Buy Don’t Buy : 10 Buy to let location tips

What locations are best for buy to let property?

Let’s start with what the word ‘location’ means in this context.

With buy to let property, it’s job is to produce revenue for you.  There are 2 critical dependencies on revenue:

• Tenants.  How much they’re prepared to pay when renting your property.  How reliable they are in paying.  How often your property stays empty with no tenants in situ
• Lenders.  Banks who are prepared to lend you money to buy more properties with less cash

Both tenants and lenders have their ‘location criteria’.

• Tenants want properties with easy parking, access to local amenities, public transport, not too much noise and all those other qualities we like in a good location
• Lenders want properties which are low risk.  If you don’t pay the mortgage and they have to repossess, they want the assurance that if they repossess they can sell at a high enough price to get their money back plus costs.

With that in mind, let’s get into the specifics of a great location for a buy to let property.

The right demographic

Demographics are the science of describing social class and population characteristics.  The UK government has a social grading system which they use to describe the sorts of people who live in any area in England and Wales.  The grading system goes:

• AB: managerial, senior administrative or professional occupations such as doctors and lawyers accountants.
• C1: supervisory, clerical and junior managerial professions, professional occupations such as administrators.
• C2: skilled manual occupations such as being an electrician or tradesperson, or factory worker.
• DE: semiskilled workers, those without regular work or unemployed.

Generally speaking, AB social grade people have the resources to buy their own property and tend not to rent.

This table from Whitegates shows on average social grade AB and C1 people account for just under 50% of all people renting renting. And the vast majority of renters are C1.

What does this mean? The ideal tenant is someone who makes enough money to live comfortably, but can’t afford their own house.

In the UK there is very accurate demographic information showing social grades for different neighbourhoods.  The right location is an area where a C1 person wants to live.

When you’re searching for locations, it’s very important to factor in local demographic!

The screen grab below shows you the InvesFinder system with percentage of population who are not DE.  The higher the number, the higher the social grade. When buying it’s very important to buy where social great DE is no more than 40% of the local population.  If you’re not one of our clients, you can use DataShine’s mapping service to understand local demographics.

The main point about demographics and location: property is aspirational.  People want to live in areas with the highest social grade possible.  If you want to attract C1 people, it’s important to buy in areas where there’s a good mix of AB and C1.

Lender mortgage-ability

Before we get into which locations lenders prefer, it’s important to understand a few basics with lenders:

• Generally a lender will prefer the kind of property a tenant would prefer. If the property is easily rented, the lender’s money is more secure because you can pay the bills.
• Always keep in mind ease of resale. A bank has to assume it may own the property its lending money against.  They want quick resell for the right price.

Let’s examine some locations.

1. Slow to rent, slow to sell.

Here is a screen grab from our InvesFinder system.  It shows the number of properties available for rent in M3 6GA.

Rightmove properties to let within 0.25 miles of M3 6GA

As of writing this article there are 175,  1 and 2 bed properties for let within 0.25 miles of this M3 6GA. As a percentage of total stock, it’s probably ( as a guess ) 15 to 20% of all stock available to rent.

How long would it take to rent a property here? PropertyData have very helpful information on average time to rent within the local postcode district.  In this case ‘M3’ takes about 2 months to let out a property within this postcode district. bear in mind these are averages.  Very commoditised markets like two-bedroom apartments in M3, small price adjustments will definitely affect the time to rent.

For comparison, based on our data, a good buy to let should rent out within 6 weeks at most. M3 more or less works on time to rent. What about time to sell?

Right Move properties to sell within 0.25 miles of M3 6GA

As of writing there are 58 one and two-bedroom apartments for sale within 0.25 miles of M3 6GA. PropertyData shows the average time to sell the property in M3 is 12 months or more.

If you’re familiar with the tragic Grenfell disaster

You will know about the subsequent enquiry into the cladding which ignited and created a chimney effect which made the fire extremely aggressive and engulfed the whole building.  As a result numerous tower blocks in the UK are unsaleable until they are clad with the correct fire retardant material.  The upshot:  banks will not lend on these properties.

From a location point of view, city centre apartments with a high proportion of properties for sale are a warning.  An my advice is to avoid unless you’re certain the cladding issues are sorted out and the deal stacks up.

2. Noise pollution

Staying with M3 6GA, if you look at a Google 3D satellite map. You may have noticed a railway track near the blocks of apartments.

Would you happily live right beside those railway tracks? most people would not want the noise and disruption.  Imagine in summertime having to leave windows open and trains rattling by your bedroom window?

You could argue tenants want the central location.  However, with the rise of distributed workforce/remote working, why would you live in a small apartment beside a noisy railway in a location with no green space when you could live further out and occasionally travel into the central office?

The lenders surveyor will probably pass some comment about the property being adjacent to a railway. But the deathblow will be something to do with too many properties for rent, too few owner occupiers and too long to sell.

Avoid close proximity to fast moving roads. Obviously people don’t want to live beside a motorway.  If you were to rent that property out, the tenant would have to be fairly desperate to live in this location.  Lenders will assess how easy properties to rent out.

3. High-voltage electricity

In the last picture you saw a property beside a motorway.  In the following picture you see the same property beside a high-voltage pylon.

People do not like being close to electricity substations or powerlines. There is very limited evidence of ill health due to proximity to high-voltage electricity cables and substations, but as an investor, your goal is to maximise the potential number of people who might rent that property.  Locating near power lines and substations alienates 30 to 50% of your market instantly.  It’s best to avoid these locations.

Watch out for electricity substations. They usually look like garden sheds.

4. Hot food

Jamie, one of the founders of Invesmore Real Estate talks about avoiding locations near ‘hot food’.  That would be pubs, restaurants, takeaways, even supermarkets with hot food.

A general rule we’ve found with lenders: They don’t like lending on property either beside, above or adjacent to any business which sells hot food.

Below is a worst-case example.  This is a curry house.  And you can see the kitchen air extraction pipe going up the back of the property.  Imagine living beside that…

5. Bad neighbours

It’s difficult to predict whether you’re going to have bad neighbours.  One indicator is how they maintain their property.  As a general rule, if people throw rubbish around, leave the place in a mess and generally don’t care, they’ll probably not care about neighbourliness.

If you’ve noticed, I’ve mostly used Google Maps satellite imagery for this article.  When you’re checking out a property, Google will show you the year in which the property was photographed.  If you look on the bottom left-hand corner of your screen, you’ll see something saying ‘Map Data 2021’.  Whatever year you’re seeing on the map, that’s when the photo was taken.  If the imagery is old, perhaps those bad neighbours have moved on by now?

In any case, it pays to check the satellite mapping to see how people look after property nearby.

6. Social housing

Unfortunately there is a high correlation between social housing, lower achievable rent from private landlords and difficulty in reselling.

If you don’t have access to our systems, Data Shine have a very useful mapping tool to visualise where there is a lot of social housing.

In the map below, areas marked in dark red show a higher concentration of social housing.

7. Too much very bad crime

Crime doesn’t predict whether an area is desirable or not.  Central London has some of the highest crime rates in the UK, yet an apartment will be £2,000,000.

One of the issues with crime; it’s largely invisible.  If there was a violent crime on a street, likelihood is 10 minutes later there would be no sign of violent confrontation.

Instead, we look for signs of crime…litter on the streets, rundown houses, graffiti on walls.

The best way to understand crime in any area is to look at the data.  An important point about analysing crime data: nonviolent antisocial behaviour is counted as a crime the same as violent crime.  If you just look at the total number of crimes in an area, that’s going to be mostly low-level antisocial crime.

I look for crime that affects homeowners.  This might be violent crime, burglary, car theft, drug abuse or carrying of weapons.  A high occurrence of these kinds of crime tell me an area is not worth buying into.

To analyse crime in a balanced way, I came up with a weighted score.  Violent crime gets a very high score, antisocial behaviour a low score.  I then created a visualisation layer which helps understand the intensity of crime that affects homeowners in an area.

Here’s a screen grab from a city centre location.   There is a crime  correlation between retail outlets and a large number of crimes occurring.

The rule is where there is a lot of people, there’s probably a lot of crime.  But this crime doesn’t affect local homeowners because it’s usually contained on the high street.

If there is a high incidence of crime in a suburban built up area, there is probably a serious problem. Here’s an example below.

The police UK mapping tool is helpful for analysing crime in an area.  Importantly, it can filter crimes by type.

8. Commercial property

It’s a bad idea to buy very close to commercial property.  You have no control over the kind of noise, pollution or smells that business can emit from its premises.

From our experience looking at hundreds of thousands of properties… Properties adjacent to commercial premises are harder to sell.

From a renters point of view, if they’ve got a choice they will live somewhere quiet away from the noise and disruption of a factory beside their home.

9. Bad Parking

If you’re buying a city centre property, you are unlikely to get easy parking.  But then, you have the benefit of excellent public transport and walking access to local amenities.

However, from a buy to let point of view, there are much better deals outside of city centre locations.  However, to get around you will probably need a car.

And…if someone can afford a car, they’ve got a reasonable income and that’s a good tenant.

if you want to attract good tenants, they often come with a need for parking.  Good tenants include families that want to settle down in one place for a while.  If you have a family, you’ll need a car.

In the screen grab below, you can see a terrace of houses with no parking whatsoever. Those properties would be fairly difficult to rent out.

10. Too far from amenities

People like to live within walking distance of shops and local amenities.  Ideally they live somewhere quiet and are within 5 minutes walk a grocery store or public transport.

there is a very helpful tool called Walkscore which we integrate with InvesFinder.  It has a metric: a high number i.e. above 70 tells us local amenities are very close by.  City centre scores can be 90 plus.  For the suburbs, a score of over 60 is acceptable i.e. there are amenities within 7 minutes walk.

in the screen grab below you can see some properties are a long way from local amenities.  It’s an issue for renters.  If it’s a family who need a quiet location and they have a car, not such a big issue.  In any case we all like to be close to shops and restaurants.

Finally, what is a good location?

A good location has:

•  at least 50% of the population AB C1
• Green space nearby
• It’s not adjacent to somewhere that sells hot food
• It’s not beside or near a commercial property
• It’s got good parking
• There is a high proportion of owner occupiers in the area
• There are no electricity pylons or substations nearby
• Crime is low
• Your off a main road, so there isn’t much traffic
• Your within 5 minutes walk of amenities
• The social grade of the area is reasonably high

The key principles:

• By where the right people want to live which means…
• The property is a low risk for a bank

Happy house hunting!