Step 5: Choose the Right Location for Your Target Tenant
The next step in creating an ideal real estate investment group business plan is to decide on what location you’re investing in.
While many landlords fall into the trap of buying a property that’s close to where they live, this could be a mistake, with the UK rental market notorious for having huge regional variations.
These regional variations can impact every aspect of a property venture, with variations in the rent price you can charge, the purchase price of the property, rental demand, and capital growth.
You’ll want to target the best area possible and consider rental properties with the highest chance of attracting your target tenants.
For starters, let’s discuss how to evaluate if an area is worth an investment. You can do this in a few ways.
- Research the average property price in the area – You can do this using sites like Zoopla, Rightmove, or the UK House Price Index.
- Research the average rent in an area – This will be a good indicator of how much you can expect to charge, and you can find this on sites like Zoopla and the HomeLet rental index.
- Look at past house price growth as an indicator of future growth potential – You can find this on the UK House Price Index, which shows average house prices every month, all the way back to 1968.
- Think of tenant demand – This is a harder measure to find, but a good indicator is looking at how many rental properties there are in an area and the population, with lots of young people a good indicator of a strong rental market.
- Familiarise yourself with future capital growth potential – You can achieve this by looking at the latest market predictions from experts like Savills or JLL.
Based on these criteria, the current best locations for rental property include Liverpool, Manchester, Birmingham, Leeds, and Luton. You can learn more by checking out our top 10 list of the best places to invest in property.
If you live away from any of these areas but still want the benefits involved with starting a rental business there, you can always hire a property management company to fulfil all your landlord responsibilities.
Here at RWinvest, we have helped a huge amount of foreign investors that look to invest in areas like Liverpool and Manchester.
Remember, though, that you should avoid buying too many similar properties in one area, no matter how attractive it seems. This is because if a local property market tanks, you don’t want all your eggs in one basket.
To avoid this, it’s a smart idea to diversify your portfolio. You can do this by buying a mixture of student properties and residential properties, and buying them in different areas like Liverpool or Manchester.
Thinking of Your Tenant
While picking the right location is an important step in your rental property business plan, it’s not enough to guarantee a successful investment. For this, you’ll need to think about what your tenant wants from their home and pick a property that aligns with these wishes.
This is true whether you’re buying single-family homes or a city centre apartment targeting young professionals.
Covid-19 and the resulting lockdowns have changed a lot of tenant priorities, with research from Benham and Reeves finding that high-speed WiFi, outside space, and proximity to outside green space is now the top three demands from tenants.
This is significantly different to previous rankings, which saw nearby transport links, fast broadband, and onsite security as the prior top three.
While it’s a good idea to have a property that offers all tenant priorities, it’s essential you provide the top three desires to maximise your success potential.