Or …. why ‘toilet towns’ should be on your buy to let list
From time to time I suggest particular towns as being a great place for property investors to invest in property and get told, bluntly, it’s not a place they would touch with a six foot pole.
The term they often use is something like this: ‘No thanks, that place is a toilet’.
Places like, and I’m sure if you live there you’ve heard it all before: Gateshead, Middlesbrough, Bradford, Hull, Rotherham, Blackpool, Rochdale, Oldham, Walsall, Wolverhampton and Coventry. The south isn’t immune from it’s fair share of toilet towns either. I’ve heard similar things said about places like Peterborough, Luton, Slough, Swindon, Croydon, Swansea and Merthyr Tydfil amongst many more.**
By the way, it’s not just some clients who say this. There are actually whole websites, believe it or not, that brand these places as toilets. (Toilet is a polite version of the word they actually use.)
So I want to make it clear that, so far as Insider is concerned, these people are totally wrong. Because these kinds of ‘sub prime’, for want of a better word, locations can actually be excellent places for property investors.
Now, if you are buying a place to live for yourself I can quite see why you wouldn’t want to choose these towns. You’re probably going to want an idyllic rural gem with roses round the door, cricket on the village green, a charming local pub and all those other cliches.
But places like that are usually terrible for buy to let. They’re expensive to buy into, which means yields can be shocking. Access can be dreadful and local facilities and employment negligible. Which means that demand from tenants is often very poor too.
Toilet towns on the other hand are often very good for the investor. And here’s why….
* They’re cheap to buy into, often very cheap. (Although the properties are bricks and mortar, much the same as anywhere else.)
* There’s very little competition from owner-occupiers when you’re buying. Often because a lot of the people who live there can’t afford to buy.
* There is usually very strong demand for rental property, for much the same reason. And so chances are there will be strong demand well into the future.
* Rents are often not that much lower than desirable locations.
Put these factors together and that means yields are healthy.
* There’s a big demand for shared property and budget property from tenants on benefits, if you’re interested in those markets.
* These places are often popular with students, thanks to the low living costs and tuition fees. That opens up another source of lettings, year in and year out.
* Businesses often want to locate to these places because they have cheap land and buildings, labour is easy to come by and they may have Enterprise Zone status, or other incentives. So the local economy is often a lot more promising than it seems.
In fact, what is known as ‘north shoring’ – businesses relocating to the north to take advantage of lower costs is a growing trend.
* They frequently benefit from regeneration investment. (In my book that effectively means someone else is giving you money to make the place you buy in better.)
Of course, you must tread carefully when investing in these locations. But then you need to tread carefully when investing in any location. Do careful research. Take advice, including from local agents who know the area right down to street level, on which are good locations to invest in.
Also, when you buy to let in places like this you should probably think in terms of investing for regular income rather than capital appreciation. Although there are exceptions, property in these places is unlikely to experience a London-style soar in value. Then again, in today’s property investment climate, few areas are likely to offer vast capital appreciation over the next decade.
Put in those terms, what’s not to like about these kinds of locations for the professional property investor?
** If you live in these places, please don’t take this to heart. I’ve visited most of them and without exception they really don’t deserve this kind of reputation. So Slough, Hull, Bradford and Luton and all your fellow ‘toilet towns’, even if no one else loves you, Insider does!