it's nothing's really as necessary, as it seems, these days. And everything is as reliable as its source. So do you know and trust the source of where you're finding information? Or do you do need to dig a bit deeper and find out in search out people who can help you to undertake these sort of checks, and do meet people face to face and ideally at their own premises, or even on sites that they're working on, to verify who they are, and, you know, check out the way that they're organized, and how they present their place of work, or their vehicle or things like that? You know, because people tend to, you know, how they do some things, how they do everything types of thing. So it's worth checking those things, as well. And, you know, you can consider doing something like a mystery shopper exercise, if you like. For example, if you're thinking of using a letting agent, you could pose as a tenant, just see what the experience is like, that way around. And how do they treat prospective landlords and tenants? So I think going back to the professionals, and any fact, in fact, builders, as well, builders, straights, people, professionals, if they're a member of a trade body, or an industry body or a professional body, there, you can usually check their membership credentials on the appropriate site, and do that, go to the site and check them out, perhaps call them up, and just check that they are in fact, a member. It has been known that the odd person has made a claim that they are a member of a certain body and not necessarily so check them out. That's what it says, yes, you do the same way. You know, all professionals should be a member of a trade body or their professional Institute or something like that. they govern by somebody sometimes as well, so you can check these things out. So there we go. It's kind of short and sweet today, I may have missed a few things, hopefully not. But hopefully, it's giving you something to go on. I didn't want to make this too heavy in terms of stats and whatnot. You can add things like KPI measures, key performance indicators, to some of the analyses that you're looking at. There are various resources that you could utilize to do some of this search under and research and analysis. But a lot of that's actually available in my book, the property investor toolkit, and there are some links there about various places you Go to undertake research, but it's more about the general principles is what I'm covering off today. So I'm gonna leave it there, and signpost you now if you would like to see the show notes to thepropertyvoice.net website, there'll be over there. And indeed if you want to talk to me about anything from today's episode, or anything to do with properties or skills, anything to do with property whatsoever, you know, you can always reach my podcast at thepropertyvoice.net I'd be very happy to hear from you. But otherwise, I guess all that remains to be said is thank you once again for listening to the property voice podcast this week. And until next time.
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