Investment Properties - Part II
Last week I spoke about the value attached to your primary residence and debated whether it should be seen as an investment. This week I'm focusing on residential property that isn't your primary residence; holiday homes, share syndication and investment properties.
Even though holiday property can be seen as property for your residential benefit there are many variations of the theme mostly in an attempt to spread the risk and cost. Property syndicates, share blocks, time-share and even fractional ownership schemes all aim to limit cost and risk. There is an element of property investment in these types of property ownership but it differs from pure investment property.
A speculator might buy into a development that is being sold off plan putting the minimal deposit down, usually R5 000 or R10 000, with the intention of reselling the property before they ever take occupation. The expectation here is that the value of the units in the development will have escalated more than the costs to the speculator and return a profit based on the amount of money that they have invested as a deposit.
Again you will find different types of investors in this market. Some people buy into lower priced property, normally sectional title, and some higher priced property, e.g. property within an estate. Some investors are more focused on cash flow than others who might be focused on capital growth.
Some of these investors rely on being able to trend-spot, i.e. identify an up and coming area and invest here to maximise their return.
A sub-set of this investor is the buy-to-let investor that is primarily investing to realise a cash flow that is favourable and/or capital appreciation that allows them to realise some sort of profit.
Renovators or fix-uppers
Article by: Dave Welmans - (www.thepropertygame.co.za)