Before diving into where exactly you should be buying investment properties, let’s take a deep dive into what attracts tenants in 2024. It’s important to understand what tenants look for to ensure what & where you’re buying doesn’t just look good on a spreadsheet but materialises.
Modern & Energy Efficient
A study by letting agency LettingAProperty found that 98% of tenants would prefer to live in a sustainable home and were willing to pay more for doing so. Over 50% would pay more for an energy efficient rental property.
Times are changing and landlords shouldn’t bury their heads in the sand and adapt to the growing demands by tenants.
Local Amenities
This one is obvious and it’s more so about the local amenities for the market you’re targeting. For example, the professional market may want buses, trams and trains whereas students will want preferably walking proximity to their campus, local shops, pubs etc.
High Speed Internet
One that is often overlooked and can make a difference when you consider the dependency society has on the internet and fast roaming.
Most urban locations will have this by default, if you’re considering property in more rural locations then you should take this into account.
White Goods
It is pretty much an expectation that white goods ought to be provided these days. White goods include washing machines, fridges, cookers & freezers. Brown goods include toasters, microwaves, kettles, TVs etc.
Convenience and saving a tenant money upfront can ensure minimal void periods and a higher premium.
So, what makes a location a good place to invest in?
Secondary Pockets
We’ve all heard of the major cities and how much money is being pumped into them, we say, feed off the crumbs and benefit from the ripple effect in the surrounding areas. Price growth is a good thing of course but it also creates an affordability gap between what the tenant wants and what they can actually afford. Paying attention to the active regeneration plans and thinking long-term means planting seeds early in areas primed for growth in surrounding areas to capitalise before premiums are introduced.
Infrastructure
Great investment opportunities are not confined to city centres. Suburbs and towns with generous connectivity to major cosmopolitan areas are also worth considering. An hours’ commute into a city isn’t foreign for many of us and it won’t be either to tenants who may prefer less of the hustle and bustle cities offer.
An Edge
Locations that perhaps offer something different such as catchment areas for schools, nightlife culture, beaches, airports, motorways, parks play a major role when picking locations.
Where are the best UK hotspots to invest in?
Whilst rental yields will be a large pulling factor, we also recommend placing some weight on price growth and the factors that have and will contribute to further price growth.
According to Zoopla, here are some of the top performing locations based on average yields:
North East: 7.65% average gross yields (County Durham 7.81%pa & Gateshead 7.75%pa)
North West: 6.66% average gross yields (Preston 7.55%pa & Blackpool 7.80%pa)
West Midlands: 5.95% average gross yield (Stoke-on-Trent 7.72%pa & Coventry 6.66%pa)
London: 4.93% average gross yields (Barking and Dagenham 6.22%pa & Newham 5.89%pa)
What should investors be doing to capitalise in 2024?
In a marketplace where almost everyone is claiming to have a secret hack or surge in courses claiming life-changing results, it creates massive a massive distraction and for professional investors; it’s all about staying consistent, sticking to the fundamentals and being realistic.
Buying property isn’t the difficult part but making money is where it becomes trickier.
Here are some things to consider:
- Maximising rents – new or updated properties will positively impact investment returns. Tenants/customers in cities & surrounding demand higher standards and with that comes higher premiums for landlords
- Purchasing off-plan – enables investors to lock in today’s prices in undersupplied and high-growth areas
- Buying through a limited company – for most investors, buying property through a limited company instead of their personal name means investors can offset 100% of the mortgage interest, enjoy favourable taxation for higher rate taxpayers, aids those growing portfolios, and advantages when inheritance/legacy planning
- Avoid being lured by low mortgage rates – sometimes the cheapest mortgage interest rates on the surface aren’t necessarily the best. Factoring the arrangement fee and broker fee will provide a clearer overview of the cost of borrowing
- Transferring proportion of rental income to spouse – you can transfer rental income to your spouse via a deed of assignment. This is commonly used when one is in the basic tax bracket and the other sits in a higher tax bracket.
