Property investing is a location-based business but how can you tell which is the right area in which to invest? Today we’re going to look at what it means for there to be a lot of properties on sale in a given location. Is it a bad sign? It certainly can be. You will need to look at housing density, the length of time properties are on the market, trends in property types and recent price drops. This will tell you a lot about the area your researching.
[0.55] Consider housing density
[1.18] When it could be a bad sign
[2.04] Look at how long houses have been on the market
[2.30] Trends in property styles
[3.26] Looking for price drops
[3.35] Using Zoopla
[3.45] Plugins for Rightmove
[4.10] Putting it all together
[4.35] Join our FREE training today
Today we’re going to be looking at whether it’s a good or a bad sign if there are a lot of properties on the market for sale in a particular location.
Okay so the question is…
“Hi Rob, I hope everything is going well. Quick question… I was doing a bit of market research around the area where I’m planning to invest. However, there seems to be a lot of houses for sale in that area. Is this a good or a bad sign? There’s a university not too far away so I don’t know if this is an area littered with investors. Let me know what you think please.”
That’s from Buddy.
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Okay, Buddy. So there are a couple of things to consider and it’s worth saying that this issue is very area dependent.
You could have one location in, let’s say, a section of London that’s very buoyant. That’s to say it’s an area very much in demand. So property prices are very high and houses sell very quickly. So, in this case, it’s not a bad sign that there are a lot of properties for sale, it just means there are a lot of properties in that area and therefore a lot of properties available for sale.
On the other hand, if an area is more rural. Say it’s a small village or town where there aren’t that many properties in total and say there are ten, twenty, thirty, forty properties on the market… well, that could be a bad sign. There may be a lack of employment opportunities or something else happening in that area. There may a new train line planned, or a new motorway. There might be some other kind of development planned that’s locally unpopular.
So if the number of houses on the market seems strange then it might be a bad area to invest in. But, it’s not necessarily enough to know how many properties are on the market, you will also want to know how long these properties have been on the market for.
If you’re looking at an area where the majority of for sale properties have been on the market for say, three to six months or more, then that will probably be a bad sign. So, if you’re seeing active sales happening. If you’re seeing properties coming onto the market and selling. Then, generally speaking, it should be a good location to invest.
3. Property Types
It also depends on property style. You said you’re looking at an area near a university. So, look at the area and at the property types and see if you can see any kind of trend. If you see a lot of similar house styles (for instance Victorian terraces or five bedroom houses) all come on the market for sale at the same time then that might sign that you don’t want to invest. It might be an indication that the once high population of students were moving to a different part of town. There might be some kind of new development for them elsewhere where they were moving. Somewhere closer to facilities, more affordable. Somewhere with better amenities.
And all of a sudden all the housing stock is being sold off.
There are other things to consider as well but that’s the kind of trend I’d look for first. Ask yourself whether or not there is something that connects the listings together and if there is, is it something you should take as a sign that you shouldn’t invest.
4. Price Drops
Another thing to consider is price drops. So when you’re researching an area and you see a few properties that have had recent price reductions then you should pause for thought.
There are a couple of simple ways that you can check for price drops. You can check on Zoopla, a property portal, whether or not there’s been a price reduction on a property. There are also Rightmove plugins that you can get if you’re using Google Chrome.
We’ve written about how to do this in previous posts listed below and two weeks ago we made a video about how to calculate rental demand in an area which covers many of the same techniques.
So, you need to know whether or not a property price has recently changed or had a reduction. If a lot of this is going on in a given area then there may be something going on.
- How to use Google Chrome to track property on Rightmove
- How To Use Rightmove Like A Pro & Find Houses In Need Of Renovation
- Find Local Bargain BMV Property Deals That Are Hiding In Plain Sight
5. Putting it all Together
So take these four factors and combine them. This will give you an idea as to whether or not you target area are going through a transition period. If there are a lot of properties on the market and they’re selling relatively quickly and they’re all different styles, then maybe it’s a buoyant area. Of course, it also could be that it’s just a very densely populated area with a lot of stock to resell.
6. Join Our FREE Training Today
Thank you for watching this video. If you like this content and would like to join our free online property training course we’ve got a link for it on this page. In there we cover a range of different property strategies to help you get started on building a long-term property portfolio or creating a cash flowing property business. We also look at ways to increase your return on investment with any of the properties you may be considering and we also have a couple of cheat sheets and downloadable documents. Just click the image below to join our free training course.
If you have any questions or want to share your own thoughts on how to spot a good area to invest in then please post your thoughts in the comments section. We’d love to hear from you.