How to Approach an Investment in Property Before Making Offer to Purchase

There are fundamentally 2 types of property investment...

1. Purchasing your own house or home on full title or sectional title
2. Other property purchases and investments

When it comes to buying (investing is what you're doing not simply buying) a home the dynamics might be different in so much that feelings or emotions might play a pivotal role in the decision. This is understandable. Nevertheless the decision to make an offer to purchase  for your own property or home should, as far as possible, be made on objective criteria.

All other property investments should be made on the basis of objectivity only. Emotion and gut feel should take a back seat here. Never make an offer to purchase on the basis of emotion or lack of homework. Here's the kind of points  I mean by objectivity...

• Buy in the right area so know how to judge this vital factor
• Decide upon the reason for the investment... ie for capital growth, for income and capital growth or other logical and sensible reasons. For example you might want to buy a property close to you for a son or daughter.
• Run detailed calculations and test for different scenarios such as higher than expected bond rates, long periods of having no tenant in a rented property for example. All these calculations should be rolled out way into the future. The final decision once other peripheral factors have been decided upon must be made only on the basis of thorough and comprehensive financial evaluation. You can create your own spreadsheets to do this or better still use Graham Van Zyl's Excel calculators and calculate accurate returns on investment..
• Check the true market values in the chosen area and do this using recorded and factual information. Don't take anybody's word for it.
• Make sure that there are no planning issues, servitude issues and other governmental or regulatory requirements that might impinge on a future value or property sale issue.
• Check the standing of an existing tenant if any.
• Check that rates and services accounts are up to date.
• Check the presence or otherwise of bond holders, creditors etc
• If you decide to place an offer to purchase make sure you do this with all the possible bases covered and all important checks made (eg physical inspection by authorised building inspectors).
• There are numerous other requirements to be professionally evaluated before finalising any property decision. It is always best that you control this process and do not abdicate everything to an agent. This means you need to educate yourself in all matters of importance. Believe me you will not only save a great deal of money you will prevent serious mishaps or misunderstanding from happening.

It is only natural when making a big investment in property to be somewhat nervous as to whether you have made a good decision or not. If you follow the fundamentals of evaluating a property OBJECTIVELY without emotion the chances are very good you will end up with a valuable property investment.

The Offer to Purchase

Don't make an offer to purchase until you've been able to economically evaluate your decision.

If you are unsure of the value (ie if calculations and investigation don't conform to your requirements) of any type of property investment then walk away from it. There will be many other opportunities on offer to purchase good property.