Five Top Tips for Investing in Property

Property can be a compelling investment if you know what you are getting into. It also offers diversity if you are keen to supplement your investments in shares. Izak du Plessis, the head of the Moore Stephens property team and director of Moore Stephens in Stellenbosch, gives his five top tips for investing in property.

1. Location, location, location…. That is how the old adage goes, and it still holds true. It is better to buy a small property in a good neighbourhood than a big one in a bad neighbourhood.

2. Property valuation: Do not over-pay for a property by paying more than the market value. Do your research. Check recent sales and rentals in the area. Price growth tends to mirror economic growth, so if the economy stalls, prices generally do too.

3. Investment Purpose and Investment Horizon: Know why you are buying a property and have an exit plan if necessary. Buying and selling short-term could offer a small to mediocre profit, while buying and selling long-term tends to offer more value.

4. Expected cash flow from the property: Draw up projections for your anticipated income and expenses. Your monthly cash flow should cover costs such as levies, rates and maintenance. Consider the tax benefits of depreciation.

5. Consider how much you want to borrow to support an investment: Draw up a plan on the financial commitment you want to make. Carefully work out your deposit. It is best to gear your property so that the monthly rental covers the monthly bond instalment as well as operational costs.
As with shares, property investments carry risks. But investing in bricks and mortar can be a sound way to build wealth.
Contact Izak or contact the Moore Stephens property experts closest to you.