Last updated: 5th June 2020
We talk about fundamentals all the time. These are the fundamental things you should be looking for when assessing your next property investment deal.
But what are these fundamentals that we speak of? Well, we’re about to tell you exactly what they are and why they’re so important.
This one’s a no brainer. If there’s not a high rental demand, why are you going to want to invest in a property there?
Answer: you’re not.
So it’s important to make sure that whatever location you’re looking into, there’s a good rental demand.
An easy way to find this information out would be to speak to local letting agents and find out from them what the rental demand is like. It may even differ from street to street – yes, that can happen. But getting in touch with the local experts would be the first obvious tip.
You could also have a scour through Rightmove and see how long properties took to let out in the location you’re interested in. Rightmove and/or Zoopla should be able to provide you with this data along with what the monthly rental cost is. If the demand is high, properties will get snapped up quickly and for a decent rental yield too.
Purchasing a property in a location that has good connectivity is vital! It opens up your pool of potential tenants.
There are a number of ways to tick this box. If the location you’re looking at has an easy route to nearby motorways, has good public transport services such as buses or trams, and if there’s a mainline train station nearby, these are all things that tenants look for when choosing where to live.
If you purchase a property that’s in the middle of nowhere, you’re limiting your pool of potential tenants. The rural country life might appeal to some, but it won’t to others; so it’s important to do your research.
The more options your tenants have, the more interest you’re likely to generate in your property – particularly if your target market is young working professionals, for example. This demographic will want to have local amenities and great commuter links.
If you’re investing for the long term then this one should be a given considering you’re not looking to make a quick profit.
But nevertheless, capital growth potential is important regardless of your strategy. Simply for the fact that you’re not going to want to buy a property in a location that isn’t going to see a surge in house prices. You run the risk of the property actually losing value.
The way to know about potential capital growth is by doing your research. Sounds easy enough, but you need to dig deep. Find out if there’s any regeneration projects going on or are planned for the future.
The transport network – is it being improved?
Is the location having a large sum of money invested into it to improve its surroundings?
Is there a huge new shopping centre being built?
Take, for example, this article we put together on investing in Stafford. Now Stafford might not be a location you’ve considered before, but after seeing the amount of capital growth potential, it might pique your interest. Notice how we’ve looked into Stafford’s history, education, what it’s like to live and work there and plans for the future?
These are all things to need to take into consideration when doing your location research. And if you’ve not thought about long term investing, you should give this course a go.
You might not think that this is an important fundamental to consider, but you’d be surprised.
Most locations have a school nearby – but we’re talking about educational institutions as a whole.
If you choose somewhere that’s easily accessible to university students for example, whether it be a walk, bike or bus ride away, you’re going to get more interest. The same if your chosen property is more likely to appeal to families with children who might be in primary school.
Parents looking to rent a property are more likely to choose one that’s closer to their chosen school and that’s more convenient for them to get to. Some families actually choose where they want to live because of the schools in the area.
So depending on your ideal target tenant, education is something that you should consider.
Everyone likes to have easy access to shops and amenities. We’re not just talking about high street shops or big supermarkets, we’re talking about bars, restaurants, takeaways… anything that offers convenience.
If your tenants have a family, they might want leisure centres or playgrounds to occupy their children.
The more amenities in your vicinity, the more your property will appeal to prospective tenants,
Having a good work-life balance is something everyone wants. So when looking for somewhere to live, people are unlikely to want a 2 hour commute to work.
The fundamentals we’ve listed above are all important, but if you can combine these with somewhere with huge job opportunities then you’ll be onto a winner.
For example, if you know a big name like Amazon is opening a distribution centre in a location you’re interested in, there’ll be a huge market for prospective tenants looking for rental property close to their new place of work.
Job creation = tenant demand.
Tenant demand = rising rental prices.
Obviously you don’t have a crystal ball. But research will be able to help you spot opportunities like this
We’re not saying you MUST tick all of these boxes, but we believe that these fundamentals are key to making smart investment decisions, which is why we talk about them all the time.
It’s also worth noting that these fundamentals don’t only apply to city centre locations, they also apply to both large and small towns. Understanding your target rental market will help you decide which fundamentals are more important than others, but if you’ve got a good combo of them all, you might just be on to a great future investment.
So, now you’re fully equipped with the six most important property fundamentals, it’s time to start researching your next potential investment location. If you think you need a little extra help on how to find that perfect location, you should take this course.
These aren’t just gimmicks, these methods are all tried and tested and they form part of the due diligence process that we use to find perfect investment opportunities for our Property Hub Invest clients, so we know they work.