LESSONS
LESSONS
Buying your First Investment Property
Strategies to Remember
BY PIERRE VAN DEN BERG
• Find yourself a mentor. This is invaluable. It will save you many years towards reaching your goal or acquiring financial freedom. It could also save you substantial expenses and unnecessary“ school fees”, as well as the frustration of wrong decision making.
• Although bargains can be found during any stage of the property market, there is considerable value in understanding property cycles and the specifics of a buyer’ s and a seller’ s market.
• A smart strategy for a beginner investor is to rather buy one or more investment properties before buying a home for himself. I am a firm believer that the house bought to live in is much more of a liability than an asset. Many people spend huge amounts or borrow lots of money to buy a home, limiting themselves to the possibility of further investment. Available funds should be used to acquire income generating assets [ rental properties ] rather than to succumb to the temptation of upgrading your home or over capitalising.
• Do not procrastinate, or postpone your property investment venture. The quickest and best way to learn and to improve your skills is to get right into the action. Why do you think you so often hear from investors:“ I should have started earlier”.
• Acquiring an investment property is like buying a business – the numbers have to make good sense. Additionally, the tenant’ s needs count, and not your own emotion and preferences of a property you might have favoured to live in yourself. Think like the average tenant – little maintenance liability on
the property and garden, close to public transport or major routes, schools, security, etc.
• Although very difficult, try not to get emotional and over excited by the first bargain property you see. You will do extremely well for yourself if you manage to stay calm and patient, and to suppress the hype. Look at as many properties as possible and do lots of homework.
• One of the most important aspects is the purchase price of a property. As an investor, you should never be the“ dependent” party. You have the time, and the choice among many properties, so why should you pay more than what you determine is“ your price”. Searching for undervalued properties make perfect sense, and targeting distressed sellers is an excellent strategy.
• Don’ t be fooled by the promise or prospect of high capital growth potential on a property. Income potential is a much more important aspect to evaluate, and to what degree you are assured of a constant and above average rental to cover as much as possible of your bond payment and other expenses.
• Properties which can be subdivided, renovated or a flatlet added at relative low cost- to increase your rental income- make excellent investment sense. If you find one that
RESOURCES
ThanksToProperty. com
64 JULY 2016 SA Real Estate Investor www. reimag. co. za