The accidental landlord: invest in areas you know

Don't ask this accidental landlord to predict the next property investment hotspot. If you haven't got a crystal ball, stick to the areas you know.
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Recently, I spoke at a seminar for newbie landlords and one question I was asked — the one I am always asked — was: "Which area is going to be the next property hotspot?" It always makes me laugh. I mean, do I look like I've got a crystal ball shoved up my sweater? Don't answer that.

If ever you are reading about the next up-and-coming area in which to invest, trust me, you've already missed the boat. Prices there will have already started to rise. Besides, if you take these reports seriously you'll end up running round in circles because this week Shepherd's Bush might be tipped as the best place to buy — but last week it was probably Old Kent Road and next week it might be Tooting.

A year ago, one well-known estate agent published a report identifying which London boroughs were likely to see the greatest property price increases over the next five years. Want to know what it said? In a nutshell, pretty much everywhere in the capital would rise 19 to 25 per cent. So there you have it.

When buying to let I suggest you focus on finding a property in the areas you're most familiar with. If you do this, you will know the most desirable streets and, more importantly, you'll know which ones to avoid. You will know where the best schools are, the best restaurants, the best pubs. You'll know who lives around there and what sort of people are likely to be your tenants. Best of all, you will be close enough to keep an eye on the property and you will save a fortune in management fees.

To find a bargain, cosy up to estate agents and ask them to tip you off if they have any suitable properties coming on to the market. Ones to look out for include those that come with tenants in situ, which won't appeal to those looking for somewhere to live, so might be available at a discount.

I recently spotted a lovely two bedroom flat for sale at £30,000 less than one immediately next door because it was let to a family who still had nine months on their lease. Homes & Property columnist and seasoned property investor Sam Collett says these are exactly the sort of bargains you can find at property auctions. Sam points out that buying at auction also means you'll avoid the pain and expense of being gazumped. If you want to learn how to buy property this way — though I admit it sounds pretty daunting — you might want to read Sam's book, How to Buy Property At Auction, out on March 20.

However, don't go to auctions thinking that you're going to pick up property dirt cheap. Houses and flats often sell for well above the guide price listed in the auctioneer's brochure, and you could be competing with lots of serious investors who are likely to have much deeper pockets than you.

So if you fancy a property that's listed for auction, it's worth putting an offer to the vendor to see whether they will sell to you beforehand. The first rental flat I bought was due to go under the hammer but I knew that it was worth well over the guide price — and I realised plenty of others would also spot its potential and drive up the price in the auction room. As my fellow investors knew the vendor, we managed to agree an immediate sale.

Obviously we were lucky, but then I do think luck plays a big part in property investing. Unless you have a crystal ball, of course.

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