Fast track your portfolio. Why depth and focus, not surface area, are the key to investing wisely.
The world it’s changing, it’s changing fast, and technology is the driving force. The internet and mobile phones, tablets and notebooks have shifted the way we look at the world, and have irrevocably altered the way we communicate – even the way we think. They have also changed the way we view property.
Just fifteen years ago online property searches were a joke. Internet speeds were so slow that you might as well have popped down to the local estate agent, toured several properties and then dined out on chips and tea while you waited for the computer screen to render. Today, most of the property information we want is just a click away. We can drive or fly down streets with Google maps, albeit virtually, we can view property interiors and exteriors in high definition, down to the peeling paint and we can download Ofsted reports on local schools with just a few keystrokes. Everything is right at our fingertips. But does that mean we know it all?
My answer is ‘no’, because every area has its own personality with many idiosyncrasies, its own way of doing things. And you can only get a feel for it by walking its streets, driving its roads, and meeting the people.
The point is, property investment isn’t a folly, it’s serious business and it’s vital to carry out thorough due diligence. Yet most people don’t know where to start, or start in the wrong places and at the wrong times, often overlooking the most important factor of all – value.
Who would buy a property, a fabulous and imposing property at a knock down price, if they knew the now approved HS2 rail link would be running past it in a little over ten year’s time?
The facts of the future matter when it comes to investing in bricks and mortar; so, too, do the facts of the past and present. Long faded floods can affect present and future insurance premiums while proposed local development can have a positive or negative impact on property prices depending on whether the development is a new town centre or a nuclear power station. Against this backdrop, it’s important to remember that price should only ever be seen as a subset of value – a reflection of what a property is worth at a given point in time. Value has more to do with what has, is, or is about to happen that will affect property prices.
Looking at listings on major property web portals is little more than shop window viewing from the comfort of your own home or a café. It won’t necessarily provide a true reflection of comparative value. In my experience, many buyers don’t know where to begin when it comes to making an offer, partly because they lack real negotiation experience, but also because they believe that the prices they see are indicative of market value when often they aren’t. I’m not saying that estate agents are in the business of price fixing, but it is their duty to get as a high a price for their clients as possible. They’re also incentivised by index-linked commissions. Which is why, for a buyer, insight is everything.
One property buyer I know looks at up to twelve properties a day, every day, in the Leeds City Region. Because he is location specific, he knows historical prices, comparative prices, and he knows what those prices are likely to do in the future as a result of any drafted or approved changes in the area. He has a grasp of genuine market value and is therefore able to confidently make offers of 25% or more below that market value. Working in the Leeds City region also gives him the ability to get more for his clients’ money than he would do in the South.
Many investors can’t afford London price tags whether or not the property is discounted. 25% off of half a million quid, while a serious chunk of change, isn’t going to help somebody who only has £50k to invest. Property prices in Leeds and Sheffield, however, are wide open to people with this sort of budget.
Which brings me to my next point, which is that now that the new HS2 high-speed rail project has been given the go ahead, investors’ eyes are turning to the North in increasing numbers. Why? Because, the perceived value of the area has increased. By 2026, the £33billion scheme will link London to Birmingham, before extending to Manchester and Leeds. Travel times from the capital to the north of England will be halved, putting five of England’s most prosperous cities within commuting distance of each other. But investors will still need in depth local knowledge to know precisely which areas promise the greatest returns.
I’ve lived in the North of England for a long time, and I think that HS2 represents one of the greatest opportunities for investing in and around Leeds and Sheffield that I have seen in my lifetime. For savvy buy-to-let investors, those with a long-term view, I’d back a portfolio in the North over London and the South any day. Where else can you secure four or five properties for the price of one in London? Where else can you find a place where prices are low but where perceived value is rapidly gaining traction in light of what lies ahead?