When considering property as an investment, many buyers focus on the asking price, but this is just one factor in determining a property’s value.
To truly assess whether a property is a good investment, potential buyers need to look beyond the price tag and evaluate a range of financial, market, and situational factors, says Antonie Goosen, principal and founder of Meridian Realty.
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“A property’s asking price is only part of the equation,” says Goosen. “Investors should think about what the property can deliver in terms of returns, whether through capital growth, rental income, or both. The goal is to ensure that the long-term benefits outweigh the initial costs and ongoing expenses.”
Goosen advises buyers to start by investigating the local property market. Factors such as recent sales in the area, demand for rentals, and the overall growth potential of the neighbourhood are key indicators of a property’s value. “Neighbourhood trends play a crucial role,” he notes. “Look for areas with improving infrastructure, proximity to schools, or new commercial developments. These are often signs of increasing property demand, which can boost future value.”
The condition of the property is another important consideration. Goosen warns against properties that may require extensive maintenance or renovation, as these costs can erode profits. “While fixer-uppers can be appealing, buyers need to weigh the renovation costs against the potential value increase,” he explains. “A thorough inspection by a professional is non-negotiable, as it helps to uncover hidden issues and assess the true state of the property.”
READ: First-time homebuying: Common mistakes and how to avoid them
In addition, buyers should evaluate the potential rental yield if they plan to let the property. Calculating the annual rental income as a percentage of the purchase price can help determine whether the investment will generate sufficient cash flow. “A good rental yield depends on the area and market conditions, but as a rule of thumb, it should at least cover your bond repayments and other costs,” says Goosen.
Finally, investors need to consider their financial position and long-term goals. “Don’t overstretch your budget for a property that may not align with your financial or lifestyle aspirations,” Goosen advises. “Think about whether the property will still be valuable to you in five or ten years and whether it fits into your broader investment strategy.”
By examining these factors, buyers can make informed decisions that go beyond the surface appeal of the asking price. A well-researched property purchase can yield significant returns, making the effort to assess its full potential worthwhile.
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In an article published on 9 Oct 2023 Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, shared: “Buying a home is one of the biggest purchases a person can make, so you want to be sure to make the right choices throughout this process".
Here to help make this process a little easier, RE/MAX of Southern Africa shares their top three practical tips for house hunters:
1. Be open to compromising
No home is ever going to be 100% perfect. Being willing to compromise is essential – especially for first-time buyers who are still learning what their money will actually afford them within the current market. Compromise is also an important aspect for couples who have differing ideas on what the house needs to offer. Being able to agree on the essential must-haves versus want-to-haves in a home is a crucial first step before starting the house hunting process. Keep the list of must-have items short and realistic and be open to compromise on any item that falls under the ‘want-to-have’ list.
2. Give every home a fair chance
Making viewing appointments for multiple properties is a must for anyone who is house hunting. Not only will this help buyers narrow down their search criteria, but you might just be surprised by how much you like the property once you see it in person. It often takes walking through a home to realize the property’s full potential. Apart from this, considering multiple properties can help to avoid getting overly attached to one particular house – you can never be certain that your offer will be accepted, so it is a good idea to keep your options open.
3.Work with a real estate professional
Listing portals make house hunting much more accessible to buyers, but you are losing out on so much value if you fail to involve a real estate agent right from the very beginning. Not only will a real estate agent bring a wealth of local knowledge, real estate expertise, and negotiation skills to a transaction, but they are also likely to be privy to new listings before they even hit the market. The best part about this is that their services are completely free for buyers!
Embarking on the journey of finding the perfect home can be an exciting process, especially when you have the right support and guidance at your side. “From setting realistic search criteria to thoroughly exploring all options, the key to success lies in working with an experienced RE/MAX professional who can help you carefully plan and make informed decisions. Armed with these practical tips, your house hunting can become a stress-free, rewarding experience,” says Goslett.
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Engaging with an experienced estate agent who knows the local market can also offer a significant advantage, particularly for first-time or out-of-area buyers. “An agent familiar with the area can provide an accurate assessment of whether a property is priced fairly,” Goosen points out. “They can share valuable market data, assist in negotiations, and offer insights into the seller’s pricing strategy. A transparent agent who provides a detailed analysis of a property’s worth is invaluable to buyers looking for fair value.”
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