Most people know that property is a valuable asset to own, which can both generate a healthy income and grow your wealth considerably if you are savvy when it comes to making good decisions about what property to buy.

While the thought of investing in an apartment block as a major asset can be overwhelming given its large purchase price, it can actually be a much safer investment than buying a residential property, in that your investment has the potential to scale up much more easily – everyone needs a place to live.

When looking for the perfect apartment block to invest in, one of your biggest hurdles is being able to recognise a good deal.

Valuations for Apartment Blocks

First and foremost you need to establish if the property you have your eye on will realistically provide an income for you because cash flow is important. A property valuation is, therefore, a logical place to start.

Generally a professional property valuation is an estimated market value of a property, determined through the use of sophisticated statistical calculations, but before contacting the valuations experts – which is in itself an invaluable investment – you can do a fair amount of educated assessment on your own to formulate an opinion on the value of an apartment block.

Consider these factors:

Location – Buying in the right neighbourhood at the right stage of a real estate cycle will result in better profits. In order to maintain a positive cash flow, you want to buy in an area where property values have the potential to go up, and not down.

Building size – Number of apartments, the square footage, and the total estimated rent potential. To determine the annual rent potential, multiply the number of apartments by the monthly rent, for example, 10 X R10 000.00 = R100 000.00, then multiply this by 12 months = R1 200 000.00 rent per annum.

The type of market you want to buy into – While C class buildings may have a higher tenant turnover, the overall maintenance can be more demanding than with A or B class buildings.

The strength of the rental market in the area and market expenses.

The final value of the property referenced to comparable sales.

Risk value – If the property does not appreciate in value, can you rent for positive cash flow, and can you handle the negative cash flow created by a few vacancies?

The size of your deposit – The less cash you put down on a property, the more potential there is for buying more properties at a later stage, especially if the properties values increase. However, be cautious of “No Deposit” investing if you are a long term player.

Your interest rate for financing a loan on the apartment block – Take into consideration if you were to buy with an adjustable interest rate loan and the rates go up, would this put you out of business?

Committing to your Investment

Whether you choose to make your own assessments before approaching a professional and registered valuer in order to cement your decision to ‘commit to purchase’, or you choose to speak to the professionals from the outset, it is imperative to exercise patience, because each valuation is unique and it will take time to gather all the important data related to your investment.

For professional and objective property valuations that will give you the ultimate peace of mind when you are committed to investing in an apartment block, contact The Property Partnership East Rand on 0860 999 440 or Email: