Real Estate Investor Magazine South Africa November 2018 | Page 22

ACQUIRING
Do your due diligence properly
Sourcing and Assessment of Property Investments
F
actors that determine the quality of sourced property
investment opportunities includes your:
time available for research;
• overall level of knowledge;
• ability to structure the approach;
• utilisation of funds for the most effective outcome.
Without proper research and understanding of how-to
source, secure, manage and exit property investments, you are
likely to achieve a less than satisfactory result.
We will discuss the two most widely used sourcing options
and the realities thereof:
Option one – Buying on Auction
You might have this idyllic concept to purchase property at
below market value using this method, but the sourcing of
these properties is fraught with obstacles and challenges.
Firstly, you need to assess the type auction and familiarise
yourself with the terms and conditions thereof. These include
sale in execution, deceased estates, liquidations, etc.
Secondly, you need to develop feasibility models, value
assessment approaches and due diligence procedures.
An enormous amount of practical experience is required to
determine:
• buyers that will likely bid;
• estimated value of bids;
• roles of creditor representatives; and
• handling of property expenses e.g. arrear rates and taxes.
More than 60% of auctions are cancelled before actual
bidding can commence, thus spending time on such an
auction is costly with the most valuable commodity, which is
your time!
Should the auction proceed, further challenges include:
• obtaining access to determine market value;
• maintenance quotes; and
• relocation of existing occupants.
Changes in laws and regulations will change the industry
drastically with less estimated sales in executions to take place.
The model is a fleeting ideal, that breaks down family
structures with many negative connotations.
Astute property investors however take the impact
investment approach which is far more sustainable.
Option Two – Buying from developers or new
developments
This well-known model, if utilised correctly with proper due
diligence and research can be a good approach.
However, only a low number of first-time property investors
will receive the real benefit thereof.
Property developers require unit sales to secure their
development bonds or reach the breakeven point for the
development. Properties are thus marketed aggressively to
reach that goal, without selling the remaining units that will
negatively affect their own investment returns.
Should you not have proper statistics that relate to:
• net rental yields;
• expected capital growth;
• market value of similar properties; and
• expected escalation of rentals
The possibility to determine the expected return whilst
purchasing below market value is very low, with less than
satisfactory end results.
The Ideal Sourcing Option
Imagine how wonderful it would be if you had access to:
• already sourced opportunities;
• complete with due diligence by a professional experienced
team;
• at 75% of market value all cost inclusive;
• or pay less than market value all cost inclusive with benefits
of at least 20% of the purchase value; and
• the investment you make has a lasting impact in the lives
of those who you transact with?
Register today to experience this on www.propertyassist.co.za
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NOVEMBER/DECEMBER 2018 SA Real Estate Investor Magazine