Investing in property is commonly regarded as a fail safe investment tool, and a savvy way to create wealth. Property is an asset in which you can build up equity, which then in turn allows you to invest in further properties, thus building a property investment portfolio. Take note of these three tips for investing in property.
Invest with your head and not your heart
Investing with your head means being able to separate your emotions towards the property from your financial assessment as to whether the property will yield good results. Often a property will seem like a great investment as it is cheaper than expected. However, properties that are put on the market at lower than market-value often have very large problems; problems that won’t be visible at first look.
Properties in a part of town which seem to be getting “less classy” are generally a bad investment, regardless of how well the property is priced. Similarly if an apartment block is situated in a great part of town, but is run down and shabby looking, good tenants will avoid it.
“Sectional title apartments in blocks which lack the funds for proper maintenance are a particularly bad risk.” (www.investinginproperty.co.za).
Always conduct thorough checks on the body corporate, ensure that they are up-to-date on their budgets and that they have a surplus of funds in their accounts. Also check what the levy is per month. A ‘special levy’ should be thoroughly investigated, as this can be a means for the body corporate to recover funds more quickly, and can often indicate that they are in financial trouble.
Visualise the type of tenant the property will attract
The type of property you invest in will determine to a great extent what type of tenant you attract. Many investors will tell you that having a bad tenant is just not worth the trouble of having investment properties. Bad tenants can destroy beautiful walls, floors, counter tops etc. What is more worrying, however, is that the squatting rights in this country mean that if a tenant does not pay rent, after a certain period of time they have squatting rights, and it is a very difficult and lengthy legal process to evict them. Sadly, property owners often resort to more violent measures out of sheer desperation.
Unless you are willing to put up with bad tenants, ensure that your investment property is in a savoury and safe part of town, and in a complex that is well maintained with good and active security.
Keep up to date with new area and complex developments
Investing in off-plan complexes saves you transfer fees. If you are investing in multiple properties, this saving can make a substantial difference. Make sure that you are registered on property website databases to ensure you receive early information regarding new complexes, auctions and the like.
Investing in property is a difficult game to play, and as a new investor you are flanked by numerous players who know 10 times more than you do. Remember these tips for property investment, and you will be a top investor in no time!