Kayla Cloete - REMAX
on 12 Jan 23
Categories: Finance & Budget
In the real estate world, there is a substantial difference between an investor and a home buyer. The criteria by which the property will be judged will differ vastly depending on how the buyer intends to use the property.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that it is important for buyers to establish their intentions for the home upfront before they start the house hunting process.
“Those who intend to live in the home will need to find a property that suits their personal needs and should consider factors such as proximity to their workplace and schools, future plans for family expansion, and other aspects concerning the overall functionality of the home. Investors, on the other hand, are more concerned with wealth creation and should therefore consider things such as average annual house price appreciation, area demand, and rental prices in the area,” says Goslett.
Both home buyers and investors need to consider that, unless they plan to flip the property, most real estate investments are a long-term investment strategy that can take at least five to ten years to mature.
“If the property a buyer purchases is not their forever home, they need to remember that it takes a while to build up enough equity in the home to help them climb the property ladder. There are also various costs that they will need to cover when buying a new home – such as transfer duties, and bond registration costs – and selling the current home, such as compliance certificates, a municipal rates clearance certificate, and an agent’s commission. Even if it is just a starter home, I would advise home buyers to purchase a property that they will be comfortable living in for at least five years. This will allow the market enough time to appreciate in value to help them afford the costs of upgrading to a larger home,” he recommends.
If your goal as a property investor is to set yourself up for future financial security, then Goslett also advises against prematurely selling the property before it has had enough time to appreciate in value. “Perform the necessary calculations on what to expect on monthly rental returns to make sure that you can afford to hold onto the home for around five to ten years before selling,” says Goslett.
As a final word of advice to investors, Goslett suggests that the year ahead might present the perfect conditions in which to purchase more investment properties. “All market indicators seem to point to house price appreciation slowing in 2023. If this is the case, it might not be the best time to sell, but it could present the opportunity to build out your real estate portfolio so that you have two or three properties benefitting from the solid long-term growth we are bound to see once the market recovers. To find out more about how your local market will perform in the year ahead, reach out to your nearest RE/MAX agent to make sure you never miss an opportunity,” he concludes.