adminthat they either find or create value. Profit is not only realised at sell, but also at purchase.
If one manages to purchase a property at below market value that will mean that they have already made a profit before developing a particular property.
Below is a list of three property situations that one should identify when looking to purchase a property with the intention of offloading it at a higher price.
Discount properties
These are properties on the market that can be purchased at a discount.
One can benefit from this by identifying sellers who are forced to liquidate their estate to solve a cash need or liquidate their mortgages at a discount to solve an immediate need.
These properties are not readily available and normally are 1 to 5 percent of the total properties that are on the market at any given time.
They usually surface on the market in numbers after a shift in political or economic systems of a country.
In credit economies they are hedged by changes in the bank base rate as these effect mortgage interest rate.
During the credit crunch, people who where liquid managed to benefit immensely from the whole scenario and purchased lovely properties at discount prices.
In Zimbabwe discount properties were awash on our market during the first few months of 2009, however, there was a lot of confusion and misguided speculation that most people missed the opportunity.
Some took advantage of the confusion and purchased for themselves discount properties, which they sold immediately after for a huge profit.
However, history has a tendency to repeat itself and the next time discount properties are on the make, I do hope you will be ready.
Distressed properties
These properties are found on a case-by-case basis and are not a result of any fundamental changes in the politics or economics of a nation.
These are properties where the seller is anxious to offload a property to solve an immediate personal crisis. It is not always easy to get an owner of a property to expose their desperation card, but once certain of the cash need of the seller, one is in a position to create a win — win situation.
I will just catalogue some of the most common personal crisis’s that could result in the availability of distressed sellers on the market, a need to cover university fees for children, properties destroyed by fire, problem tenants, family medical bills, business deals gone badly, and many others. These properties are common on our market because of the prevailing economical challenges and a prospective investor just has to look hard enough for such opportunities.
When such an opportunity presents itself a prudent buyer or investor has to find ways he can create win — win situation with the seller without extorting them.
For these type of seller’s, peace of mind is more important than anything else, so they are easier to negotiate with.
Conversion properties
These are properties that can be converted from one use to another and by doing so, significantly increase the property price.
We have in Harare a lot of neighbourhoods around the central business district that are mainly utilised for commercial purposes and are sought after by business’s that require quieter areas plus a lot of parking space for their clients.
However, in the same areas we still have individuals who use their properties for strictly residential purposes and have not applied or attained commercial rights for such properties.
After identifying such a property and purchasing it at its residential value, it would command more once converted to commercial use.
Examples of conversions include turning town houses in to offices, flats into offices or penthouses, office space to retail, vacant farmland to residential or commercially zoned acreage.
Identifying run down properties in the specified target areas and renovating them.
This will dramatically increase the value of the rent a property can command, thus increasing the total value of property.
- Vengai Madzima is a property investment consultant and analyst with Wisdom Properties. He can be contacted on 0772 468093 email: [email protected]
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