Our business is built around helping landlords and property investors find the right property. Consequently we need to understand what motivates them to buy certain properties, to understand why they buy what they buy.

It’s an interesting subject as there are a number of distinct factors behind property purchases, and often there is more than one consideration. Understanding these is important for us, and if you’re buying, important to you too.

What we know, from serving the market as we do, is that for us to succeed we have to offer a wide variety of properties which tick a number of different boxes in order to give buyers the best possible choice.

So we’ll draw on that extensive experience to highlight some of the key factors behind purchasing decisions.

Price

It will be no surprise to anyone reading this that price is a key factor in the decision to buy an investment property. However the amount of influence price exerts varies from buyer to buyer.

Some investors have a fixed price range within which they work. For instance they may set an upper limit beyond which they simply won’t go. For the purposes of illustration we’ll take £70k as a figure to work with.

An investor who sets a hard limit is accepting a number of consequences: they will have to be flexible about location; certain sectors of the market are likely to be closed to them; they may face greater renovation and refurbishment costs.

Investors with a hard ceiling might be likely to own a number of properties scattered across Scotland. Although areas such as Dundee and Aberdeen are showing excellent rent growth at present, property prices there are still competitive.

However a £70k limit will tend to rule out high-value properties in Edinburgh and Glasgow unless you’re particularly lucky.

If rental yield is a priority, then price matters to you. Since yield is calculated by dividing the property price by 12 months worth of rent and multiplying by 100 to give a percentage, if higher property prices don’t return higher rents, then yields will suffer.

It’s fair to say that when making a purchasing decision, property investors will always take the price into account, but it may not be the most important factor for all of them.

Location

There are investors whose primary motivation to buy a property is location, and for those investors other factors such as price are significant but not principal considerations.

Glasgow, and to a greater extent Edinburgh are good examples of where this thinking applies. Some investors concentrate nearly all of their efforts within these cities because they know that demand remains high and that good properties command excellent returns.

As you’ll appreciate this can result in a competitive market, both amongst investors and tenants as there are limits to the number of available properties within defined geographical limits.

Equally, there are investors who will actively avoid certain locations for exactly the same reasons. For them, the highly competitive market is anathema and they prefer to seek out less-contested locations when looking to invest.

Both groups however will have a weather eye on the following – returns.

Returns

Return on investment is a key consideration for all property investors, however they differ on what kind of return they’re looking for, and this will directly influence their buying decisions.

Broadly speaking property investors will be looking for either income from rent or capital appreciation on the properties they buy. Ideally they will achieve both but that’s not always possible and their preference will dictate what they buy.

If income is key, investors may concentrate their efforts, and resources, on Houses of Multiple Occupancy (HMOs), student flats and commercial properties. Since commercial properties are slightly outwith our normal concerns, we’ll leave them aside.

HMOs and student flats are regularly in high demand, with HMOs having the advantage of multiple rents. However, both will likely require greater management (unless students have changed dramatically since our days!)

Student flats will also depend on local demand, so while all the major cities in Scotland enjoy high demand for student accommodation, it will be a poorer investment in Elgin or Drumnadrochit.

Demand for HMOs is less governed by location but will thrive in the same locations as student flats, for the same reasons.

If you’re seeking capital growth, to pay for your retirement for instance, most property types will deliver over the long-run. Landlord Today looked at this question and concluded that despite economic vicissitudes, property still delivers excellent returns over the longer term.

Although flats suffered more short-term reverses in value during troubled times compared to detached and semi-detached homes, over the long-term they delivered good capital growth.

Using the Nationwide House Price calculator, a property in Scotland valued at £150,000 in 2004 would, in 2024, be worth £281,235, an 87.49% change in price. When you consider the economic upheavals in the last decade, that’s a healthy increase.

As ever there is an element of risk involved, and if you’re relying solely on your investment to fund retirement you may have to decide whether to buy multiple properties or to buy one or two high-value, high-return properties.

Target market

This is a key factor in determining why investors buy what they buy – or it should be. Regardless of the form of return on investment you’re seeking, you are going to want to have tenants in your property with as few voids as possible.

It’s therefore a shock that some buying decisions are made without a though for who is actually going to rent your amazing neo-gothic, eight bedroomed property which sits in the middle of a 500 acre peat bog miles from anywhere.

For a more prosaic example, a third-floor flat in a traditional tenement building with no lift, no garden and highly contested on-street parking is possibly not as attractive as you might think to a family with very young children.

Mistakes like this are more likely to be made by new investors; those with hard-earned experience have probably learned what works and what doesn’t.

Having a good idea of who you’re hoping to rent your property to is vital before money is spent. No matter how attractive the price, if you can’t see the target market it may be a poor investment.

Understanding who will rent your property, and therefore what they need, is a crucial factor in determining whether a purchase makes sense or not.

Advice from the property pros

A lot of what has gone before may seem pretty obvious, but that’s often true for those who have earned their experience and wisdom after years in the investment market. It may not be obvious to those who are new to it.

For them, there is a danger that price looms larger than other considerations and they therefore jump at the first BMV (below market value) bargain that comes their way, assuming that since the rental market is so competitive, they’re bound to find tenants.

They might be lucky or they might not but either way they are taking a greater risk than they need to.

There is a lot of advice out there regarding the property investment market, some good, some not-so good. Asking experienced investors which factors make an investment property appealing will give you a much better feel for the market.

For many investors the property market is a long game and understanding this allows you to take a little more time to work out what you want from it.

In summary…

There are many factors that make an investment property appealing. Some will chime particularly strongly with many investors, while others may be only a minor consideration.

It’s critical that all investors understand what motivates their purchases, and we spend time with our clients to ensure that they understand which properties are a good fit compared to their expectations and needs.

In this respect buying property is similar to buying anything – if you need a large family car a Ferrari is unlikely to meet your needs, regardless of how wonderful it is in other respects.

If you’d like to discuss any aspect of buying investment properties, pick up the phone or drop us a message and we’ll help you with your first (or twenty-first) step on this road.

Thanks for reading!

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]