Real Estate Investor Magazine South Africa November 2014 | Page 24

ACQUIRING BY GAYE DE VILLIERS Maximising Profits In Property The key is to buy well... P roperty is a tangible, well-respected asset class, but as is the case with all investments, the key to maximising profits is buying well and then ensuring you sell well, says Carol Reynolds, Pam Golding Properties area principal in Durban, Durban North and La Lucia. She says some investors maintain the philosophy that you simply shouldn’t sell property, and their modus operandi is to collect and build an asset base without having to offload. “This is, however, utopic and is ultimately a luxury that only the wealthy can enjoy. For the most part, the average investor will have a dynamic property portfolio involving both buying and selling, with the ultimate goal of generating wealth. Sound acquisition “As a starting point, investors must ensure they buy well, namely make a sound acquisition achieving good value in a good area, so at any given time, if they need to offload, they will be able to do so at a profit. To this end, area is critical and it is better to find a property that has not yet reached its full potential. The idea is to buy a property that presents very poorly and needs some ‘TLC’, so the property sells below its market value. Area is critical, so you need to try and find the worst house in a good area, so you can enhance it – without over-capitalising - and then sell at a good price.” Good ‘bones’ Reynolds says to achieve this goal, good ‘bones’ are also vital. It is very difficult to transform an ugly duckling into a swan, when the ugly duckling has really bad bones. Bad bones mean the basics have been carried out poorly. For example, there is simply no flow and it is impossible to create flow because the house has been badly designed. Or, the property is positioned incorrectly on the site, and hence it is impossible 24 November 2014 SA Real Estate Investor to maximise the views or garden without literally demolishing the property and starting again. “What you need to find is a property with great bones but poor cosmetics. Ultimately, your goal is to add some make-up without having to undergo a full facelift! This way, you minimise the time spent on upgrading the property, and you will minimise your costs. Often, all that is needed is a coat of paint, some landscaping in the garden and new light fittings. If you need to spend a bit more on the renovation, spend your money where it counts: open up spaces by demolishing internal walls, and then spend your money on the bathrooms and kitchen. Don’t overspend on high quality fittings as these are never fully appreciated – instead invest in creating good spaces and great flow. Then modernise the kitchen and bathrooms tastefully rather than extravagantly.” Catch the buyer’s market She says once you have found your ugly duckling, there are two other important factors that render a property a good buy. Firstly, you want to try and buy in a buyer’s market, where there is an abundance of stock and sellers are being forced to reduce their prices to compete in the market place. If you have missed the boat and are in a more buoyant seller’s market, then you really need to be astute with your buying, as market conditions are not favourable for buying. Motivated sellers The second important factor is the motivation of the seller. Irrespective of market conditions, if you find a motivated seller, you will get a better deal. Ask your estate agent why the property is on the market. The agent will not be able to disclose everything to you due to client confidentiality, but will be able to give you an indication as to the reason for selling. Generally, sellers www.reimag.co.za