Different property experts have different opinions when it comes to property hotspots. Many say ‘invest like crazy in a hot spot while it is hot’. This can be a good thing to do providing you don’t find yourself overspending on the property.
A problem that can occur with hotspots is that, once a location is a hotspot, everybody knows about it, so you have to compete with ten other people in order to get the property you have your eye on. Therefore, in hotspots it can be very difficult to buy properties below market value. What would be better would be for you to get to the area before it was a hotspot.
A lot of areas become property hotspots after they have undergone serious regeneration of some sort, or after new transport links have been built that allow easy access between it and the city or some other major point of interest.
Things like regeneration and transport links take years to plan and years to put in place. Hence, if you find out about the areas that haven’t started yet, but have been approved to undergo regeneration in the future, you are much more likely to catch the location before it is a hotspot, and logically there should be a lot less competition for the properties.
If you like life a bit riskier, you can find out areas, which have had plans submitted but not yet approved for regeneration. There should be even less competition for these, because there is no guarantee that these locations will have their plans approved, so you are buying speculatively.
A successful Property Investor Follows the Basic Rules
As a professional property investor, you should have made sure that you have good rental cover, so even if the planned regeneration doesn’t happen, you still have positive cash flow. And if the planned regeneration does happen, that is a great bonus, and you will most likely be able to put up your rents in due course, or sell at a decent profit.
The great thing about getting into an area at the ‘planned but not approved’ stage is that often the people you are buying off don’t even know about the plans for the area (even though they might have received information through the post about it) so they won’t be trying to hike the prices up because of it.
One plan some investor’s use is to keep a close eye on what the big house-building companies are doing, and where they are investing a lot of money. You can be fairly confident that the big house builders will have the fingers on the pulse and will have ploughed lots of money into researching an area before they start building properties there.
By just keeping an eye of what the big house builders are doing, you can track down potential property hotspots very easily.
Should You Avoid Property Hotspots Like the Plague?
Another way of thinking about property hotspots is that ‘if they are hot, avoid them at all costs.’ If a location has got to the stage where it is classed as a hotspot, then it is too late to invest in it, because the prices may already have risen to an unacceptable level. However it is not too late to make money because of it.
What you could do instead is look at towns just outside the hotspot, but within an easily commutable distance to the hot spot, and start investing there. What happens is that, after an area has undergone serious regeneration, the property prices go up in that area, and eventually they go up so much that people struggle to buy there. But they still need to work there, or have other reasons, such as family contacts, to want to be near to the regenerated area. So what happens is that they buy just outside the area that has been regenerated, because the prices can easily be up to 30% cheaper.
Then, after a while, the prices there go up and the same thing happens again. In essence, there is a ripple effect like a wave going outward, and the property prices around the regenerated area will begin to increase more than the national average because of this ripple effect.
Instead of chasing property hotspots you might want to consider looking at what areas historically have consistently high yield or capital growth or a good combination of the two.
These areas that have consistently out performed the rest of the country historically will likely continue to do so in the long term. So if you are in property for the long haul then over a 15 year period these areas will most likely out perform the hotspot that was a hotspot for a couple of years then cooled right down.
If you planned for your strategy to be to target property hotspots and invest heavily there, this might work well for you, if you don’t mind a bit of competition. However, instead you might want to consider adjusting your strategy slightly and targeting locations before they get to be hotspot, or to the approved planning stage, or you might want to target areas just outside of the hotspot.
You can use the local authority to find out about any plans in their specific area. A good website to try is www.communities.gov.uk. If you do a search or navigate through the various options, you will find a whole host of information on planning and regeneration in different areas. In addition to this the www.planningportal.gov.uk is a fantastic source of info.
The bottom line with property hotspots is that they can be a great way to make money but you should not pursue them at the expense of the fundamentals of property investing. If you can buy property in a so called hotspot, that fits your criteria and that still follows all the basic rules of successfully purchasing investment property , then you should go for it. If the property does not fit into your strategy or breaks some of the rules, then you should tread very carefully.**Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.