Distressed buyers create opportunities for property investors

Those who remain sceptical about the possibilities of a property revival are also inclined to query the repeated reports in the press claiming that investors and speculators are returning to the residential property market – but this is happening, says Mike Greeff, CEO of Greeff Properties, and the reasons for this, he believes, are not hard to find.

“Right now,” said Greeff, “the number of distressed homeowners is at an all time high. This is creating bargains for those with cash or with the ability to get a bond.”

Taking as an example a typical “not very grand but quite satisfactory” three bedroom home sold recently in Wynberg for around of R1 million, Greeff said that this was R350 000 below the original asking price but that after waiting many months for a buyer the seller had been virtually “forced” into accepting the offer.

After putting down a R100 000 deposit, the buyer had been able to raise a bond of R936 000, his bond costs being in the region of R8 300 (paid upfront) and his transfer duty R36 300.

He was then able to find a tenant prepared to pay R6 400 per month which meant that his shortfall on the month bond repayments (i.e. the sum he had to pay in himself) was R4 200

“By the end of 2010 prices should be back to March/April 2008 levels – and the buyer will be in an even better position,” said Greeff.

“On a conservative estimate, this Wynberg home will then be worth the original asking price – R1,35 million. If the investor sells at the end of 2010 he will net R350 000 – a very healthy R280 000 (excluding CGT) return on an outlay of only R100 000 and 18 months rent subsidies totalling R75 600.”

Asked what proportion of buyers are in fact planning to be in for a short 18 to 36 month run, Greeff said that at Greeff Properties, about 20% of all buyers coming back to property are in fact short-term investors (i.e. in for less than five years). Many others, he said, are building portfolios which they will pass on to their heirs.

Article from: www.greeff.co.za