"The asking price of a home is an important consideration when investing in property, but it's not the only factor to think about. It's just one element in determining a property's value. To truly assess whether a property is a good investment, you need to look beyond the price tag and evaluate a range of factors," says Gerhard Kotzé, CEO of the RealNet property group.
"When investing in property, consider what the property can deliver in terms of returns-whether through rental income, capital growth, or both. The goal is to ensure that the long-term benefits outweigh the upfront costs and ongoing expenses.
"Apart from the price tag, start by researching the local property market. Factors such as recent sales in the area, rental demand, and the overall growth potential of a neighborhood are crucial in determining a property's value. As always, opt for areas with improving infrastructure, proximity to schools, or new developments, as these indicate increasing demand, which can boost future value.
"The property's condition is also a major consideration. Properties requiring extensive maintenance or renovation may not be the best choice, as these costs can eat into your profits. While fixer-uppers may seem appealing, buyers must weigh renovation costs against potential value increases. This is why thorough inspections by professionals are essential-to uncover hidden issues and provide a clear understanding of the property's true state.
"Additionally, buyers should evaluate the potential rental income if they plan to let the property. Calculating the annual rental income as a percentage of the purchase price helps determine whether the investment will generate sufficient cash flow. A good rental yield depends on market conditions and location, but as a general rule, it should at least cover bond repayments and other expenses.
"Finally, investors need to consider their financial position and long-term goals. Avoid overextending your budget for a property that may not align with your financial or lifestyle aspirations. Think about whether the property will still hold value for you in five or ten years and how it fits into your broader investment strategy.
"While it may be tempting to purchase a fixer-upper within your price range, remember that just because you can afford to buy a property doesn't mean you can afford to own and maintain it."
