WHERE TO INVEST
When it comes to ‘quantum property investment’, location is an important factor to take into account. Where you invest is fundamental because you want to invest in an area with low-priced property but with good economic and employment prospects. This low-priced (atomic) property forms the basis of ‘quantum investment’ advocated in this book.
If you invest in low-priced (atomic) property in a strategic area and you add value (by improving the property), you can increase your “energy” of profit by repeating the strategy. In other words, by adding each low-priced but improved property to your portfolio, you can eventually attain the cosmic value, which could facilitate entry into the high-value market such as London, New York, Cape Town, etc.
Every major city has high and low value areas. So, when determining the location to invest, look out for areas close to, but not inside, the high-value areas. There are a number of indicators to look out for, namely:
- Business inflow/Employment
- Population Growth
- Public amenities and activities
- Government’s local policy
- High Yield
- Capital Appreciation
(a) Business inflow & Employment
This is the most important indicator. Look out for areas where companies are moving in and jobs are being created. This is a sign that the area is on the up. It is important to note that people go where jobs are. In other words, population follows employment.
High employment can be beneficial for the up and coming area. It means you have a ready tenant who can afford to rent your property. It also means your ‘quantum property’, after improvement, would have a ready buyer who can afford to pay for the property.
It is important to look for trend; enter the local market early before it gets saturated and price starts to rise. If you invest in the area after price has risen, then your “energy” of profit would be lost.
Almost all local authorities in England & Wales have a Business & Investments Unit, which provides socio-economic statistic about the area. This section of the local authority regularly publishes a range of local economic and performance data. This data are useful because they provide the investor with necessary material to gauge the level of business activities in the area.
(b) Population Growth
Another indicator of upward mobility is population growth. If you invest in an area where the population is growing, this creates a high pool of ‘possible’ tenants. In other words, increase in population would create a demand for properties to rent or buy.
People flock to areas where there are jobs. They also go to areas that are trendy, youthful and entertaining. I look for the following which draws in the population to an area: (a) new sports stadium and entertainment arenas; (b) universities, since they bring a steady stream of students; (c) improved transportation, which makes it accessible; (d) airports; (e) major events, such as concerts, carnival, Commonwealth games, etc. All of these are major population drivers and are reliable indicators of growth.
If the area is touched by gentrification before you get there, then you may have arrived at the location a little late. You can still invest in the area. It just means that you simply have to search a little bit more thoroughly for the bargain ‘quantum property’.
(c.) Public Amenities & Activities
Areas where the public amenities are being improved are a good indicator that the location is up and coming. Look out for improved roads, rail or transportation. This brings the area closer to other high-value areas.
The redevelopment of an area and regeneration is a powerful indicator that the area is up and coming. People like to live in improved areas which are accessible.
There are other indicators such as trendy wine bar, café, major high street banks, art galleries, fashion shops and new supermarkets opening. It is important to note that supermarkets such as Tesco, Morrison or ASDA have entire departments dedicated to market research; they have in-depth research data on the demographics of an area.
Coffee shops such as Starbucks or Costa would have done market research about the area before opening up there.
Look out for developers such as Persimmons Homes, Bellway, etc. Where there are developers, this is a good sign. Developers have an entire department dedicated to market research. They also know the local authority’s plan for the area concerned.
You can find out about planned transport link or regeneration scheme that are in the pipeline by visiting your local town hall and ask to see the Unitary Development Plan (UDP). This would give you an indication of what the local authority is planning for the area.
(d) Government’s local policy
Look out for areas undergoing regeneration. An up and coming area is
one where the local authority is carrying out regeneration plans such as beautifying houses in the area, improving the streets, creating pavements, streetlights etc. Not only does regeneration create jobs, it also pulls in people and investors. Investing in this area during (or immediately after) regeneration could be beneficial as you would be able to buy at a reasonably low price before competition from other investors pushes up the price.
It is important to note that some local authorities (such as Leeds, Salford, etc) have now introduced ‘Selective Licensing’ policy. This means that if you are a landlord in this area, you would not be able to let out your property unless the property is in a good habitable condition. A licence is then awarded to the landlord permitting him to let his house. Although not many people are happy with this, I feel it would improve the area and would stop landlords from allowing their property to fall into disrepair.