How to Choose the Location for Your Property Investment

Property is one of the most popular forms of investment and for a good reason. The value of companies and commodities can fluctuate rapidly as a result of all sorts of factors yet bricks and mortar stands fairly firm.

We all need somewhere to live and, with the Government desperately trying to meet its own housebuilding targets, there is a shortage of properties for the population to live in, which leads to demand.

Yet that doesn’t mean that investing in any old property will automatically lead to you becoming rich. Picking the right property is important if you’re to get the best possible return on your investment.

When it comes to this, location is crucial. There are many factors which can make one location better than another and it’s only by recognising these that you can make the smartest choice when investing. You need to consider the following:

Shortage and demand

When there is a shortage of anything, its price is likely to rise and that’s the same for property. In markets where there are very few one/two bedroom houses for single people or young couples, or where there are not enough family homes to cater for those with children, it’s likely that you will be able to command a better rent for your property (and see its price grow quicker). Sometimes sheer demand – perhaps due to a nearby university – can also prompt this.

The value of a property, when it comes to an investment, can be measured by the size of its yield. This figure, as this jargon buster explains, is the amount of rent you can earn from a property, expressed as a percentage of its total cost.

The yield is important as it shows you where you can get most from your money, pound-for-pound. Use this statistic to look for the areas where you will get the best returns. It’s fairly easy to get a good estimate of the potential rental income of a property these days, with portals such as Zoopla able to give you an idea of the amount you could charge.

Take time to research this. If you look hard enough, you might be able to find a yield of higher than 10%. The Telegraph estimates that Sheffield is one location that can earn you this sort of return.

Schools and jobs

Not every property investor wants to make their income from rent, however. There are plenty of opportunities for people to ‘buy up, do up and sell up’ a property for a decent profit. Again, though, the location will help. Pick a home near to a high-performing school or an expanding business and you’ll be operating in favourable conditions, with such factors alone enough to drive up a price.

Schools are a big draw, with parents prepared to pay more to get into a good catchment area. One study found that one in four families move for this reason alone.

Infrastructure

The factors above are all about spotting the right existing conditions in the market. Smart investors will also be able to look at what is coming in the future, and see the locations that are due to bring the best growth.

One example of this comes with big infrastructure projects. New roads or rail routes can bring big financial reward for an area and a boost for house prices. New connections such as this open up commuting opportunities and put a place ‘on the map’. Take a look at the impact of Crossrail on the house prices in and around the stations it will serve to see this in action. The HS2 rail project might well do likewise for the stations along its route.

Reputation

A good school or an infrastructure project might well persuade you to invest in a location but it’s also worth bearing in mind that some towns, villages or cities have a long-standing reputation for being a ‘nice place to live’. Often this is because they’re a beautiful location in their own right and, if this is the case, you should be confident that properties in these places will always be pretty desirable.

They can also be a good choice if you’re looking to rent out your property to tourists. Homes near the coast, close to National Parks or near to major attractions can all earn a decent holiday rent for you.