When to invest – and when not to

Private Property South Africa
Private Property Reporter

Investing in property can be a simple matter – and Privateproperty.co.za certainly aims to make the purchase process easy. However, investing can be a minefield. Here are some salient tips to safeguard you from making expensive mistakes.

“Knowledge is everything when it comes to finding the right investment property,” says Justin Clarke, CEO of Privateproperty.co.za. “Almost every facet of purchasing a property, from the location to the price you’ll pay, will be shaped by how well prepared you are.” So, before you buy, research trends to identify strong growth in suburbs or regions. Spend time narrowing your search to particular streets and types of properties. Also monitor sales results so you know what to pay when the right property comes along.

But, advises Clarke, don’t buy a property because you want to invest. Your decision should be based on the potential of the specific property.

Secondly, he says, avoid investing in a residential block if a high proportion of units are already owned by investors. “Where and over-supply exists, you’ll be forced to compete on price.” This is an east determination to make, simply by checking out the number of to-let boards on the pavement.

When looking at a second investment, , Clarke advises that you avoid buying too many units in one development. “If the development performs badly, it will have a significant effect on your returns. Instead, you should look to spread your investments among different types of property.”

Remember the adage about buying low and selling high? Property markets run in cycles. And when property is hot, everyone wants a piece of the action. But as property author and founder of Destiny Financial Solutions Margaret Lomas writes, rather than joining the rush to buy in areas where prices are booming, it may be wiser to look elsewhere. She advises investors to instead focus on properties in areas that may be running behind the overall trend but which still have strong underlying fundamentals.

Next, says Clarke, if a property investment seems too good to be true then it probably is. “When you find an apparently great deal, always ask why it is so cheap. There will probably be a good reason.” Many inexperienced investors buy what they think is a bargain, only to discover that there is no rental market for that type of property in that specific location.

But one of the biggest problems facing landlords is that of “bad” tenants. It’s crucial to have your prospective tenant vetted by an accredited organisation, such as TPN, before signing any kind of lease contract.

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