The five fundamental keys to profitable property investment

Why you must always invest where the property fundamentals are strong

One of the first lessons to learn as a property investor is to always invest in strong property fundamentals. It is these fundamentals that hold the key to successful property investment. The better the fundamentals where your property is located, the more income and capital gain you are likely to make. They are what makes a location a property hotspot like Birmingham.

In this article, you’ll learn what the five property fundamentals are, and how they affect the return you may make on your investment.

Introducing the five keys to profitable property

There are five property fundamentals that are key to choosing the right property. Make sure your investment property or properties meet these criteria, and you won’t go far wrong.

1.      Shops

Your tenants need to be able to conduct their daily life easily and conveniently. So, your property needs to be within striking distance of shops, off-licences, and takeaways. In today’s world, people also expect to be near a major supermarket. Make sure your investment property is in the right place for all these amenities.

What you are looking for:

  • Large shopping centres
  • Small shopping centres
  • Local shops within walking distance for emergency and convenience goods (such as bread and milk)

2.     Schools

Your tenants may have children, and so the locality of schools – and the standard of those schools – will be important to them. Properties in the catchment areas of the best schools rent more easily, and at better rental prices. Colleges and universities are good for investors aiming at the more educated and wealthier market.

What you are looking for:

  • Junior schools
  • Senior schools
  • Universities and colleges

3.     Transport links

Many people commute to work, and so road and rail and bus links will be vital. This is especially true if your target tenants are young professionals. Think also about tenants who may have to travel locally for work.

What you are looking for:

  • Airports
  • Bus routes
  • Train stations
  • Major roads

4.   Major employment

It may be that your tenants are looking for a fresh start. They might be moving because of a lack of employment openings in their own area. An area with a good local economy will present better opportunities for landlords and investors. Look at the employers in the area and their history. Is it easy to get to the centres of employment from your property? Are local employers mostly big firms or small startups? These may seem like minor considerations to you, but to your potential tenant, they may be deal-breakers. So, give them some thought before acquiring your investment property.

What you are looking for:

  • Numerous major employers of over 100 people
  • Lots of small and medium-sized enterprises
  • Employment hubs such as industrial parks, shopping centres, city centres, and built-up areas within easy reach

5.     Major investment – Grants, funding, and other government initiatives

What sort of investment are local and national governments and local industries making in the area? Are there plans for new buildings, roads, leisure centres, or other developments? Are major corporations planning to base themselves in the area? All these things can be a strong indicator of the general direction in which the area is heading. You need to know about this so that you can assess whether the area’s economic prospects are heading in the right direction.

What you are looking for:

  • Regeneration
  • Enterprise
  • Growth Cones

About regeneration, enterprise zones and growth corridors

Certain parts of the country are government-designated ‘regeneration’ or ‘economic growth areas’. In 2011, for instance, the UK government identified a number of new ‘enterprise zones’ and sought to encourage businesses by awarding tax concessions and grants. Owning accommodation in these areas can be a very sound investment, as new businesses – and new employees – enter the area.

New investment and business relocation can also have a ripple effect, producing growth corridors that spread outwards – usually along the main transport routes. This trend can drive demand, and therefore prices, for rental accommodation as growth ripples outwards. Also, people that cannot afford to live in the centre of the growth area – or simply don’t want to – may decide to live a little further out and commute to work.

When assessing an area for the presence of major investment, you should consider funding that is in place or budgeted, and not ‘promised’. You’ll find that this comes in three forms:

  1. Private – Private organisations will take on projects such as building a shopping centre, building office blocks, developing residential estates, and creating opportunities for employment and leisure.
  2. Public – Governments and local authorities will take responsibility for major infrastructure works which are often the precursors to regeneration and revitalisation of an area.
  3. Joint – Private and public working together – in a lot of cases, regeneration will be a combined private and public project. This is often the best type of regeneration, as it will normally be on a massive scale and be completed in the shortest time.

A word of warning: don’t confuse regeneration with urban sprawl

One of the mistakes that many people make is thinking that regeneration is happening in an area, when in fact it is just the natural and normal process of urban sprawl due to population growth. (Think about Milton Keynes, and you’ll understand what I mean.)

The simplest way to tell the difference is to look at whether they are tearing down old buildings (regeneration), or building on fresh, unused land (sprawl).

When we select properties for their investment potential, we undertake extensive research into the potential to produce the best long-term return. At the heart of this process, we put the five property fundamentals described above. To learn how we uncover tomorrow’s property hotspots today, contact Gladfish on +44 207 923 6100 and discover the best places to invest in property UK.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
February 23, 2018

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