Choose the correct options when investing in property

Property investment can be very financially rewarding, but entering into the world of property investment can be intimidating, not to mention risky, says Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa.

“In every phase of the property market there are opportunities available to investors, provided they are well-versed and undertake the necessary research,” says Goslett.

“Without putting in the time and effort required, property investors could find themselves making the wrong and sometimes very costly decisions. Seasoned and successful property investors can only reach their full potential by having a vast understanding of the property market and the factors that influence it. Knowing what to look for and what to avoid will increases the chances of success and will affect overall investment returns.”

Goslett says there is no need to rush into any investment.

“Rather take the time to do the appropriate research, than rush into a deal that could cost you a lot of money in the long term – knowledge is the key to success. There is no need to take the first deal that comes your way. Take your time, shop around and compare other properties that are available before making any final decisions. Look at the price of the property and compare this to the value. This can easily be achieved through working with estate agents and asking them to provide a comparative market analysis.”

Most people know the ‘location, location, location’ mantra, and there is good reason for it. Regardless of the property’s condition or type, its location will be the determining factor as to how much the home’s value will appreciate. It is imperative to choose the right location over any other factors. Good options are areas that are close to a good range of amenities. Areas that consistently show steady growth in value are those near to business nodes, transport routes, good schools and shopping centres.

Although the law protects property buyers to some degree, it is never a good idea to assume that everything in a property checks out just by looking at it. Goslett says investors should have properties professionally inspected before signing a purchase agreement.

“A professional inspector should be able to spot any defects that may otherwise go unnoticed, such as the structural integrity of the property. It may cost money to hire an inspector, but knowing about any costly defects may influence the purchasing decision and price,” says Goslett. “Having to fix any defects that were not discovered will only eat into possible returns.”

If in doubt, ask for help – it might be tempting to make your mark and go at it alone, but it is far better to learn from other people’s mistakes than your own.

“If possible, seek the advice of experienced property investors who will be able to act as mentors. During the initial stages of learning the ropes, it is always better to have a seasoned investor or adviser on hand to provide some helpful hints and guidance,” says Goslett.

Stick to the budget – one of the most dangerous things you can do is lose track of where you are with your budget. It is vital to keep track of finances and debt.

“Ideally you should plan an in-depth budget and cash flow analysis to accurately ascertain your financial position. You need to know what you can afford and what is out of reach financially. This should be monitored and can be measured by completing a personal cash flow statement,” says Goslett.

You should also compare the financing deals from different banks before deciding where to secure a home loan. The interest rate the bank is willing to give on the loan will affect the long term returns on the investment, so securing a loan will be an intricate part of the purchasing process. You need to consider that most financial institutions will require a deposit of between 10 percent and 30 percent.

Suitable maintenance – once you have bought an investment property, it doesn’t mean you can now sit back and watch the investment flourish. A certain amount of care and maintenance is required to ensure that the investment returns remain healthy.

“You will need to protect your investment by ensuring that the property is in good repair and well looked after,” says Goslett. “Maintenance costs will need to be added to your budget and plan. There is also the matter of ensuring that you have the time and capacity to properly manage and maintain the property. If you don’t have the capacity, you can hire a management agent to make sure all repairs and general management of the property is taken care of.”

Diversification – To mitigate exposure to risk, you need to ensure that you have diversity in your portfolio when buying property specifically for investment purposes. If possible you should try to buy different kinds of properties in various areas, rather than buying a few properties in one development.

“You need to learn as much as possible about the environment you are trading in, and consult as many experts as you can, as well as making use of professional, reputable and knowledgeable estate agents to help with the sales process,” says Goslett.

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