The "secrets" savvy property investors employ
Category Newsletter: Lead Article
For investors with the patience to take the long view, property is almost always a satisfying investment vehicle. This is the view of Jan le Roux, CEO of Leapfrog Property Group, who says that time and again property proves to be a resilient investment type, provided the investor approaches with a clear goal in mind, plenty of patience - "patience is the ultimate property investment virtue" - and a willingness to learn.
Naturally every property portfolio will be different but there are a number of key considerations that are always useful to factor in or simply bear in mind, whether it's your first property investment or your 15th.
Location, of course
No property advice would be complete without a reference to location. "Location is a key determinant of a property's anticipated appreciation so it really is important," Le Roux highlights.
He suggests thinking about it like this: The best property in an average area will fetch an average price while an average property in a sought-after area is likely to fetch a very good price. That's because properties can easily be improved upon while it's far more challenging to increase the desirability, safety or appeal of an area.
"Demand drives pricing and prime locations are always in high demand. Consider the location's access to major transport routes, the quality of the schools in the area and the nature of the amenities like hospitals and shopping centres," Le Roux says.
Distinguish between rental yield and capital growth
Both rental yield and capital growth are important considerations with an investment property but not to the same extent and not at the same time.
"Rental yield is how much money you make from renting out a property while capital growth refers to the value of the property over time," Le Roux explains. The goal with an investment property is capital growth, which is why long-term performance should enjoy priority over rental yield.
Understood differently, capital growth is the value of the property over time while rental yield is the monthly cash flow.
The thing about eggs in baskets
Any financial advisor worth their commission will tell you that diversity is key in an investment portfolio, and property is no different. Practically this means opting for a flat if your portfolio already includes two free-standing properties, or looking at a different location or even considering something cross country or currency.
"Make sure to manage your risk exposure and maximise your returns. A trusted property professional is a great resource in this regard as they have expert insights into the dynamics of various locations and property types," Le Roux says.
Patience, that property virtue
As alluded to above, patience is crucial where property investments are concerned. "Take time to understand the investment, consult a property professional, research the market and the location, and do comparative analysis where applicable," Le Roux recommends.
Compare price and value, and be clear about the difference. Avoid hasty, emotional decisions as you could be paying for it down the line.
Always apply common sense
Last, but far from least, a few "common sense" tips can go a long way in helping you make a sensible property investment. Le Roux's top three recommendations in this regard is to buy in a growth area, particularly if your plan is to rent the property out. Similarly, opt for practicality over luxury because it is generally more difficult to find tenants for very fancy properties, as opposed to one that simply addresses a need for accommodation.
And ultimately, says Le Roux, "use your head and not your heart". An investment property should not be approached with the same emotional expenditure as a property you intend living in.
Author: Leapfrog Property Group
