Adding property to your investment portfolio is a great way to diversify and create a buffer against possible losses caused by a downturn in the economy. With real estate properties, you have an advantage over paper investments in that you will always have the physical value of the property. The right real estate almost never completely loses its value, which offers a comforting tangibility not offered by many other investments.
Before buying property for investment purposes, it’s essential to have a thorough valuation done to realistically ascertain what is the sustainable income of the property. Remember that there is no real value in property if it doesn’t generate income or save you on having to pay rent. Both historical and current income figures should be used in the value calculation, which can then be compared with other properties in the neighbourhood.
If this is your first foray into to the property investment arena, there are a few issues to consider before deciding on whether or not you want to buy:
Is The Property In The Right Area?
Location, location, location isn’t just an industry cliché, it is a hugely important consideration. Are you familiar with the neighbourhood in which you’re thinking of buying? The location of your property is one of the biggest influencing factors on the determination of its value. Buying in the “wrong” area will make it more difficult to rent out.
Will You Qualify For Finance?
The qualifications for buying an investment property are different to those for buying a property for your personal residence. You will usually have to show a debt-to-income ratio of less than 45 percent.
Do You Have A Business Plan?
Buying a property to rent involves a lot more than simply purchasing the property. You need to think about who will show the property to prospective tenants, who will be responsible for maintenance and who will liaise with the tenant in the case of any complaints.
Regardless of the potential income your investment property could generate, it’s important to remember that not all properties are worth their asking price. It is definitely a worthwhile investment to hire a professional valuator who can objectively and dispassionately value your potential investment before you commit to its purchase.
For objective, professional property valuations you can rely on, contact The Property Partnership East Rand on 0860 999 440 or Email: office@tpp.co.za – we’re standing by to help you.