The Seven Golden Rules of Successful Property Investment

Investing in property can be a juggling act. There are a number of factors to take into account – and get right – if you want to achieve consistent returns.

We call these factors our “Seven Golden Rules“.

Here we explain how these factors affect your investment – and how to get it right.

1. Show me the money

The most important thing to consider when you invest in property is the numbers. What is the real value of the house and how much should I offer? What will it cost to renovate? If you buy to let, what sort of income can you expect from letting the house once it’s been renovated? If you buy to flip, how much can you expect to sell it for, and what will it cost to do so?

Speaking to an experienced investment consultant can help you run the numbers and make sure the purchase makes sense.

2. There’s no need to rush – take time to think things through

Property investment is no get-rich-quick scheme. If you prefer a quick result, a long-term investment in property is not for you. Building a property portfolio takes time. You will also need to have the patience it takes to weather a downturn in the market. Remember that a downswing can be a boon – a useful buying opportunity.

Time is also a factor at the outset: don’t rush into a choice. You need to take the time to do due diligence, and weigh the pros and cons of each property option you have.

3. Become an expert

Unlike investment in stocks, the residential property market does not have a stock exchange. There are no giant electronic boards telling you what a fair value for your investment would be. The only way to make a sound decision is to make sure that decision is well-informed.

The residential property market is complex. There are just too many factors at play to know the whole market with any depth. By focusing on a specific niche – and becoming an expert – you can gain insight into that market. When you understand that specific market, you will be in a stronger position to buy – or sell.

There are any number of niche markets that you can choose from. If you speak to an expert in the field of property investment, they can help you identify the best niche for you. They can also help you learn more about the niche you’ve chosen. The more you know, the better your choices will be.

4. Make sure you keep a balanced outlook

Often, buying a house is based on emotion. No matter how logical we try to be, we can’t always help falling in love with a property that appeals to us.

This is not wise when you buy a property as an investment. Whether you plan to buy the property to let it, or upgrade it for sale, emotion can cloud your judgement.

Don’t forget that the house you plan to buy is an investment – it needs to make economic sense.

Often an objective eye will help you choose the right place – for the right reasons. Someone with the right experience can undertake a detailed cost-benefit analysis. They can help you to ensure the decision makes economic sense.

Remember: the goal of investing is to get as much of a return as you can. If a pretty little house turns your head, get help from a third party who understands that goal.

5. Go with your gut

A good instinct is a key property investment skill. Anyone who wants to invest in property would do well to first invest the time to develop a good gut feel. Some people confuse gut feel with emotion. In reality, they’re two different things. A good instinct is a skill that can be honed, and it’s not the same as buying on emotion.

Each property has its own identity. So it is vital that you develop your own gut feel. This instinct will help you make the right choice. Knowledge is power. If you are serious about your investment, it pays to learn as much as you can about what you want to buy – and where to buy – before you take a look at your purchase options.

6. Build a solid network

Build an “A” team around you. This will help you manage your risk – and take some of the work off your hands. (Except, of course, if you are a hands-on person who loves getting his hands dirty.) Who you choose to fill out your team depends on the nature of your portfolio. An “A” team could include professionals such as:

  • renovators
  • maintenance crews
  • specialist agents who understand your investment criteria
  • a property specialist lawyer
  • a bookkeeper or accountant with experience in this area
  • and a reliable property manager.

Sorting the reliable service providers (especially contractors) from the charlatans can be a painful and expensive process.

Working with a network of reliable contractors on the ground takes a lot of the pain out of the process. It can take some time to put together the right team for the job. Once you have a team you can trust, hold on to them like gold.

7. Make sure your papers are in order

Different countries have different laws when it comes to buying property. There is also the question of tax to take into account. Because the law evolves with the society it serves, understanding it all – and keeping track of every change, can be a tough job.

At YDL, we have invested substantial time in understanding the workings of both tax and the law surrounding offshore property investment. In fact, we have built a solid reputation as experts in each of the seven golden rules we’ve discussed here.

If you’re ready to invest in offshore property, call me on 011 465 7356 or email me on anton@ydl.co.za. I look forward to answering your questions.

Warm regards,
Anton