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