Property Assist has provided the ultimate short checklist for property investment, providing insight for potential investors and how to make the most of their new financial venture.
Here are a few key points to look at before investing in property:
- Research the area and the current status of the area
- Determine demand and current trends in the area
- New developments, roads and spatial plan of the area must be taken into consideration.
2.Review new or changing legislation
3.Ascertain the current position in the property cycle
4.Property due diligence
- Ensure that you do a structural property inspection
- Plan Scrutiny: Plans in line with the current structure built on the property.
5.Property owner due diligence (solvency)
6.Purchase price of the property:
- Consider doing a property assessment by area specialists
- Look at the suburb actual sales
- Comparable properties for sale
- Registered valuations.
7. Condition of the property and cost of repairs if applicable
- Maintenance quotations
- Compliance certificates and quotations must all be taken into consideration.
8. Rates clearance amount (inclusive of arear rates and who is liable to pay for it)
9. Copy of the Title deed for restrictions and more
10. Research Investment Risk and return
- Find out the Return on investment
- Risk rating in relation to exit plan and property security
- Dos and don’ts when investing in property
- Do not let greed or fear drive you during your investment process
- Do not buy emotionally – it’s an investment, not your home you going to live in. Many investors are driven by the question if they will live there, however, this is not important but rather whether there is a demand for property in that area and what the price range is.
- Do not buy because your friend said so without doing the research yourself!
- Do not buy without reading the contracts and other information properly and making sure you understand everything. You should keep on enquiring until you have a full understanding of all details relating to the property
- Do not buy without getting proper advice. This should not be from someone who only has partial knowledge or is not a specialist in the field as property investment is a specialist field.
- Do not buy outside of your planned strategy just because it looks lucrative – stick to the plan
- Do not buy at the high end of a property cycles
- Do not pay too much (i.e. not higher than 95% of the true market value with all costs inclusive)
Our advice to those who invest in property – about safeguards in an unstable community
The only way that you can completely mitigate the risk of the various cycles and influences in an unstable economy or even political insecurity is to use uniquely structured property investment opportunities. These opportunities should have a proven track record for at least 5 or more years. Further, need to, for the last 30 years of property cycles in South Africa show that they would have withstood the stress test over this period and can continue to withstand such tests.
Another method is to lower the risk for loss of capital is to buy at the right price and thus purchase the larger part of the return which provides a buffer for the various influences of an unstable economy. Another way to deal with this issue, and which has more application in the commercial and industrial space, is to ensure that your lease is signed for longer terms but at the same time to ensure that at least 65% of your tenants are national tenants with reasonable yearly escalation rates written into the lease agreements.
For more information visit propertyassist.co.za