Property as an investment: A few fundamental considerations
Finding a property for investment is an art, and there are some fundamental considerations to take into account to secure your investment over the long-term. Here is a brief look at some of the most important factors.
Location remains the single biggest factor determining the long-term growth in a propertys value. Never become emotional about an investment property. Location is a moving target and one must be aware of early demographic changes and trends. Choose a location conveniently close to shops, schools and medical facilities. Also, stay close to home so you can access your property easily, it is more difficult to manage a property at the coast when you are based in Guateng.
Sectional title complexes should be considered as a means to avoid excessive maintenance costs for properties with high maintenance features, such as big gardens, swimming pools and tennis courts.
Also, it is preferable to buy in klinker brick developments to cut repainting costs, or investors should make sure that the paintwork will last for a few years.
Take into account the level of security offered, as good security adds to the value of the rental. The complex should offer attractive amenities, which are maintained by the Body Corporate. Potential investors should try to stay clear of exposed properties that are subjected to traffic noise and pollution, or high rise developments with lifts or stairs.
Beware of hidden costs
The most deadly hidden costs are the complex financials and unpaid electricity. Ask your bank manager to assess the financial statements of the Body Corporate, banks request these documents at the time of approving the finance. Unpaid electricity can be problematic and the seller must settle the bill before the sale may proceed. It is also essential that you confirm that your tenant is paying the monthly electricity so that the debt does not spiral out of control. Finally, beware the special levy – often major repair by the Body Corporate precipitates the sale of a unit and the purchaser becomes liable for the payment, thus reducing the potential yield on the investment.
Buying off plan
The benefit of fixing your input (construction) costs now for delivery later goes without saying. The risk lies in buying for speculation and not being able to afford the bond should prices or rentals fall or remain constant. Know the developer, check other developments and be definite on the specifications you expect in the unit.
Getting the fundamentals right at the start will go a long way to secure your investment for years to come.