Knowing what to look for when buying a house will ensure you get the most out of your property purchase.
Not all property purchases are equal. Some investments can be rewarding whilst others can leave you in financial ruins. The burning question is how can you differentiate between the two?
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, you need to be knowledgeable on everything there is to know before signing the deal on your purchase. Being well-informed will enable you to make the correct decision and successfully allow you to get the most out of your property investment.
Opting to buy a home in a fair market won’t assure that you will receive healthy returns over the long term. According to Goslett, there are certain golden principles that are important to consider before making your property purchase:
What to look for when buying a house?
- Property that will be affordable to maintain in the future
- A suburb that will appeal to future tenants
- The potential rental yield
- The amount of property available for rent in the area
- The market value per square meter
- The type of facilities and amenities nearby
If the property is for investment purposes it will be more important to research what will appeal to possible tenants in the area and who the tenants might be. Do not underestimate the value of location and the role it plays, even small differences between two locations can have a significant impact on the pricing of property.
Deciphering the type of purchase you are making, be it a home to live in or an investment property, is important in order to adopt the correct approach when entering the buying market. “If the home is bought with the intention of being the buyer’s primary residence, the decision making process will be far more emotionally guided. The buyer will look at aspects of the property and the surrounding area that appeal to them personally. However, if the property is for investment purposes it will be more important to research what will appeal to possible tenants in the area and who the tenants might be,” advises Goslett.
Although most information on the area, property or complex can be found online - viewing the location in person is still vital in order to ensure absolute peace of mind. “Take the time to drive around the area and walk the streets. Consider what the traffic is like and who your potential neighbours could be, as well as the facilities and amenities in the area. A real estate professional with working experience of the area will be able to provide a comparative market analysis, which will reflect recent stats and figures of sales in the area,” says Goslett.
READ MORE: The best kept secrets for buying a home
Simplify and stick to the basics
The fundamental principles of property buying never go out of fashion, even when the markets shift or become influenced by outside factors. There are certain core points that successful property investors need to adhere to at all times. These include aspects such as the property’s location, the value per square metre and the potential rental yield which will always be the key criteria on which an investor makes a decision.
Subtle differences can have a big impact
Do not underestimate the value of location and the role it plays, because even small differences between two locations can have a significant impact on the pricing of property. Two homes can offer identical features but can differ in value depending on where they are located. “It is possible for property prices to vary substantially from one suburb to the next. In fact, it is even possible for homes to have different values based on which side of the street they are on. From an investment perspective, purchasing the worst home in a sought-after area is far better than purchasing the best home in an area with less appeal,” advises Goslett.
As a property investor, it is important to think about what you would like to achieve with your property portfolio and what needs to be done to get there
According Goslett, for buyers who are investing in properties to let, it is essential to discover the specific market you are targeting as various aspects will be attractive to various people. Investment buyers should be aware of the amount of rental stock available in a specific area before opting to invest in a buy-to-let property as the rental sector for properties is largely dependent on the demand for it in the market. An investment could fall flat if there is already an oversupply of properties available for rent in a particular area.
Have a plan in place
It is vital to have a plan in place before buying home. “As a property investor, it is important to think about what you would like to achieve with your property portfolio and what needs to be done to get there,” says Goslett. “As a property buyer, it is essential to think about where you would like to settle for the next five to ten years.” Having a list of goals to achieve will help you to remain focused and will give you something to work towards. Buyers should always strive towards properties they can potentially afford in the future rather than limiting themselves to what is affordable right now.
Drop the debt
Key elements to any property transaction is finance and affordability. The number of cash buyers in the market is significantly smaller than the number of buyers who require a home loan to purchase property. According to Goslett, a buyer’s application for finance has more of a chance for success if they reduce their debt-to-income ratio and always strive to maintain a clean credit record.
Having a deposit of between 10% and 20% of the purchase price of the property is vital in today’s market. Putting down a deposit will increase your chances of bond approval and it will also ensure a reduced monthly repayment.
A property is more than just bricks and mortar
The return you get on your investment is important but it shouldn’t be the only factor you consider. According to Goslett, the basic principle of purchasing a property is that if you wouldn’t want to live in it, it’s not likely many others would either. The property has to be appealing to the buyer and they have to want to own it.
“Purchasing a property that provides a healthy return is not just about luck and timing, it’s about much more than that. The most important aspect is to research as much as possible, and only buy a property once all options have been carefully considered,” Goslett concludes.
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