Checking out a chosen area

When looking to buy cheaper housing

If you’re searching relatively cheap areas watch out for red light districts. Decent single women will know where they are and avoid them like the plague, making them difficult to let (except to working girls) and believe it or not – most young men don’t like being endlessly propositioned all the way home every night.

In every town centre or city location, visit during the day on weekdays and weekends – and go back at night. Some areas can change dramatically after nightfall. Difficult areas tend to be tricky to let (euphemism for cheap!). You may still want to buy there but avoid paying ‘top dollar’. Beware agents telling you an area’s ‘on the up’ – they always say that.

Trust your instincts. If you have enough acumen to be buying a second building, you’re not a stupid person. Believe what you see, not what you’ve been told. Trust me, your potential tenants will be looking very carefully before they rent.

Never lose sight of the fact that you’ll need a steady stream of customers for at least a decade. Whether this property will regularly attract customers is the only criteria that counts.

Ex-council property

Large council blocks may produce low priced units, which may be (but often aren’t) easy to let. But what if they attract nothing like the local area’s average capital appreciation? Make especially sure that local tenants will be willing to rent in the environment by mock advertising.

Ex-local authority flats can be cheaper than those on the open market but that local authority is your freeholder. Bear in mind the council’s departments can be slow to respond to problems – legal or maintenance. Your leaking windows might make this investment completely un-lettable but that won’t necessarily cut much ice with a huge organisation whose purpose is to house the needy – not running around after investors with burned fingers. This kind of investment has been popularised lately by a few journalists but this type of letting is significantly more hassle in every respect, despite a bit of good press. Expect delays at every stage – including resale. Go for it by all means if it suits you – but not because you were under-informed.

Check the facilities and the amenities

In large cities, check transport links – your tenants certainly will. If you need to use a lift in a block of flats – does it work? Did it work last week? If you’re looking in a private sector block at a leasehold, try knocking on a door or two and asking questions. Ask what the freeholder is like. Are they reasonable or do they have a track record of unnecessary works and billing their long-suffering leaseholders? Does that expensive lease actually prevent you subletting? Are there any other rentals in the block? Ask how often they are empty.

In smaller blocks, some leaseholders intensely dislike private rentals and they can make your tenant’s life quite uncomfortable. Best find out first, or spend unnecessary time endlessly re-letting. Be nice – then be nosey.

That three-bedroom house on the pleasant private estate might be a low price because the area’s nice enough but the local school’s appalling. If your target market is families this could be a problem. Find out before you buy. If your target market is, say, 25-year-old sharers – it may not matter. But will they want to spend every weekend surrounded by other people’s screaming kids? Or might this lower the demand/rent?

How to squeeze detail from the information you’ve been given

A good estate agent won’t tell you he’s trying to shift a stale or overpriced property. So you’ll also need a keen eye for detail. Take a good look at the leaflets. What season do they show? Knock on the door and ask the vendor how long the property’s been up for sale – without the agent’s canny advice, they’ll often tell the truth. If not – ask the neighbours. Again, I emphasise, people skills are a must in every aspect of this type of investment. Being nosey can save you a fortune.

A warning for the unwary

Never believe the guff about a new employer moving into town, or a new road connecting nowhere to somewhere – unless you can see them actually digging the foundations. Estate agents are like spiders, they can’t help spinning.

Are there good and bad times to buy investment property?

Not especially – it’s a number crunch thing. It remains an excellent way to acquire money that you don’t now have. Some people have cash – say from a deal or an inheritance. Others are looking to borrow. Everyone’s circumstances vary so there’s no fixed right or wrong. The only thing that should affect your decision is tenant supply at rent levels that make your own numbers work.

Once you think you’ve found something appropriate

Take a step back mentally and think it through.

How good is the area? What type of person lives round there? Be honest – is what you can afford in a ropey area? If so, that’s likely to determine the type of tenants you’ll attract – so – does that bother you? If the investment’s sound – it shouldn’t.

Property investors need to be completely dispassionate. You won’t be living here yourself and you might hope your daughter doesn’t – but that’s not the issue. Investment in property is about sums – will yours work here – or won’t they?

Buying a more attractive property might seem more appealing. However, that smart house might not generate as much monthly return as two cheaper units. Indeed, there’s a great deal to commend several cheaper units as it spreads risk and improves cash flow.