Property remains a viable asset class in which to invest and still forms one of the most important investment cornerstones for South Africans. For those who are currently looking at investing in a property, the timing couldn’t be better.

Since buyers’ market conditions prevail, those who do their homework thoroughly and follow sound investment advice are sure to reap solid returns in the long run.

There is no doubt that South Africans are spoilt for choice when it comes to property investment options. From bachelor flats and apartments to game farms and small holdings and everything in between, buyers have a range of property types from which to choose.

However, location remains the most important factor when purchasing a property – no matter what type of property it is – and so buyers need to select the area in which they invest carefully. Buyers also need to take the time to investigate the relevant properties on offer in their area of choice and compare the costs per square metre, the fittings and finishes etc.

When looking to invest in a residential property as a primary home, buyers need to consider what their needs are and identify which accommodation options best suit their requirements. Those buyers looking to invest in leisure or rental property will have completely different requirements to buy-to-live purchasers and those who are looking to buy vacant land.

For example, first time, single buyers looking to get their foot in the door should consider investing in an apartment while townhouses, on the other hand, are an ideal property type for young couples or those wanting to scale down for retirement.

Those purchasing a property in a sectional-title scheme or apartment building should check the rules and regulations governing the building or scheme, particularly ones regarding pets, visitor access, parking and maintenance.

While single detached dwellings are by far the most common form of housing in South Africa, gated communities are another popular option of freehold property, because homeowners often have access to a range of facilities and amenities within the estate. These kinds of properties are very popular among families or young couples who want to start a family in the near future. This is because of the lifestyle elements they offer where children are free to ride their bikes around the neighbourhood, play in the communal parks or play areas with the security of the estate to ensure residents safety.

No matter what type of property buyers are considering purchasing; there are some questions buyers need to ask before making one of the biggest financial commitments of a lifetime.

These include:

Why is this a good area in which to invest?

• Are property values appreciating in the area? By how much?
• Is the neighbourhood well maintained?
• Is the neighbourhood safe?
• Are more and more houses being built or bought in the area?
• Is the area mostly zoned for residential properties?
• Are roads well maintained and is there a proper infrastructure in place?

Other important location considerations include:

• Is the area zoned for heavy commercial development?
• Are there noisy highways, airports, or railroads nearby?
• Is there heavy traffic in the area?
• Are future highways or developments planned within the area?
• Are there wastewater plants or landfills nearby?

When buying vacant land, buyers should ask the following questions:

• Are sewer and water lines available?
• How much fill removal or fill replacement is necessary?
• The cost of removing large rocks and boulders in order to build?
• Is there proper drainage on the land?
• Is the soil suitable for construction?

At the end of the day, a good investment can only be assured if a buyer has done all the necessary homework and comparisons and is sure that the investment they are making is worth the financial commitment they are laying down to acquire it. While the recession has meant that property is not appreciating at the rate it once was, astute property investments still have the ability to provide investors with solid gains.

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Adrian Goslett, CEO of RE/MAX of Southern Africa explains how, where and why buyers should do their homework before purchasing a property

Although buying a home is usually a happy and exciting experience, always remember to do your homework before making a decision. “Although in the fast-moving real estate industry you may feel pressurised to make decisions quickly, a home is a major investment and it is important to take the time to make it wisely,” says Adrian Goslett, CEO of RE/MAX of Southern Africa.

Financing and affordability

The first thing any prospective home buyer needs to determine is what they can afford and whether they qualify for a mortgage. Says Goslett: “There are a number of benefits of getting a prequalification for a home loan from a mortgage originator before you start looking. Bear in mind that this is not a guarantee, but it gives you a good indication as to what price range you can afford. Furthermore, a prequalification is also a clear indication to estate agents that you are a serious buyer. Today, with the National Credit Act, many applicants do not qualify for a 100% bond, and so the prequalification process will also indicate how much deposit you will need to save in order to qualify.”

However, Goslett notes that aside from mortgage prequalification and deposits, home buyers also need to work out whether or not they can afford all the other expenses involved in buying a new home, such as transfer duties, moving costs, home insurance, the costs of connecting the electricity, telephone, ADSL and television, as well as being able to modify and tweak the new home to meet their individual needs.

“It is also vital to work out what the monthly rates and taxes bill will be,” he says. “If you are buying within a development, you need to know what the levies will be and whether there are any increases planned for the near future. Another very important aspect when buying a sectional title unit is to check out the financials of the body corporate and to ensure that everything is paid up to date and running smoothly. If you buy a unit and the body corporate in question is behind in its payments, then that could become your problem down the line,” explains Goslett.

He notes problems can also emerge if the buyer submits an offer to purchase that is subject to the sale of their property. This is because the money to buy the new home is being funded by the sale of the existing home. “This is a standard practice, and all very well if the buyer has their property on the market for a reasonable price, but so often, many of today’s sellers still have totally unrealistic ideas on what their homes are worth and, as a result, put them on the market at unrealistically inflated prices. In such cases, it is really vital to determine a realistic price for your home before you make an offer on another one.”

Research the neighbourhood

Once you have decided what area you would like to invest in, then it is time to roll up your sleeves and do some CSI-type investigations into the neighbourhood. Says Goslett: “There are a number of things that you should investigate, namely the level of crime and traffic the area experiences, whether there have been any relatively recent or planned zoning changes in the area, what kind of amenities the area offers and how well these are maintained. The area’s schools and their quality are also an important aspect to investigate. In addition Goslett advises potential buyers to take note of the level of maintenance of the road infrastructure and pavements as well.

He says that the local residents’ association, municipality and police station offers a wealth of information for interested home buyers. Also, he highly recommends that anyone serious about buying a new home should make an effort to meet their potential new neighbours before making an offer to buy: “Not only are neighbours and excellent source of information about what’s going on in the area, but it is a good idea to determine whether you will get on with these individuals or not. Living next to neighbours that you don’t get on with can be a very stressful situation, and sadly, most homeowners only get to meet the neighbours once they have bought the home.”

Buying off-plan

If you are looking to buy off-plan into a development, be warned that although it is usually more cost effective, it does come with its own set of risks. Due to inadequate controls, an increasing number of unscrupulous developers have entered the market and produce sub-standard work and inferior new builds. The faults in any development often only appear months down the line when it is too late for the new owner to do anything about it. As a result, Goslett advises anybody who is interested in buying off-plan to do some in-depth investigations into the developers, as well s taking a look at the quality and durability of their prior developments, before signing on the dotted line.

Informed negotiations

In order to negotiate the best possible price for the house you want, you need to accumulate as much information about the value and market demand of the property in question. “Knowledge is power and any agent worth their salt should be able to provide an interested buyer with a list of properties in the area that have been sold, stating the asking price, as well as the actual selling price of the home. This will give you great comparative information with regards to the house you are interested in,” says Goslett.

Everyone knows that over time, areas change for the better and for the worse, and as such Goslett says that buyers should ask the estate agent for some statistics on the capital improvement (or decline) of any particular area over the last five or so years: “This will give you an indication on whether or not the area is a secure investment and whether it has potential for reasonable returns going forward, bearing in mind that property is a long term investment.”

Some other information that is of use with regards to the negotiating process is to determine the level of market competition and demand. Says Goslett: “Work out how many properties are on offer in the area and how long it took them to be sold. This will indicate how quickly you need to move in order to secure the deal. Also, try and find out how long the house you are interested in has been on the market – the longer it has been listed, the more open to negotiation the seller will most likely be.”

Structurally sound

And lastly, determining that the home is structurally sound is of course, very important, notes Goslett: “It is highly advisable to hire a reputable home inspector who will be able to give you a full report of the home in question. Also, it is worthwhile asking the existing homeowners if there has been a history of any flooding, damp or sewerage blockages.” He also notes that it is essential to check to see if all the fixtures work, such as the stove, all the lights, the pool pump, the electric gates and the alarm system.

While obtaining some of the necessary information about the property you intend to buy and the neighbourhood in which it is situated may seem like an unnecessary hassle, the more information at your finger tips, the more confidently you can negotiate the deal. “Buyers remorse on a purchase as large as a home is not a pleasant experience, and one of the best ways to avoid this kind of a situation would be to do your homework, thoroughly,” Goslett concludes.

Remember by choosing us for a loan, you will get professional advice to make sure you are getting the best deal possible.

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