Just last week I bumped into someone I’ve known for a while whilst popping into M&S on Teddington High Street (pop in there FAR too often)! Now this person, who I’ve known for a while, has always been super enthusiastic about property and every time I see them they love to hear about my latest projects. This time though they asked me a specific question which I thought I should share on my blog as I’m sure it comes up a lot in the mind of people who are keen to get started in property; How do I know that I’m buying the right investment property?
Now, to keep this simple, I break it down into 4 elements:
- Type of property
- Tenant demand
- Type of property
Let’s assume that your aim is to build up a portfolio of several properties and that, to benefit from economies of scale, you want them all to be in roughly the same area. You therefore need to make sure that there is a plentiful supply of the same type of properties in that area so that you can create a ‘cookie-cutter’ approach, i.e. buy similar properties (e.g. 2 bed terraces) in the same area that are a similar age, require a similar renovation and attract a similar type of tenant. That way, everything you learn from your first project you can carry over to your second, third, fourth etc. This is the simplest way to get very competent very quickly. Get good at one thing and do it over and over again!
When you start out in property investing the risks are at their highest if only for the fact that you haven’t done it before. I would always therefore say not to spend too much money on your first property, whether you’re using your own funds or investors. My first property was £64,000 and the most expensive one I’ve bought to date was just £118,000. If you aim for £70-100k then you’ll be able to add enough value but will limit your risks of buying something too expensive and paying the price for years to come. Of-course these prices are impossible in our beautiful Teddington, hence why I invest in the north!
Now, the area you invest in is very important. If it is your local area, then great as you’ll know the best roads to buy on and which roads to avoid. When I go ‘on-patch’ with my property sourcers I love the level of detail they go into about where they are buying. Literally from one road to the next can mean the difference between safe neighbourhoods attracting professional tenants to where you wouldn’t dream of setting foot after dark. As I don’t invest in Teddington then I need to leverage my sourcers and their local knowledge of areas in the north. I’m more than happy to do so though as it pays in dividends!
- Tenant Demand
If there was a ‘most important’ tip to finding the right investment property, then this would probably be it. At the end of the day, for an investment property to be an investment then you need tenants living in your property who are going to pay your mortgage and give you enough left over each month. You therefore need to know that you are buying the right property in the right area which is renovated to the right standard to attract the right kind of tenant you are marketing too.
There’s no point buying an HMO (House of Multiple Occupation) in an area which is very affluent and full of families. Equally, there’s no point in buying a big family house and renovating it to a high spec when the area is predominantly tenants on benefits who could never afford your type of property. The best way to find this out for your chosen area is to visit all the local letting agents and ask them where they see their highest tenant demand. I always ask them “if I could bring you your perfect property to rent out tomorrow what would it be?” That always gets a pretty straight answer!
Hope that helps. As always, please do get in touch if you’re interested in getting into property investing, always happy to have a chat over a coffee and help where I can.