When planning to invest in property, there are a number of considerations you need to make; where to invest, how much to invest, how the investment will be funded, expected return on investment etc. But really, all of things result from the number 1 question you should be asking – who is my target market.
When
businesses are formed, it is best practice to write up a business plan. The
business plan can vary greatly in what it contains, but in essence it states
what the business does, how much it plans to make, and who is going to buy the
product/service. For the majority of property investors, only the first two
elements are focused on – what you do (let out a property or room) and how much
you plan to make (working out the gross/net yield). Far too often, the final
element is only focused on once the property has been purchased – who is going
to buy (who is the tenant). By then it’s too late.
I was
having a meeting with an investor earlier in the week and we spoke about this
very thing. Having a target market is fundamental as it helps you focus on
where these tenants like to live and what types of properties they tend to
rent. If anything, this one question can help form your whole Buy To Let
strategy.
Bournemouth
is quite an interesting market as it caters for every type of tenant; students,
professionals, families, housing benefits, retirees. However it is very
important to note that different areas of Bournemouth are more desirable for
certain types of tenants.
Let’s say
for example you were targeting the student market. You must consider that
students will typically look for either accommodation close to the university,
or close to the Town Centre. With that in mind, you then need to consider
students are on a tight budget so having a top end flat asking for £1,000+pcm
is going to be out of reach. Therefore you would be looking for Town Centre or
close to campus property fairly low end (but clean, tidy, easy to maintain and
functional) with an expected rental income of around £400 (room only) £550pcm
(studio) £600 (1 bed) £750 (2 bed for sharers) as a guideline. You would also
want to keep in mind the amount of new student accommodation that is being
developed and whether that will cause issues with demand.
If you
then compare that to what a small family would be looking for you would see
many differences. Typically this group of tenants will be looking more towards
a 2-3 bedroom terraced house/semi, with a fair sized garden. Their budget will
be slightly higher but so too will their expectations so the property needs to
be able to feel ‘homely’. The area that would appeal most to this group of
tenants will be dictated around where the best schools are. This is usually
outside of the main town and where possible away from student accommodation,
but with good transport links and near the shops.
As you
can see, understanding your target market is key to building your BTL strategy
and if you get this wrong, it could be very costly.
So what tenants should I be aiming for?
This
isn’t as straight forward as it seems because it depends on a number of
different factors that are personal to you. Every investor will have
preferences, but ultimately it needs to fit with what your investment goals are.
Something I like to do in initial meetings with investors is find out what has
bought them to wanting to invest and what their goals are. Some investors look
for a long term capital growth property where yields are not as important as
they want an asset to sell when they retire to bump up their pension pot. On
the other hand some investors want a good net yield for a regular monthly
income.
If you
are currently looking to purchase an investment property, make sure you have
considered who will ultimately be renting your property. Not only does this
allow you to charge the optimum rent, it in turn delivers less voids and a
greater return on your investment.
If you
would like to have a free honest conversation about anything discussed in this
article, or for any advice on the Bournemouth property market, please do get in
touch. Send me an email at luke.marchbanks@belvoir.co.uk give me a call on
07979 123970 or lets arrange to meet up over a coffee.
No comments:
Post a Comment