BY KYLE BATH
Sourcing and Assessment of Property Investments
Factors that determine the quality of sourced property investment opportunities includes your:
• time available for research;
• overall level of knowledge;
• ability to structure the approach;
• utilisation of funds for the most effective outcome.
Without proper research and understanding of how-to source, secure, manage and exit property investments, you are likely to achieve a less than satisfactory result.
We will discuss the two most widely used sourcing options and the realities thereof:
Option one – Buying on Auction
You might have this idyllic concept to purchase property at below market value using this method, but the sourcing of these properties is fraught with obstacles and challenges.
Firstly, you need to assess the type auction and familiarise yourself with the terms and conditions thereof. These include sale in execution, deceased estates, liquidations, etc.
Secondly, you need to develop feasibility models, value assessment approaches and due diligence procedures.
An enormous amount of practical experience is required to determine:
• buyers that will likely bid;
• estimated value of bids;
• roles of creditor representatives; and
• handling of property expenses e.g. arrear rates and taxes.
More than 60% of auctions are cancelled before actual bidding can commence, thus spending time on such an auction is costly with the most valuable commodity, which is your time!
Should the auction proceed, further challenges include:
• obtaining access to determine market value;
• maintenance quotes; and
• relocation of existing occupants.
Changes in laws and regulations will change the industry drastically with less estimated sales in executions to take place.
The model is a fleeting ideal, that breaks down family structures with many negative connotations.
Astute property investors however take the impact investment approach which is far more sustainable.
Option Two – Buying from developers or new developments
This well-known model, if utilised correctly with proper due diligence and research can be a good approach.
However, only a low number of first-time property investors will receive the real benefit thereof.
Property developers require unit sales to secure their development bonds or reach the breakeven point for the development. Properties are thus marketed aggressively to reach that goal, without selling the remaining units that will negatively affect their own investment returns.
Should you not have proper statistics that relate to:
• net rental yields;
• expected capital growth;
• market value of similar properties; and
• expected escalation of rentals
The possibility to determine the expected return whilst purchasing below market value is very low, with less than satisfactory end results.
The Ideal Sourcing Option
Imagine how wonderful it would be if you had access to:
• already sourced opportunities;
• complete with due diligence by a professional experienced team;
• at 75% of market value all cost inclusive;
• or pay less than market value all cost inclusive with benefits of at least 20% of the purchase value; and
• the investment you make has a lasting impact in the lives of those who you transact with?
Register today to experience this on www.propertyassist.co.za