Real Estate Investor Magazine South Africa November 2014 | Page 24

ACQUIRING

BY GAYE DE VILLIERS

Maximising
Profits In Property
The key is to buy well...

P

roperty is a tangible, well-respected asset class,
but as is the case with all investments, the key
to maximising profits is buying well and then
ensuring you sell well, says Carol Reynolds, Pam
Golding Properties area principal in Durban, Durban
North and La Lucia.
She says some investors maintain the philosophy
that you simply shouldn’t sell property, and their modus
operandi is to collect and build an asset base without
having to offload. “This is, however, utopic and is
ultimately a luxury that only the wealthy can enjoy. For
the most part, the average investor will have a dynamic
property portfolio involving both buying and selling,
with the ultimate goal of generating wealth.
Sound acquisition
“As a starting point, investors must ensure they buy
well, namely make a sound acquisition achieving good
value in a good area, so at any given time, if they need to
offload, they will be able to do so at a profit. To this end,
area is critical and it is better to find a property that
has not yet reached its full potential. The idea is to buy
a property that presents very poorly and needs some
‘TLC’, so the property sells below its market value.
Area is critical, so you need to try and find the worst
house in a good area, so you can enhance it – without
over-capitalising - and then sell at a good price.”
Good ‘bones’
Reynolds says to achieve this goal, good ‘bones’ are also
vital. It is very difficult to transform an ugly duckling
into a swan, when the ugly duckling has really bad
bones. Bad bones mean the basics have been carried
out poorly. For example, there is simply no flow and
it is impossible to create flow because the house has
been badly designed. Or, the property is positioned
incorrectly on the site, and hence it is impossible

24

November 2014 SA Real Estate Investor

to maximise the views or garden without literally
demolishing the property and starting again.
“What you need to find is a property with great
bones but poor cosmetics. Ultimately, your goal is to
add some make-up without having to undergo a full
facelift! This way, you minimise the time spent on
upgrading the property, and you will minimise your
costs. Often, all that is needed is a coat of paint, some
landscaping in the garden and new light fittings. If you
need to spend a bit more on the renovation, spend your
money where it counts: open up spaces by demolishing
internal walls, and then spend your money on the
bathrooms and kitchen. Don’t overspend on high
quality fittings as these are never fully appreciated –
instead invest in creating good spaces and great flow.
Then modernise the kitchen and bathrooms tastefully
rather than extravagantly.”
Catch the buyer’s market
She says once you have found your ugly duckling, there
are two other important factors that render a property
a good buy. Firstly, you want to try and buy in a buyer’s
market, where there is an abundance of stock and sellers
are being forced to reduce their prices to compete in
the market place. If you have missed the boat and are
in a more buoyant seller’s market, then you really need
to be astute with your buying, as market conditions are
not favourable for buying.
Motivated sellers
The second important factor is the motivation of the
seller. Irrespective of market conditions, if you find a
motivated seller, you will get a better deal. Ask your
estate agent why the property is on the market. The
agent will not be able to disclose everything to you due
to client confidentiality, but will be able to give you an
indication as to the reason for selling. Generally, sellers
www.reimag.co.za