How to select the right investment property

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In my capacity as CEO and founder of the IGrow Group of companies, I present regular property investment seminars, and attendees often ask me: how can I buy the right property and beat the market?

Have you ever wondered how some investors are making enormous amounts of money in real estate and seemingly always get it right, buying the right types of properties, in the right locations at the right time?

There are tens of thousands of properties for sale, but less than 2% are investment-grade stock. So, how do you tell the difference between an average and a high-performing property? How do successful investors grow their portfolios two to five times faster than the average investor?

Successful investors know how to select the right type of properties, in the right areas and buy them at the right time.

There is a bit of a secret recipe you need to follow if you want to achieve the same results as the most successful investors out there. This is my seven step, top down property selection process and approach to always beating the average investment property and getting my money to work for me at its highest potential rate:

  1. Knowing your strategy and buying criteria

There are hundreds of different strategies you can follow. You simply need to pick one strategy and master it. Are you focused on building your asset base (equity) or is cash flow more important to you?

Determine your buying criteria and commit to it before you search for that perfect deal. How many bedrooms and bathrooms do you want, will you buy a house or an apartment, sectional title or own title? A certain amount of flexibility is needed so don’t be totally rigid, but know what your parameters are regarding price, shortfall, cash flow, ROI, etc.

  1. Getting your timing right in the economic cycle

Look at the big picture of the economy – how is it performing overall? Is it booming, in a downturn, bust or in an upturn? You need to buy at the right stage of the economic cycle.

The most successful investors are counter cyclical investors – you never want to buy too close to the top of the economic cycle. Buy when everyone is selling and sell when everyone is buying.

However, by following the IGrow philosophy of real estate investment the aim is to not sell properties but rather keep your properties for the long term while you strategically refinancing and build your asset base.

  1. Selecting the right province

Buying in the right province is all about assessing the right stage of its specific property cycle. Each province has its own economic cycle, and as an investor, you don’t want to buy at the peak and have to wait too long to see growth in your investment or even risk experiencing an initial decline in the value of your property.  So choose the right province within the right stage of the economic cycle.

  1. Selecting the right suburb

Look for the right suburb within the right province. This is usually where there are multiple economic pillars driving the population growth, and thereby pushing up property values.

Strong demographics in a suburb is also a very strong driver for sustainable rental income growth and capital growth. And finally, look for a proven track record of sustainable capital growth, because a strong proven history of rental and capital growth may indicate sustainable growth in the future.

  1. Selecting the right part of a suburb

You need to look for the right area within the selected right suburb. And the truth about the trenches is that you need to get in the there. What I mean is you need to walk the streets and feel the spirit of the land.

While there, see where the most desirable streets are located so you really cherry pick the best buy-to-let opportunity in the best street in the best potential area.

For example in Cape Town great views of the water or the mountain are always more popular and in higher demand. Where there is demand there is growth and that’s where the money is made.

  1. Choosing the right type of property

Then you need to find the right type of property within your selected area. Find out which type of property is performing the best in the area in which you plan to invest.

Your choices are likely to include:

  • Ownership structure: sectional title or full title
  • Size: 1, 2 or 3 bedroom units
  • Property type: apartment, townhouse or house

Again, in this case, the past is a good predictor of future performance.

  1. Analysing the numbers

Many investors do all the research and follow the perfect selection formula but stumble at the last hurdle when they fall in love with the deal instead of falling in love with the ROI. By simply running the numbers through a customised real estate investors’ software program, they cut through the emotion and make a final financial decision prior to buying.

And that, in a nutshell, are my seven steps to a successful investment property selection. You can do this! Go out there invest strategically, invest intelligently, become financially free and leave a legacy.

 

About Jacques Fouché and IGrow Wealth Investments

(This article is based on a transcript of Jacques’s YouTube video)

Jacques Fouché founded the IGrow group of companies in 2006, and it has grown to become South Africa’s number one real estate investors’ group. IGrow teaches real estate investors, business owners and entrepreneurs how to build a multi-million rand property portfolio so they can retire financially free and leave a legacy to their loved ones.

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