It’s a well-known fact that certain areas are more popular than others. When choosing an investment property, knowing where to look is key. Last month, we looked at the different types of investments in real estate. Whether you decide to invest in residential, commercial, industrial, retail, or mixed-use property, the success of your investment will ultimately depend on where it’s located.
We also discussed three trends in residential property that have proven themselves toe be solid investments: student housing, affordable accommodation, and holiday homes. A great student house isn’t worth much as an investment if it’s not near campus, just as an excellent beach house probably wont be too popular if the “view” is only visible from the tiny bathroom window. As we saw last month, there are great opportunities to be had in the niche market. But what about the rest?
Supply and demand
Love it or hate it, the Cape Town property market has shown little sign of slowing down. While the rest of the country has seen modest property price growth, Cape Town seems to defy the odds. Simply saying that Cape Town is beautiful isn’t enough to completely explain the oftentimes insane returns. Rather, it seems to be a matter of supply and demand.
This principle can be applied to any region or sector. If you’re looking to invest in warehousing, you’ll need to be in an area with a strong demand. Better yet, you need to look for areas where the market isn’t already oversaturated. Due to the geographical realities of the Mother City, there’s a very finite amount of land available. The result? Premium price-tags.
When choosing your location, look out for the following key points:
1. Centrality: Properties in close proximity to major hubs will always be more popular than those located an hour’s commute away.
2. Neighbourhood: Depending on the focus of your investment, the neighbourhood is essential. Are you catering to families with children? Retirees? Students? Young professionals? Depending on your answer, your property will either be close to universities and schools, hospitals and parks, or popular restaurants and shops. Regardless of your focus, keep in mind the importance of a safe neighbourhood. Enquire about neighbourhood watch programmes, security cameras, access control, or patrols by security companies. Not only will this help protect your asset, it will also attract tenants.
3. Look around you: While internet write-ups and agent summaries are helpful, few things will be as effective and accurate as actually looking at the property and area. Take advantage of showdays – and drive around the area for a bit while you’re at it. Notice the gardens, condition of surrounding buildings, parks and public areas and proximity to landmarks and major routes.
4. Upcoming developments: Every investor’s dream is getting into a neighbourhood before it hits the big time. Enquire about upcoming developments or plans to expand the area. Big things to look out for is upgrades to roads, office buildings, shopping malls, schools, and commercial hotspots.
5. Ignore the building: This one applies to all types of property – within reason. The age-old cliché of “location, location, location” holds true once again. As long as the building is structurally sound, you can work with it – depending on the asking price, of course.
Full article also available in our free digimag.