How To Identify Optimal Property Investment Locations
It’s often said that the most important factor in property investment is ‘location, location, location’ – but if you’re interested in expanding your rental portfolio, purchasing a different property type or branching out into a popular West Sussex region, picking the right spot isn’t always easy.
There are multiple variables such as average rental income, the popularity of the city, town or village, the percentage of the local population that rents accommodation and the prospects for long-term returns due to house price appreciation.
In this article Tod Anstee Lettings runs through some expert advice about the pros and cons of different areas, the signs to look for that promise an attractive return, and questions to consider before you make any decisions.
How to Choose the Right Property Investment Area
The criteria we mentioned are the core factors that make a rental property a viable, profitable investment:
- The rent you can expect to charge.
- Anticipated rental yield.
- Long-term property appreciation.
- Demand for rental housing.
- Size of the local rental market.
West Sussex is an incredibly high-demand area, but yields vary between premium family properties in exclusive villages and waterfront towns and student accommodation near Chichester University, for example.
As experienced local agents, we often consult with new or existing landlords to discuss investment opportunities, properties likely to experience very few vacancies, and other aspects such as where residents need parking permits or areas close to outstanding schools.
Prospective renters don’t solely look at the type of property and its condition when they decide whether to apply – they’ll look at amenities, proximity to parks, restaurants and shops and public transport links.
Having a clear idea of the types of tenants you are likely to appeal to and how they will perceive the property you are thinking of purchasing is a great starting point.
Pros and Cons of Cities vs Towns vs Villages for Property Investment
Our next question is whether it’s better to buy rental properties in central Chichester, in a larger West Sussex town such as Bognor Regis, Worthing or Horsham, or a quiet village – perhaps West Wittering or Birdham.
A lot depends on how much you have to invest, the type of tenants you’d like to let to, and whether you’d prefer short-term or long-term tenancies.
There is a common misconception that rental properties in cities are a safer bet, but the reality is that yields are usually comparable to returns available elsewhere since the cost of investing in a city is typically higher.
However, there are some benefits, in that city-based properties often recover from market downturns faster because the local economy is likely reliant on various industries and employment sectors.
In contrast, a peaceful countryside village usually appeals to more affluent tenants and families, so there is a lower risk of void periods – either can be an excellent investment.
Picking a Property Type to Invest In
After you have chosen your investment location and thought about demand, returns and the type of tenants you would prefer, the next stage is to consider property types.
As a general rule of thumb:
- Houses appeal to couples and families
- Flats or apartments are let to professionals or younger tenants
- Bungalows are in high demand with retirees
There are variances from these generalisations, and some properties in prime locations appeal to a broader demographic. Still, it’s important to pick investment properties for your intended tenants, not based on personal preference.
For example, a high-quality apartment with private off-road parking would be a good prospect for professional renters if the apartment building is within easy reach of a train station, major road or central business area.
That same property – even if the decor and furnishings are superb – won’t command as high a rental price if it is more remote.
Rental Property Portfolio Diversification
Our final point to consider is diversification, a common theme in general investment principles that applies just as much to a property portfolio.
Professional landlords with several properties often have a particular niche or area of expertise, perhaps owning multiple studio apartments, terraced homes or student lets. Others prefer familiar areas and might invest in properties within a certain location or one of the popular West Sussex market towns.
The risk is that if you have the same property types in the same location, you are more exposed to void periods impacting the majority of your portfolio if something goes wrong.
Scenarios might include the closure of a large employer or business park or a drop in a segment of the property market. The pandemic, albeit a highly unusual circumstance, meant that millions of students returned home to study remotely, meaning that some HMOs became vacant overnight.
Diversifying is an optimal way to mitigate these risks and ensure that one void period affecting one property is a standalone occurrence.
If you invest in properties that appeal to varying demographics – say students, families, professionals and younger couples – with a mixture of houses and apartments, you balance your portfolio and increase your investment security.
Professional Property Investment Advice
Residential property investment can be profitable with reliably high yields and capital growth on your assets over time.
The market is resilient and can generate ongoing investment returns, provided you choose the right type of property and a high-demand area to invest in.
If you would like to discuss available properties in any part of West Sussex or get advice about the investment approaches that best suit your requirements, please contact the Tod Anstee team at your convenience.
Our local property consultants can recommend areas with continually high rental property demand, property types with the highest rental returns and up and coming hot spots that promise lucrative opportunities for investors.