A Few Common Sense Tips in Choosing Real Estate Property
- Select property in line with Town planning potential growth or rezoning. Seek to understand the zoning rules. Some zoning have freely permitted, permitted uses by special Consent, Not permitted, underway local plans e.g. Newlands, Eastlea, Milton Park. For example Eastlea was a residential area without commercial use permits. One time we made a purchase with a team of friends around Eastlea for a residential property which was poorly maintained. We upgraded and renovated it. After a small capital injection we sold it at about 60% profit in USD. However because we were not aware that the area was being rezoned we sold the property two months earlier. One of our partners was desperate for funds and so we had to dispose. Exactly two months later the area was rezoned to allow commercial activity and offices. Suddenly the price of the property rose by 100%. If we had just done some research with town planning we could have increased our profits.
2. Select properties within sought after “lifestyle” locations that will attract consistent rental demand by quality tenants.
• If the intention is to increase value then choose areas which are known to be lifestyle location se.g Borrowdale or especially Borrowdale Brooke, Folyjohn in Harare or in Bulawayo the Hillside, Burnside, Matschemhlope areas etc. The property prices appreciate and so do the rentals for these kinds of areas. This is so because they appeal to tenants’ ego and social status appeal.
3. Select properties within suburbs and streets where limited land is available.
If there is limited land available for further development, you will have less competition for tenants. Property values will also increase at a greater rate. “Limited land” also means that the area is in demand — people want to live there. A developer in Harare and Kadoma called Damofalls has been releasing lots of residential stands onto the market. My wife and I bought some three stands from these developers in 2000 and were waiting for them to appreciate in value before disposing. Unfortunately because of the continue release of other stands in they same area by the developers there was no demand for the land and so prices were depressed. Our returns at disposal five years later were minimal. We could have received a better return from other investment vehicles. Limited land e.g Shawasha Hills or Borrowdale Brooke means property values continue to increase.
- 4. Select properties in suburbs/towns with proven capital growth over the past 5 years.
As an investor you want to acquire land in areas which have demonstrable growth potential. So do not invest in areas with no potential.
5. Select properties in areas which have “affluent” tenants with high disposable income.
More and more people are now leasing residential property, and investing excess income into investments. The higher the tenants income, the more chance you have of raising the rental amount every year, and the less chance your property will be affected in the event of a recession or market downturn. In this case it means you want to look for properties that would attract either corporate tenants or international non governmental agencies. These tend to pay better and maintain properties well.
6. Select properties which have land content.
The general “rule” is that land appreciates in value and buildings depreciate. The land can be further developed into other profitable uses e.g cluster homes or subdivisions etc.
In certain circumstances, specific high rise apartments might be worth more than houses in the same area, because they provide their occupants with fabulous views — water, city, mountains.