A fortune at your feet.
We live in turbulent financial times and the question is often posed whether an investment in property is still a viable option, or one rather be avoided. When it comes to building a nest egg for the future, property is still regarded as one of the safest long-term investments.
For the innovative thinker who has patience, boldness and tenacity, and is willing to do extensive research before taking the leap, there is a myriad of opportunities available to invest in property. Here are a few ideas:
Student housing: A shortage of accommodation for students around the world opened a fairly new type of opportunity whereas big houses or small blocks of flats are purchased, and individual rooms are let either furnished or unfurnished in close proximity of colleges or universities.
Sheriff's auctions: Distressed sales can often bring about a bargain-buy. It is important not to get taken by the hype of the moment and bid for higher than you originally set out to do. Prior research of property values in the immediate surrounding areas is essential.
Mixed-use developments where people live-work-play: These type of properties, mostly sectional title, are high in demand and easy to sell. Get in on the development stage to buy as low as possible.
New developments: Especially Sectional Title offers an opportunity that is pursued by many investors, because there is no transfer duty payable and the unit can easily be sold at a higher price even before it is registered in one's name. Another benefit of buying off-plan for investors is the chance to secure property at today's market value and not having to pay the balance for extended periods, A word of caution though: Stay away from cookie-cutter type developments with hundreds of available units - they are difficult to sell at a profit because there are always competing units for sale at any one time.
Buy-to-let: Purchasing properties to keep over a long period of time will ensure capital growth, provided that they are situated in a good area where demand is high and supply is low. It is important to diversify and not invest in only one suburb. Get a good estate agency with a proper rental management system to manage the rentals for you.
Buy-to-flip: The purpose here is to not to hold on, but to sell a property at a profit hopefully in a short space of time. One must have an estate agent at your side to find these little gems or have the means to research property prices and trends in the area. Aim to find property priced below current market value, or a house that needs renovation. It is important to do proper calculations to determine whether it is a solid deal or not, considering not only the purchase price, but also costs to renovate (and add 20% error margin), agent's fee, transfer and holding costs, compliance certificates, etc.
Built-to-sell: Not for the faint-hearted! You need several professionals at your side to manage the compliance, construction and finishing processes. Be sure to check the zoning of the erf before buying. Tiles, floors and walls must be in neutral colours to appeal to a wider audience.
For newcomers to property investment attempt Rent-to-buy or an Instalment sale. Both these options come with its own set of legalities to comply with, but it provides an opportunity to get one's foot in the market without necessarily having to qualify for a mortgage straight away. Consult an attorney to explain the consequences of defaulting.
For the best returns on your property investments, always keep the following pointers in mind:
- Buy below market value
- Buy at the water's edge - a river, the sea, a dam.
- Buy on a hill - a view is always a winner
- Buy in the path of progress and areas experiencing gentrification.
- Avoid pyramiding and over-extending! Each property must be a stand-alone investment: Don't 'steal from Peter to pay Paul!'
- Property investment should be driven by the numbers, not emotions or personal preferences.
Property can satisfy one's wants, needs and desires in countless ways and having a good, diverse property portfolio is exciting and rewarding. It is worthwhile taking that first step, if you haven't done so yet, and then to proceed with caution. Remember, it is the money that you invest in income-generating assets that will set you free financially, not the money that you save in the bank.
Author: Adrie Barnard