How to Decide Where to Invest in Property in 2021
Interest rates have been slowly decreasing over the last 18 months and it looks like they will continue to drop. With negative interest rates in the UK still being a very real scenario that could happen any time soon, many people are now considering investing their money for the very first time. This is a way for individuals to earn better returns and make their money work harder for them.
One of the most common long-term investment strategies of choice is often property investment.
It is also not just investors looking to get savvy and make property purchasers, there has been a steep increase in First Time buyers across the UK using their own money saved from lockdown, to buy a property. According to This Is Money, 43% of First Time Buyers are now paying their own mortgage deposit in full compared to 29% in 2016. This data was collected by Purple Bricks.
Many people across the UK have been saving their money due to being unable to spend it on things they might usually spend on such as holidays, cars and eating out. People have extra cash and are keen to put it into an investment that will yield them higher returns than in the bank doing nothing, and over time very sadly – actually decreasing.
In spite the current economic uncertainties caused by the Coronavirus and all that’s happened over the past year, the housing and rental market remained remarkably resilient in most areas of the UK.
Property investing is a long-term strategy or should at least be viewed that way in order to make the most profitable long-term successes. It can be tricky to know where to start investing and you might find yourself inundated with resources from YouTube to Podcasts but unable to make a firm decision in amongst the noise. Location is always key, whether you plan to flip a house or rent it out, you absolutely must carry out the right due diligence on your chosen location and feel confident that it works with regards to hitting your criteria and reaching your goals.
In this article, we’ve outlined some significant points for you to consider when deciding where to invest:
Start your own search
Before you get started on viewings and placing offers, you must be certain on your chosen property investment area.
A good mix of homeowners and private renting tenants will ensure you are able to proceed with a variety of investment strategies in the area.
It is important to understand why people live in your chosen investment area: will there continue to be demand in years to come? Are people moving out of the area? Are rent prices increasing or decreasing in the area?
There is a broad range of factors that you must consider and analyse before you buy a property.
Before making an investment purchase, it is imperative to ask yourself – where are the property hotspots and how do we find them? Where will I find the tenant demographic I am looking for? Where can I yield the returns I am looking for? When can I find a property within my budget?
There are so many questions to answer and you really need to spend time carrying out research in order to find answers. It is important to research and learn and fully understand for yourself what you are trying to achieve before you reach out to professionals such as estate agents and brokers. Once you have an understanding of the basis, it is crucial to then call on local professionals to help answer your questions and guide you in the right direction.
It is also helpful to view market trends, look at city and local plans, review what investment might be taking place or on the horizon for your area. All of these factors will influence your decision.
Important factors to consider will also be proximity to schools, transport links, major town and city centres, the demographic of the area currently, and the types of demands home-owners and renters are making in the area with regards to what types of properties they are looking for.
Here are some key factors that will help influence your decision:
·Rental yield
Rental yield is the return a property investor is likely to achieve on a property through rent. This is one of the most important factors when searching for an investment property that you hope to create cash-flow from on a monthly basis. Make sure you don’t skip your homework here!
You need to decide whether you are buying for capital growth or not; this will determine your strategy as well as your area. You may also have a certain yield percentage that you want to be achieving with your investment properties.
Most single-let properties work best with a minimum of 7% + gross rental yield and multi-lets are often upwards of 12%.
In order to understand the capacity of capital growth in the area, you will have to review local council plans, development in the area, popular growth, regeneration plans and a number of other indicators.
Along with capital growth, if you want to know how to become a successful property investor, you’ll need to focus on trends like rental demand.
The number of people in the UK living in rental accommodation is higher than ever, with major increases over the last few years. Due to a lack of social housing and the difficulties faced by people wanting to buy their first home, there are a record number of people looking for rental accommodation, leaving more opportunity for buy to let investors.
You may often find that you have a variety of different investment areas to achieve high yields and capital growth, as they do not always exist in the same place.
·Identify your potential tenants
You need to consider who will be renting or buying your property. To gather information on tenant types, it is a great idea to speak to local letting agents and fellow landlords. For an idea on who might buy the property if you are flipping, it is an estate agent who can help you out. They spend all day managing the sales of properties in the local area and many have been operating for a long period of time and know exactly what they are talking about.
It could be a family, or students, or a single individuals – there are a number of options and each tenant type comes with varying preferences which you need to understand in order to ensure the property is sold or rented in good time.
Potential regeneration in the area in future years
The time might come when you would like to sell your rental property and it is important to understand how that might look in a few year’s time for you, at the time of purchase.
An area with major regeneration and redevelopment plans is a good indicator that your property will probably be able to sell quickly in the future. It also means that the local authority has allocated finds to transform the local area for the better. If the area is full of run-down houses, tired high streets and bordered up shops, it would be a good to ask yourself “why?”
Employment opportunities and Job growth
It is a good idea to review job opportunities in the area. If there are local offices and factories for example, that plan to remain local for some time, there will always be a demand for properties nearby for workers. The type of job and average salary of the local demographic will help give you an idea of the type of numbers you might be working with for your potential property investment deal.
Transport Links
Convenience is always something that people are willing to pay for which is why transport is also at the top of the list of key considerations. Good transport links means ease of access and a higher pool of tenants to chose from as they can easily move around the city.
Good links to transportation add value to the price of a property. Look for areas that have plans to improve local transport. Properties near to good transport links and amenities are likely to get the best rents and always be occupied.
Five Best Areas to Invest in 2021
Here are the top 5 best locations to invest in the UK compiled by us using data from Rightmove, Zoopla & Seven Capital.
1. Liverpool
Liverpool is another popular North West hotspot for renters. It’s another great place to invest in property in the UK as it has always been considered one of the most affordable cities for buying rental properties.
The capital increase in Liverpool is not as typically high as Birmingham and Manchester but it has several postcodes with the highest performing rental yield in the UK. Liverpool has actually seen a phenomenal uplift in property prices over the last 18 months which has attracted more investors than ever before.
Regeneration also has played a major part in its strong capital growth. The major projects include Liverpool Knowledge Quarter, Liverpool ONE and the upcoming Liverpool Waters. So, if you’re looking for top property growth areas, investments in Liverpool are worth your while.
Key Statistics:
· Average Price: £186,527
· Average Rental Yield: 5.30%
· Price Growth in Five Years: 8.45%
2. Birmingham
The UK’s second largest city remains to be on the top best places to invest in 2021. UK investors consider Birmingham as a hotspot for capital growth. It has displayed property price growth of 14.17% over a period of five years and expected to rise by 19.5%.
This city has attracted several UK investors due to regeneration and demand from students and working professionals which indicates that the city will continue to thrive in the future.
Key Statistics:
· Average Price: £202,162
· Average Rental Yield: 5.4%
· Price Growth in Five Years: 14.2%
3. Manchester
Known to be the “Capital of the North” is one of the most exciting places to live and work in the UK. It remains to be a favorite BTL investment in 2021 as the city is now the top destination for young professionals in the North West.
Further reason to invest in Manchester are the expanding infrastructures such as Manchester Metrolink to HS2 plans, allowing 40,000 more passengers to efficiently travel throughout the North.
Key Statistics:
· Average Price: £242,311
· Average Rental Yield: 5.37%
· Price Growth in Five Years: 15.76%
4. Nottingham
Nottingham now represents a key investment area. Quite similar with Liverpool, the city offers postcodes that achieve high yields of around 9%.
It is more affordable than the major cities such as Manchester and Birmingham. Incredible demand is also seen from both professionals and students because of its affordability and strong rental yields.
Key Statistics:
· Average Price: £214,435
· Average Rental Yield: 4.66%
· Price Growth in Five Years: 16.92%
5. Newcastle
Newcastle is the 8th largest city in the UK based on population and is located in the North East of England. It is one of the most affordable location which also drives a strong average rental yield of 6.5%.
Key Statistics:
· Average Price: £198,307
· Average Rental Yield: 6.50%
· Price Growth in Five Years: 6.20%
Summary
Location should be the number one factor to consider when starting your investment property search. Remember that the location of your property is the one thing that you cannot change after you sign your purchase agreement. Wisely choose the best and right location to invest in.
Hopefully you’ll make a better decision in the end…happy hunting!
