Most investors want to know about hotspots. Is there a place and type of property that will give you returns and capital growth at a rate that’s significantly above average? If so, surely everyone would want to invest there…and that’s often the problem!
In reality, by the time a location has been publicly labelled a ‘hotspot’, it’s likely that many of the gains have probably been made by those who have (a) owned property there for many years or (b) took a calculated risk and invested at a very early stage of regeneration.
Some reported ‘hotspots’ are just expensive areas that have become even more popular and capital values are already high, meaning you need a lot of money to buy. Other times they’re ‘emerging markets’ where investment is being made in regeneration. These areas can attract investment which can result in an excess supply of new builds, reducing the potential for capital growth in the future.
So, just remember that when you see ‘hotspots’ highlighted by the media, view them with caution as the ‘holy grail’ of rapidly-rising prices and excellent rental returns doesn’t appear very often. Even when somewhere does genuinely appear to be on the up, you’ve got to make sure you’re very clear on your investment objectives and do some proper research before parting with your money.
This year’s hotpots: where were landlords predicted to buy?
In February, before the coronavirus crisis hit, Paragon published research that showed the Midlands was likely to see the greatest investment activity in 2020. The focus on regenerating the ‘Northern Powerhouse’ was boosting demand pre-lockdown and almost a quarter of existing landlords across the East & West Midlands were planning to expand their portfolios, meaning key cities including Birmingham, Manchester, Liverpool and Leicester were all expected to continue to be attractive investment choices.
Mid-pandemic, now where should you put your money?
As the economic effects of the global coronavirus crisis continue to unfold, putting many people’s jobs and incomes at risk, it’s more important than ever to get back to basics with property. If you’re looking to put money into Buy to Let this year, you need to find a ‘hotspot’ which works for you. That’s a property in a location that is going to give you sustainable, better-than-average returns through solid demand, today and into the future. And you should be able to find a good investment within around 20 minutes of where you live.
What is a ‘good’ investment?
Some investors spend months, if not years, chasing after the best possible deal, when all you really need to make a success of Buy to Let in the long-term is a good deal.
That means you need to decide what ‘good’ would look like for you. Think about your financial objectives:
- Why are you investing?
- What returns do you need and when?
- Is it more important to get the best possible ongoing income from rental profits to supplement your salary or pension?
- Or is it more valuable to you to have an investment that covers its own costs (mortgage, bills, maintenance, improvements, etc.) month-to-month, but is likely to appreciate in value at an above-average rate?
You also need to:
- Understand the true ongoing costs associated with owning, letting and managing a Buy to Let property
- Consider the tax implications of owning and taking income from property
- Understand your liabilities as and when you sell or pass on the property to family.
Importantly, the way in which the property and tenant are managed will have a significant effect on your financial success, so it’s vital to have the right professionals on board to help you. A reputable, qualified agent that really understands Buy to Let will be able to talk through your investment goals and help you narrow down some properties that are most likely to give you the returns you want and need.
No matter where and what you buy, the property market experiences natural peaks and troughs. The important thing is that you make a well-researched investment and aren’t tempted to rush in based on what may well turn out to be a passing trend.
To learn more about how your local market is performing through the pandemic and discuss potential investment opportunities in more detail, just contact your local Your Move branch and make an appointment to speak to one of our Buy to Let specialists.