Tips for prop­erty in­vest­ing

Lesotho Times - - Property -

WHEN de­cid­ing on in­vest­ing in prop­erty for the first time, there a few key el­e­ments that in­vestors should take into con­sid­er­a­tion — such as whether they are in­vest­ment-ready and well in­formed on all the avail­able op­tions.

This is ac­cord­ing to Adrian Goslett, Re­gional Di­rec­tor and CEO of RE/MAX of South­ern Africa, who says buy­ing a prop­erty is a ma­jor com­mit­ment that should be care­fully eval­u­ated in terms of your life plans and fi­nan­cial sit­u­a­tion — both cur­rently and in the fu­ture.

He says as a first-time prop­erty in­vestor, it is vi­tal to be in­formed and ask the right ques­tions, such as when, where, why and how to in­vest in your first prop­erty.

Goslett shares some guide­lines as to how first-time in­vestors can find the an­swers to these ques­tions:

1. When should you in­vest? Ac­cord­ing to Goslett, the short an­swer to this ques­tion is as soon as you can af­ford to. While it is important to watch the mar­ket and buy at the right time, it is never too early to get into the prop­erty mar­ket.

He says prop­erty in­vestors should take the nec­es­sary time re­quired to en­sure that they make an ed­u­cated de­ci­sion, as­sess­ing whether they can af­ford to make the nec­es­sary fi­nan­cial com­mit­ments.

To make an ac­cu­rate as­sess­ment of this, it is ad­vis­able to use the re­sources avail­able. For ex­am­ple, banks and bond orig­i­na­tors will be able to give in­vestors es­ti­mated re­pay­ment fig­ures based on bond re­quire­ments.

Goslett says monthly bond re­pay­ments should not ex­ceed more than 30 per­cent of the buyer’s to­tal ex­penses, and most buy­ers will be re­quired to put down a de­posit of be­tween 10 per­cent and 30 per­cent of the pur­chase price of the prop­erty be­fore they are ap­proved for fi­nance.

It is important to keep in mind that it is not just the bond re­pay­ments that will need to be paid. There are a num­ber of other costs in­volved in a prop­erty trans­ac­tion that can add up to a sub­stan­tial amount. These fees in­clude trans­fer du­ties, Deed Of­fice fees and levies, mu­nic­i­pal rates, bank charges, bond ini­ti­a­tion fees, home in­sur­ance costs, the monthly ad­min­is­tra­tion fee charged by the bank, mov­ing costs and the cost of main­tain­ing the prop­erty.

It is es­sen­tial to in­clude all of these as­pects into the cal­cu­la­tion when as­sess­ing af­ford­abil­ity.

2. Where should you in­vest? Ac­cord­ing to Goslett, lo­ca­tion is of the ut­most im­por­tance, and in terms of in­vest­ment, can never be stressed enough.

Lo­ca­tion is vi­tal be­cause be­ing in the right area and po­si­tion will en­sure a good re­sale value and re­turn on your in­vest­ment, he says.

When look­ing into an area, con­sider prox­im­ity to ameni­ties such as schools and shop­ping cen­tres. On­line prop­erty search por­tals can be used to find statis­tics on ar­eas and val­ues of prop­er­ties. Es­tate agents can provide you with a com­par­a­tive mar­ket anal­y­sis, which will give you thor­ough knowl­edge of the prop­erty sales dy­nam­ics of a cer­tain area, he says.

3. Why in­vest? Prop­erty re­mains a solid as­set class in which to in­vest. Goslett says buy­ing prop­erty is a huge step towards fi­nan­cial se­cu­rity and growth, and is a great way to in­vest in your fu­ture.

“Prop­erty is far less volatile than the eq­uity or share markets and, un­like other in­vest­ment op­tions, prop­erty in­vestors have com­plete con­trol over their as­set.”

Gen­er­ally, Goslett says prop­erty prices tend to in­crease fairly con­sis­tently over time, which makes it a lot eas­ier to gauge the es­ti­mated re­turn on in­vest­ment much more ac­cu­rately than any other in­vest­ment class.

He says prop­erty own­ers will not have to sleep with one eye glued to the stock mar­ket and have to sell the minute the mar­ket is at a high.

He says the other beauty about prop­erty is that it is the only as­set class that can be fi­nanced and lever­aged.

In lay­man’s terms this means that an in­vestor can buy prop­erty with some­one else’s money.

If an in­vestor can prove af­ford­abil­ity and meet the loan re­pay­ment con­di­tions, prop­erty is prac­ti­cally the only in­vest­ment op­tion that banks are will­ing to fi­nance.

This is be­cause they know that if man­aged cor­rectly, the money they lend to in­di­vid­u­als is be­ing in­vested in an ap­pre­ci­at­ing as­set.

If you are look­ing for an in­vest­ment that ei­ther keeps up with in­fla­tion or out­strips it in terms of growth over the long term, then prop­erty is for you.

4. How to in­vest Save, save, save. Wher­ever pos­si­ble, an in­vestor should put aside as much money as they can.

Goslett says the larger the de­posit, the lower the re­pay­ments and the eas­ier it is to buy a prop­erty.

It is also vi­tal to have as much dis­pos­able in­come as pos­si­ble, as this will have a bear­ing on whether the bond is ap­proved or not.

Pay­ing off any ex­ist­ing debt as soon as pos­si­ble will im­prove the in­vestor’s dis­pos­able in­come along with their credit rat­ing. Main­tain­ing a clean credit record will be in­valu­able when be­ing as­sessed for bond ap­proval.

Goslett says once the in­vestor has the re­quired de­posit and de­cided on the type of prop­erty that will suit their life stage, work­ing with a mort­gage orig­i­na­tor will en­sure that the bond ap­pli­ca­tion is a smooth, has­sle­free process.

“When you are ready to take the next step, it is important to part­ner with a rep­utable es­tate agency to help source the right prop­erty,” he says.— Prop­erty24

Lo­ca­tion is vi­tal be­cause be­ing in the right area and po­si­tion will en­sure a good re­sale value.

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