Investing in property (either buying or developing) can be a profitable business if done the right way.The property development business can be a tough one to break into, but it’s not outside your grasp, provided that you’re patient, ambitious, and, above all, resourceful. When you’re first getting your start, your most important task will be to consider which properties in your area have the most commercial potential. You’ll then need to secure financing and snatch up the property while it’s affordable enough to minimize your financial risk. After fixing the property up to suit your vision, you can decide whether it would better to lease or sell it and add it to your list of lucrative locations.
Steps to consider for profitable property investor and developer in South Africa
Buy Property and rent them out immediately (Buy-To-Let)
This method involves buying a property (using other people’s money, i.e. the bank) with the express purpose of renting it out and eventually making a profit from the rental. If you are not buying cash, you can use the bank to finance you.
Choose flats over houses
According to Private Property, most successful investors will tell you that flats generate a better return than houses. If your budget can stretch that far, go for a 2 bedroom, 2 bathroom flat. The greater flexibility will make the property attractive to a wider range of tenants so it’s less likely to lie empty.
Develop properties from scratch
Some of the responsibilities of a property developer include purchasing land for new buildings, signing leases for existing properties, improving and renovating existing buildings and selling properties.
To become a property developer, an individual should have a good knowledge of the local real estate market and a good head for figures.
Think twice about selling properties you just bought
Unless you face financial disaster, do not rush sell. The costs of buying and selling are high in South Africa – you will have capital gains tax (CGT), agent’s fees, transfer and conveyancer’s fees – all of which will eat into your profit.