Location, location, location is known as the 3 most important factors when buying a property, and it is easy to see why. The location of your property dictates how much yield you get, and how much capital growth, which ultimately decides how well you do.
And yet people still get it wrong…
Most investors only consider location within the area they live … rather than asking themselves where else they may gain even better and higher returns. It may seem to make sense to invest in a location near to you – you can pop in to check on it, help fix any problems, and keep eye on local market better.
However, this approach to property investment could be costing you thousands, or even tens of thousands of pounds, euros or dollars in lost opportunities in the long term.
Compare this to professional property investors, who own property all around the country they live in, or even all around the world.
By asking themselves “Where can I buy property that will give me a great return?” instead of asking “What’s available down the road?”, they stack the odds in their favour.
Investing in property is all about the numbers, this is something I realised very early on – forget about whether you would like to live there or whether the property is down the street from you.
Instead, what I pay attention to is:
The likely return – yield, and capital growth
Buying costs and selling costs, including taxes
Cost to borrow money, ie interest rates
How attractive the property will be for likely tenants/buyers
So how do you recognise a great location?
To build wealth through investment property, you need a location where there will be capital growth ie where the property will rise in value, which builds wealth, which can ultimately allow you to purchase additional properties, and build up a portfolio.
Factors that suggest growth include:
1. Growing, developing economy eg Countries entering EU, regenerated towns
2. Demand outstripping supply ie more people want property than can be supplied, usually due to increased numbers arriving which could be due to higher birth rate, high numbers of jobs created, lower prices than similar properties else where, immigration laws being relaxed.
3. Low cost of borrowing – if interest rates are very low, people are more likely to buy, in particular for buy to let, as they will be confident can cover all costs and make good yield.
It is for the above reasons that UK investors have started to look overseas recently, and why international investors target developing countries, and growing cities when deciding where to invest.
It is for the above reasons, why UK investors have been looking overseas over the last year or so, and why international investors target developing countries, and growing cities when choosing where to invest. Remember the location of your investment will dictate how well your investment performs.