Sourcing and assessment of property investments

by Jul 7, 2021Real Estate Investors0 comments

Factors that determine the quality Sourcing and assessment of property investments include your:

  • time available for research;
  • the overall level of knowledge;
  • ability to structure the approach;
  • utilization of funds for the most effective outcome.

Without proper research and understanding of the how-to source, secure, manage, and exit property investments, you are likely to achieve a less than satisfactory result.

We will discuss the 2 most widely used sourcing options and the realities thereof:

Buying on auction

You might have this idyllic concept to purchase property at below market value using this method, but the sourcing of these properties is fraught with obstacles and challenges.

Firstly, you need to assess the type of auction and familiarise yourself with the terms and conditions thereof. These include the sale in execution, deceased estates, liquidations, etc.

Secondly, you need to develop feasibility models, value assessment approaches, and due diligence procedures.

An enormous amount of practical experience is required to determine:

  • buyers that will likely bid;
  • the estimated value of bids;
  • roles of creditor representatives; and
  • handling of property expenses e.g. arrear rates and taxes.

More than 60% of auctions are canceled before actual bidding can commence, thus spending time on such an auction is costly with the most valuable commodity, which is your time!

Should the auction proceed, further challenges include:

  • obtaining access to determine market value;
  • maintenance quotes; and
  • relocation of existing occupants.

Changes in laws and regulations will change the industry drastically with less estimated sales in executions to take place. The model is a fleeting ideal, that breaks down family structures with many negative connotations. Astute property investors however take the impact investment approach which is far more sustainable.

Buying from developers or new developments

This well-known model, if utilized correctly with proper due diligence and research can be a good approach. However, only a low number of first-time property investors will receive the real benefit thereof.

Property developers require unit sales to secure their development bonds or reach the breakeven point for the development. Properties are thus marketed aggressively to reach that goal, without selling the remaining units that will negatively affect their own investment returns.

Should you not have proper statistics that relate to:

  • net rental yields;
  • expected capital growth;
  • the market value of similar properties; and
  • expected escalation of rentals

The possibility to determine the expected return whilst purchasing below market value is very low, with less than satisfactory end results.

The ideal sourcing option

Imagine how wonderful it would be if you had access to:

  • already sourced opportunities;
  • complete with due diligence by a professional experienced team;
  • at 75% of market value all cost inclusive;
  • or pay less than market value all cost inclusive with benefits of at least 20% of the purchase value; and
  • the investment you make has a lasting impact on the lives of those with who you transact with?

Get in touch with us today and we can assist you on your journey

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