an unknown area. Knowing where to start looking can
save an enormous amount of time and energy. Once it
has been established which area the buyer intends to
settle, finding the correctly priced property that is for
sale in the area via the Internet can prove advantageous.
The location of the property affects everything from
the capital appreciation to the income possibilities and
rentability or saleability of the property.
they have chosen and their objective in acquiring a
particular property.
Property investment strategies
There are various property investment strategies that
property investors can implement, each of which
involves a different approach.
There are many factors that determine whether
the location is right for a property investment, but
accessibility and future potential must be two of the
most important. Remember, too, that the surrounding
areas and properties influence the value of a property,
so be aware of the current neighbours and future
developments.
Buy-to-let
Buy-to-let property investments focus on generating
an annuity income. The capital appreciation potential
of the property is a secondary consideration to the
rental income potential. In other words, when an
investor is evaluating a potential buy-to-let property,
their focus is on the current and long-term ability of
the property to generate a monthly income, and the
capital appreciation is a long-term bonus.
Price
Buying a great investment at an inflated price is not
a smart investment strategy. Buying at the height
of a property boom reduces your ROI significantly,
while selling when the market is depressed will lead
to significant losses. Unfortunately, it is human
Buy-to-hold
A buy-to-hold st rateg y wou ld ta ke capita l
appreciation into consideration, but over a longer
term. In other words, the short-term capital
appreciation would be less important than the
potential over the long term, say 10 or 20 years, to
nature to follow the herd, and statistics clearly show
that when house price inflation is buoyant, people –
including property investors – join the buying frenzy,
and when property price inf lation drops, people
panic and sell.
Your ROI is determined by the price you buy at,
not only the price you sell at. If you buy well, you can
be assured of a good return. Even at the height of a
property boom, investors can find properties at good
prices, provided they do not become swept up in the
excitement of the market. Look out for ‘motivated’
sellers who can be found in any market, and for
whom the selling price is not the most important
factor. And be sure to negotiate – always!
Evaluating A Property Investment
It really depends on what property investment strategy
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naturally appreciate in value, or perhaps as a result
of developments in the area. Buying at a good price
is always an important consideration, but in a buyto-hold strategy, it becomes even more important
than usual, since the return on investment (ROI) is
magnified if the purchase price is low.
Speculation
If a property investor is speculating with property,
in other words, buying high to sell higher, the shortterm capital appreciation is critical. The objective
here is to make short-term gains based on high
property price inflation. This is a very risky strategy,
since the capital appreciation may not be realised, or
a buyer may not be found, and the investor could be
stuck with a long-term commitment that he or she
is unable to honour. In boom times, many investors
made spectacular profits using this strategy.
Residential Handbook 2013
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