Swimming Upstream
The trick with property investing is to watch what everyone else is doing. Then do the exact opposite! When times are tough, people don’t buy houses. The risk is too high.
What happens if Bhongo, the Marketing Director of a prominent law firm in Johannesburg is invited to a Zoom meeting and is surprised to see the HR Director, Emy-leigh, waiting for him? Waiting to deliver the blow that will strip him of his title, the income his family of four depend on to pay the bills every month and his spacious corner office which he thought was waiting for him once lockdown ends?
No. No ways. Waaaay too scary. Better to play it safe, better to rent and ride it out and hope the economy turns.
Bhongo and his fears represent the general mood in the country at the moment. When this happens, property prices drop because the demand is not there to drive prices up.
As a savvy property investor looking to invest in some buy to let properties, what should you do?
You should BUY!
Rule #1 of property investing is that you make money when you BUY so if property prices are low, there are deals to be found.
Now I am not suggesting every single property on the market is a deal in a market like this. Not even close! What I am saying is there are more deals on the table, more properties that will offer you the opportunity to make money when you BUY.
How do you determine which properties are worth investing in? Ask yourself the following questions to ensure you make money when you buy:
If I buy in this area, who are my tenants likely to be?
To answer this question, we need to find out the demographics in the area. A good website to help you determine this is www.lightstoneproperty.co.za.
What is the average age in the area?
If it is student type age, we want to make sure there are colleges and universities nearby. If it is late twenties to mid-thirties, chances are good families live there. Think parks, schools, hospitals, libraries.
If I lived here, what would I expect to be able to find close by?
Put yourself in your potential tenant’s shoes. Imagine what they facilities they would need nearby. What could persuade them to settle in that suburb? Are there decent shopping centers nearby? How long would it take to commute from this suburb to the major business districts?
What is rental demand like in the area I am looking to invest in?
Are there lots of homes standing vacant or is there a waiting list at the local Managing Agents office of people queuing to move into the area?
Are there any development plans for this area?
Check with the local town planner to determine if there are any development plans in place. Useful to discover BEFORE you buy that they plan to build low cost housing across the road. Or demolish the block next door to build a 20 story block of flats. Scenarios like that could see your property losing value overnight. Of course, if there are plans to build a new shopping center or office park nearby, that could see your property value escalate.
Do your homework in order to make sure there will be strong rental demand for the area you invest in. This will ensure you have a constant supply of potential tenants which will keep occupancy levels high and a steady stream of passive income flowing your way!
