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On the issue of investing in property.
A few things to consider before making a purchase.
1. PURCHASE PRICE
2. LOCATION
3. RISKS
4. RESEARCH
A thread: @MohauHlonyana @nmalibongwe10 @iamkoshiek
A few things to consider before making a purchase.
1. PURCHASE PRICE
2. LOCATION
3. RISKS
4. RESEARCH
A thread: @MohauHlonyana @nmalibongwe10 @iamkoshiek
*This is not professional or financial advice but my own views based on my own experience.
What is an investment property?
This is a property purchased specifically to earn rental income.
You can make a speculative purchase for a capital gain on the resale but this is not part of this thread.
This is a property purchased specifically to earn rental income.
You can make a speculative purchase for a capital gain on the resale but this is not part of this thread.
Not every property you purchase is an ‘investment’ you can get into horrible debt, lose your shirt and life savings buying the wrong property.
Forget what agents or developers tell you, they are here to sell. Not help you make an investment decision.
A few tips to help.
1. PRICE
- Purchase Price
- Affordability
- Yield
- Purchase Price
- Affordability
- Yield
Purchase Price
The purchase price is not what has been listed by the agent or what the seller requires.
The purchase price is what you agree to pay.
Negotiate until you get to the right price for you.
The purchase price is not what has been listed by the agent or what the seller requires.
The purchase price is what you agree to pay.
Negotiate until you get to the right price for you.
Do not be emotional in negotiations (this is the worst thing you can do - buying on impulse or fear of ‘losing out’).
Do not be afraid to walk away if the price is not right for you (this is the best thing you can do).
There are many properties and opportunities in the market.
Take your time it’s a long term game not forex trading.
There are many properties and opportunities in the market.
Take your time it’s a long term game not forex trading.
Affordability
Can you afford the loan repayments.
Do all your calculations before hand including increases in interest rates, the cost of levies, municipal rates and repairs.
Can you afford the loan repayments.
Do all your calculations before hand including increases in interest rates, the cost of levies, municipal rates and repairs.
What percentage of the costs will the rental payment cover and will it be sustainable.
Yield
Realistically what is the rent income that you can expect to receive consistently relative to the purchase price.
This will impact what your purchase price should be and your affordability.
Realistically what is the rent income that you can expect to receive consistently relative to the purchase price.
This will impact what your purchase price should be and your affordability.
NB: Be realistic about rentals and quality of tenants in the area - long term.
2. LOCATION
A lot swings on this.
- where is the property located
- what amenities are close by (shopping centres, schools, clinics etc)
- what is traffic like
- accessibly to public transport
- security
- type of tenant (student, young professional etc)
- value over time
A lot swings on this.
- where is the property located
- what amenities are close by (shopping centres, schools, clinics etc)
- what is traffic like
- accessibly to public transport
- security
- type of tenant (student, young professional etc)
- value over time
3. RISKS
Consider what the risks are.
- Tenant default, can you afford to pay the mortgage and other costs if you don’t receive rental income for an extended period
- Should you need to sell, can you sell quickly and still get top ‘dollar’.
- Is the neighborhood in decline
Consider what the risks are.
- Tenant default, can you afford to pay the mortgage and other costs if you don’t receive rental income for an extended period
- Should you need to sell, can you sell quickly and still get top ‘dollar’.
- Is the neighborhood in decline
NB: Run a background check on your tenants and where possible get previous landlord feedback.
4. RESEARCH
Spend as much time as you can researching the property, the area, surrounding areas.
Research market trends on values and rentals in the area and surrounding areas.
Understand your tenant type an what the inherent risk is with that tenant base.
Spend as much time as you can researching the property, the area, surrounding areas.
Research market trends on values and rentals in the area and surrounding areas.
Understand your tenant type an what the inherent risk is with that tenant base.
