If you tired of yields of 2-3 percent as in some places in the South….you probably have thought of the Northwest or Northeast to invest in Property. Yes, you are promised price appreciation….however price appreciation is a gift not a given.
Those double digits returns in the Northwest and Northeast are very enticing however the key is management. Without management, your investment will be lost. You need local people with local knowledge. For example our JV partners grew up in Manchester and own 50 affordable properties whom they rent to working tenants and LHA-Benefits. They survived the 2008 property crash while all of those who chased wonderful new builds lost their underwear. Another colleague whom we are looking to work with is an ex police who loves property and we are looking to create a synergy of efforts in Newcastle. Talk about local knowledge and connections.
Firstly we look for areas in which there is value. Currently we are looking very deep to Liverpool & Newcastle. If we purchase a property at approx 50k, we are below the replacement value. Those same houses sold anywhere from 65-80k back in 2008. We will generate double digit returns and are paid to wait. More so, we will pay down a mortgage…sell some…keep some…stay liquid.
So how do you start?
First, if you are brand new to out-of-area property investing and don’t have a clue where to start, your location choices are likely going to feel extremely overwhelming. I have two things for you to think about that will hopefully at least get you moving in some kind of direction:
Where do you have friends and family?
Are there any cities where you have friends or family who might be good assets to have on your “team” on the ground? If you have property knowledge you can work with friends or family if they are willing. Even if your friends or family there aren’t part of your team, they may be able to occasionally drive by your property once you own it and tell you if anything crazy seems to be going on. It never hurts to have an extra set of trustworthy eyes on an investment property!
Look where successful and experienced investors are buying. For example Manchester and especially Salford you could pick up property to refurbish for 50-60k…today because investors came in…more like 90-120k. That is why we are shifting to some degree. Don’t struggle to reinvent the wheel when experienced investors are already out there succeeding with out-of-area properties. I did secretly throw a keyword in there—experienced. Don’t take just anyone’s word for what they claim to be a good city to invest in, but remember, you’re just trying to get a list started. You can dig into details later as you go along. Read on the internet about the areas.
For example this newspaper article about Liverpool
Ask yourself and do some serious homework…
- Do the numbers work?
- How likely am I going to be able to sustain those numbers?
If you don’t know what numbers I’m talking about, I’m talking about your returns. Returns (a.k.a. profits) can happen in two major ways: cash flow and appreciation. This is at least true for rental properties.
Prices were 65k and up to 85k. Not rocket science! In addition to the equations in that article, a term you will want to be familiar with is “price-to-rent ratio.” This term compares the price of a property to how much rent it can collect. The reason these two things matter is because they will determine whether you can cash flow on the property or not.
These properties in which we are starting to buy….rent between 425 up to 450 per month. If an investor is in for approx mid 50k range…they are at virtually a 10% gross return. Go find that in London. It is one thing to simply purchase and refurb, the key is to manage. I had a facebook chat from a gent asking about Professional HMOs in the midlands…one of my first questions…who will manage it …and make sure it is not article 4.
You need to do homework in an area…you need local knowledge….and you mostly need good management.
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