How to identify the next hotspot for property investment

In our experience, it can be risky to chase property ‘hotspots’ that are highlighted in the media because they tend to change year on year and may be based on short-term trends. Often, there’s a lack of supporting data and little explanation of what makes one particular location better than another.

A real hotspot in buy-to-let is somewhere that has solid fundamental factors that will support your investment for the next 15 to 20 years. Ideally, you want to buy a dwelling that will deliver well on both rental profit and capital growth, but prioritising one of those will help narrow down the right hotspot for you.

For instance, if you already know your priority is ongoing rental profits, you may be thinking of investing in HMOs, so your focus will be on university zones and locations where there’s high demand from young workers looking for affordable, convenient room rentals. On the other hand, if you’re more focused on capital growth over time, that’s more likely to come from properties in areas that are desirable for higher earning professionals and families.

Whatever way you want to let a property, here are four key things to look for that indicate a location should be a sound rental investment hotspot:

1. A thriving local economy

The bedrock of a strong property market is the local economy, so the first thing to look at are indications that the area is thriving. Signs include:

• Local businesses are expanding, and new ones are moving in
• Transport and communication networks are being improved
• There’s government investment into the area
• New homes are being planned and built
• There’s a vibrant culture and leisure scene

2. A growing population with the right profile

If the economy is strong, the population is likely to be growing, as people are drawn to places that offer a decent standard of living, lots of amenities and good work opportunities – and that means a continuing demand for accommodation.

From a rental perspective, the greatest demand generally comes from those aged between 20 and 45, so look into whether that’s a section of the population that’s increasing.

3. Strong rental demand from the type of people you want to house

Within the rental population, there’s a variety of demand – from students and young working professionals to families and older people. And depending on which type of let you want to offer, some areas will make a better investment prospect than others, so take some time to research where your target renters ideally want to live and whether that demand is likely to continue.

4. A local authority that supports private landlords

Something that’s becoming increasingly important for landlords is to check the local council’s policies on planning and licensing. Every local authority has the power to implement its own regulations that govern how and even whether a property can be rented out.

If you’re thinking of investing in an HMO, you also need to be aware that under planning regulations, councils can limit the number of unrelated occupants allowed in a property and may even decide not to allow any more HMOs in a particular area.

So, find out what schemes and planning rules might currently be in operation in an area you’re considering and the requirements for gaining a licence and ideally find a council that works closely with the private landlord community.

Consider investing further afield

While it may feel more comfortable to invest in properties close to home, expanding your search to high-performing rental hotspots further afield can be a smart move - provided all the key criteria are met. If the area offers strong rental demand, solid yields, good capital growth potential, and aligns with your investment goals, distance shouldn’t be a barrier.

The key to managing a dwelling successfully from afar is partnering with a reliable local letting agent who understands the market, can handle renter relations, and ensures smooth day-to-day management. With the right support in place, you can take advantage of lucrative opportunities without the stress of being on-site.

Working with a good estate agent that really understands buy-to-let can be a huge help in narrowing down your search area and finding the right investment property for you. We’re always happy to help landlords, wherever they might be thinking of investing, so do get in touch with your local branch and have a chat to one of our experts. If the immediate area doesn’t offer quite what you’re looking for, they can reach out through our branch network and put you in touch with other colleagues.