As recovery in both the housing market and the economy move from strength to strength, real estate is once again becoming a popular investment strategy and this is for a good reason, says Adrian Goslett, chief executive officer of RE/MAX of Southern Africa.
Goslett says for those with access to finance, property investment is fairly easy to get into, however, it is advisable for investors to do research and put the time into learning about the property market to help them avoid making unnecessary, and often costly, mistakes.
Real estate investment has always provided a long-term vehicle for investors looking for a financially secure investment options that can provide a cornerstone for wealth creation.
Property can often ensure a return on investment that other investment strategies simply can’t, provided that the standard property buying principles are adhered to, he explains.
Goslett says for those with access to finance, property investment is fairly easy to get into, however, it is advisable for investors to do research and put the time into learning about the property market to help them avoid making unnecessary, and often costly, mistakes.
Goslett offers a few tips to assist with successful property investment:
Select the right property
The first step to ensuring that you are making a good real estate investment is selecting the right property.
“This is where a large majority of an investor’s research time will go and investors need to find a property that is well-priced and located in an area with strong potential for long term growth.”
It is often said that it is better to buy the worst house in the best area, then the best house in the worst area, he points out.
He says a property which may require some attention but is located in the right area will more than likely be a good investment option.
Investors will need to find out about any future development plans of the area if applicable and look into predictions of the area’s future capital growth.
An estate agent can provide an investor with a comparative market analysis which will enable them to compare other home prices in the area to assess whether or not they are getting a good deal.
Think outside of the box
Goslett says that over the long term the natural capital appreciation of a property will increase.
However, investors are not restricted to simply waiting for this to happen.
“There are ways in which an investor can increase the value of the property or generate income in a shorter period of time by thinking outside of the box.”
Value can also potentially be added by extending the property by through the addition of rooms or even just a bathroom, by building a granny flat that could be rented out, subdividing the property, or even allowing a billboard or a cell phone tower to be erected, explains Goslett.
A few options that investors can explore are the acquisition of business rights on the property or converting the property into a guesthouse or nursery school, if this is feasible.
Value can also potentially be added by extending the property by through the addition of rooms or even just a bathroom, by building a granny flat that could be rented out, subdividing the property, or even allowing a billboard or a cell phone tower to be erected, explains Goslett.
All of these options need to be thoroughly researched to ensure that the financial outlay will be recouped and worth it in the long run.
There are also proper procedures that investors will need to follow in order to utilise these options.
“It would be advisable for the investor to check the title deed and current zoning of the property to see if they are restricted in any way as a starting point.”
Ensure diversification in your portfolio
According to Goslett, one of the most vital aspects to successful property investment is to have a diverse portfolio.
This includes all elements of the portfolio such as the type of properties and the areas in which they are situated.
“Often different areas react differently to the various property cycles and if an investor has a variety of properties in different areas, the risk is spread out to ensure a greater chance of success.”
The optimum portfolio will cater for a wide variety of possible tenants and not just be solely focused in one area, says Goslett.
It is the age-old philosophy of not putting all your eggs into one basket.
In real estate investment, much like other investment options, there will be bad times and good times.
The key for success is to make sure that although the portfolio is diverse, it is also relatively low risk.
Be patient and don’t quit your day job
According to Goslett it may take some time to grow a strong portfolio and develop as a savvy real estate investor, so don’t risk leaving steady employment in the beginning stages.
“There may come a period when your real estate portfolio requires more of your time and is successful enough to sustain you financially, but until then, it is advisable keep your current employment.”
Success is not measured by how many times you fall, but rather how many times you get up.
Goslett says that as a novice real investor there will be obstacles to overcome and it is understandable if mistakes are made in the initial stages.
However, the ability to recover from those mistakes and proceed forward will allow an investor to go from good to great, adds Goslett.
Print
