6 tips for the first-time investor

Private Property South Africa
Private Property Reporter

1. Go for capital growth

This is the most important consideration when buying an investment property. Capital growth will increase your equity or “net worth” more quickly than home loan repayments alone. Research annual median values and track recent sales to identify high growth areas. Look for streets or precincts featuring architectural uniformity with a broad appeal.

2. Add value

Choose a property that can be inexpensively improved. A fresh coat of paint and new carpet can add value to your investment and increase your rental returns. Be aware of any unseen structural works such as re-wiring as this can be expensive to repair.

3. Invest for the long-term

Time in the market – not “timing the market” – counts most! As you never know when the market has peaked or troughed until after it has happened, the longer you hold a high-quality investment the better.

4. Be tax smart

The tax advantages of negative gearing are a key feature of property investing. Negative gearing involves borrowing to invest. Take advantage of tax benefits such as negative gearing, but be aware that saving tax without achieving consistent growth will never confer financial independence.

5. Location, location, location

Purchase a property that is close to essential and desirable facilities. That means within walking or a short driving distance to schools, public transport, shopping areas and leisure and entertainment options such as public parks, cafes, restaurants and cinemas.

Sometimes you can identify pockets with future potential. Look for precincts with the same characteristics as established prime areas but a lower buy-in price, as they often qualify as genuinely undervalued. Watch what first home buyers are doing. If they begin moving into a particular area in large numbers, you may well have found an undervalued area.

6. Knowledge is power

As with any investment class, always research your property purchase carefully and keep a close eye on market trends. Monitor ‘big picture’ factors like interest rates, economic growth, government policy, demographic trends and local developments.

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