Double-digit return in real estate investments

of the world’s billionaires.
To ensure such a return in the property sector one has to focus on those properties that have potential to yield a significant capital gain.
When investing in property for the purposes of double-digit returns, it is imperative that one does not do it with blinkers but with an open mind.
Most new investors focus on areas that are already established and sought after like Borrowdale in Harare.
Although this area does retain value, most of its properties are sold at prevailing maximum value and return on investment is normally in line or just above inflation.
One will face problems with selling a property in this area to get a similar or better property for less in the same area.
It becomes imperative that a property investor is aware of policy and urban council’s projections for different areas.
Some of the areas that will bring the most return are those that are being ignored by people until a new development suffices in such areas that will attract business or persons.
To ensure double-digit returns on investment three elements must be present on a particular property.
One of the factors is that the value of the particular property should increase significantly after its purchase.
In addition, the property should be purchased at a price that is considerably below market value which will ensure that double-digit profit is actually attained at purchase.
The other point is that the potential for rental return should be so high that the property will purchase itself within a period of at least two years.
It is recommended that property investment strategies be applied that are in line with the investors time requirements to ensure that returns are achievable be it in the short term or long term.
If an investor chooses short-term investments, one has to consider as an example properties that can be purchased at significantly lower prices so that one achieves the benefit immediately.
It is critical to also understand the dynamics of resale because if the intended outcome is to reap benefits quickly, the same property must have capacity for resale immediately otherwise the purpose for investment is lost.
Where an investor can balance the top two of the three requirements above, successful short-term transactions may occur that can surpass benefits offered by other forms of secure short-term investment methods.
In opting for such investments one can spread risk by purchasing a number of low-cost housing below market value and placing them back on market immediately.
Why I suggested low-cost housing is because in the current illiquid, market low-cost housing is offering the highest sale movements.
This is because more people can afford it as compared to high-end housing. If one opts for a one-time short-term investment by purchasing a single high-income property, then other factors may come into play. In this instance, one has to ensure that significant demand is available in the area the property is located.
One may improve the property and focus on the attractive benefits the property may have, that may include its conversion potential for prospective purchasers.
This may necessitate the segmentation of potential market into classes of those that are in business, tourism, the elderly and those looking for security or those who have just made some money.
When one focuses on long-term investment this requires purchasing of properties even at market value with significant value growth potential or high income earning capacity.
Although a property may offer value growth potential, one has to consider its income earning capacity.
This is the crux of long-term investment, it provides a double bonus for the investor because he earns money while waiting for the value to go up.
In a capital market where asset values are determined by the market, there is a vital link between the value of a property and the income it produces.
Where income increases, the property value increases. In essence, a property should be valued according to its income earning capacity.
This is calculated according to the ratio of the properties net operating income over the market capitalisation rate.
Net operating income will take into cognisance factors that include maintenance and repairs, management fees, utilities and other council charges that may be applicable.
Double income digits are possible even in our market, however, they require strong partnerships with seasoned property investors that are cognisant of our markets variables.