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Property Investment - Researching The Location By Tim Wright, Fri Dec 9th
It's always wise to have an idea of what type of property you'relooking for when considering an investment and this articleoutlines 8 of the different factors to consider when researchingspecific locations.
1. Infrastructure
It's important to consider a town's infrastructure when lookingfor an investment property, especially in terms of what futureinvestment is to be made in that area.
Local Authorities and Councils will have an annual budget forboth the maintenance of current infrastructure and also for theconstruction of new infrastructure projects. Finding out howmuch the annual budget is and future investment will give you anidea of how proactive the authority is in attracting newresidents, extra funding and business opportunities.
Most councils will be happy to provide most of the informationand a lot of it will appear on their websites. Also look at thewebsites of local big businesses to get information on theirfuture plans which will attract investment and create new jobsin the area.
2. Proximity to Amenities
In most cases, the main purpose in buying an investment propertyis to attract tenants who will pay a weekly or monthly rent.
It's important to know what type of tenants you are looking toattract and so any potential investment property will need to beclose to the amenities required by the tenants. A city workerwill want to rent a property close to shops and transportwhereas a farmer will have different requirements.
Most properties in close proximity to the town will rent fairlyeasily compared to those which are a 15 minute drive outside ofthe town. Properties close to the town will also attract tenantswho don't have their own transport.
So it's best to know what your tenants requirements will bebefore you purchase.
3. Local Employers
It will always be easier to find tenants in towns where thereare large employers in the vicinity. These include factories,large shopping malls, hospitals and universities.
With hospitals, many of the employees may be employed on atemporary basis and so owning or buying their own property inthe area may not be a choice for them and renting is the easieroption. Also, in the case of universities, a lot of the studentswill come from out of town and so renting is again the bestoption. This offers them more flexibility however it also meansthat your investment property could be vacant during certainmonths of the year and may switch tenants on a regular basis.
Again, be sure to research the future plans of these employers.If a major employer is due to shutdown or relocate in the nearfuture then there will be a glut of empty properties withlandlords doing whatever they can to fill them includingdrastically reducing the rent.
4. Geographic Location
This will determine both the type of tenant you get and also howeasy your investment property will be to rent out.
Holiday properties near the ski fields will command a higherrent than a property in the city however it may only rent outfor a few weeks per year. A beach house will also be in the sameposition. Again, it's important to understand the type oftenants in the area, what they are looking for, how much theyare willing to spend, etc.
A beach house may command a high rent but may only attractretirees who are willing to pay top dollar and so this narrowsthe number of potential tenants. Properties closer to cities andamenities will likely attract a higher number of tenants willingto pay a lower weekly rent.
Spend time understanding the demographics of the areaspopulation and you will have a better idea of the type of tenantyou can expect.
Find out the populations' average salary, the different agebrackets, percentage of those married and single and thepercentage of the population that rent.
The demographic information will show if the town's populationhas been growing or declining over the past number of years andtherefore if an investment is a safe bet. It will give you anidea of the earning capacity of tenants and how much rent youcan expect.
It may also show movements of parts of the population to newparts of the same area due to factory closures, increase incrime etc.
6. Property Median Prices
Historical property prices will be a good indicator to thefluctuations in property values in the area over time.
A property may look like a bargain at first glance but with alittle research you may discover that the same or similarproperties changed hands previously for a lot more money. Theremay be a simple explanation for this such as a vendor wanting aquick sale but it may also reflect a dive in the local propertymarket for various reasons.
Median prices will give an indication of what you can expect topay for the different types of properties (no. of beds, landsize, etc) in the area and the figures may also show the numberof recent sales. The historical figures will also give a patternof historical growth or decline in the area over time and thiscould be used to indicate a property's future value.
7. Occupancy/Vacancy Rates
Each area will have a certain percentage of rental propertiestenanted (occupied) and the remainder without tenants (vacant).Towns with a high vacancy rate (normally deemed to be more than4%) will make it possibly harder to find tenants to fill yourrental property as it shows a lot of competition for too fewrenters.
Too few renters will also mean that landlords will have to bemore creative in attracting tenants and may need to reduce therent and offer other incentives to entice renters.
Areas with high employment and a strong outlook for the futureare likely to have a higher occupancy rate and this may evencause competition amongst renters, allowing landlords to sethigher rents.
8. Property Managers
Finding a trustworthy property manager is important if you willnot be looking after the property yourself in terms of findingtenants and collecting the weekly or monthly rent.
Good property managers will communicate regularly, carry outperiodic property inspections, arrange repairs and, mostimportantly, regularly deposit the rent (minus expenses) to yourbank account.
There are also many other duties a property manager can carryout and it's important to question those managers in thepotential area to find one or more likely candidates that aregoing to take care of your investment.
Find out how many rental properties they manage, how longthey've been in business and ay other questions you deemnecessary until you find one you are happy with.
In closing, the above points are only guides for you to learnmore about an area before you make an investment. There may bemore factors you'll need to consider depending on your situationbut if you research the above you naturally increase the amountof knowledge you have about the area. And the more knowledge youhave will reduce the risk of a potentially poor investment.
About the author:Tim Wright is an international property investor and regulararticle contributor. He is the author of "Bulgarian Property -The Overseas Buyers' Kit available athttp://www.bulgarianpropertybuyer.co.uk
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