The 7 “deadly sins” of investing in property (article 1 of 4)

Private Property South Africa
YDL Property Investments

Do you know someone who has invested in the US property market and had disastrous results? Has their experience caused you to not pursue your own offshore opportunities?

Many of us would like to have investments offshore. They offer us comfort in knowing that not all of our investments are single currency based. Long-term property investment in a country with a hard currency is an attractive proposition for many South Africans.

On the other hand, often our urgency and excitement to set up overseas investments causes us to leap before we look. This lack of diligence can cost you dearly.

Uninformed investing in foreign territory can be tricky but expert help can manage these risks.

  1. Lack of proper research

The USA has 50 states and over 30 000 cities and towns. How do you decide where to invest?

The answer requires a good understanding of the economic and property market characteristics of a particular city. Factors to consider are supply and demand drivers such as state and city, population, income and property price growth, affordability, interest rates, buyer confidence, supply of inventory and absorption rates.

In addition, buy-to-let investors need to understand market rentals, where tenants will come from, projected rental escalations and the like.

But many buyers skip past this step as it is simply too much work. Doing so naturally increases the risk of getting it wrong. Many people have gone down this road, only to live with massive regret when their investment fails to deliver against their expectation.

  1. Lack of local knowledge

It is difficult to invest in another country as – even if you do the above research – nothing beats the power of local knowledge. For example, which suburbs and streets are the best and which should be avoided? Does it look to be in decline, or are signs of growth and vibrancy evident? Are shops closing down or showing a struggling economy, or are new developments springing up? To property experts, simply walking down a street can provide a gut-feel for an area.

Some investors rely on reports such as those from Trulia or Zillow to assess what they are being offered by brokers. The problem is that these websites are often far too general in the information that they provide. Much of the data is metro- or county-wide, whereas the information that is required to make an informed decision needs to be specific to a property’s location.

How does YDL Property Investment meet these challenges?

The answer is simple: YDL establishes a presence and opens local offices in the areas in which they do business.

For example, YDL has identified Atlanta as being a prime property investment location and has subsequently set up an operation there. Rather than hand their clients over to brokers, who can be more interested in their commission than clients’ overall wellbeing, YDL’s teams are local experts and can therefore make quality recommendations. As property investment experts, the YDL teams know the local conditions down to street level.

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