Making money off property

properties.
I hope to address this issue in a series of articles. I touch on how to buy, sell and make a profit off properties.
I will also focus on the dos and don’ts and provide some insider techniques and tactics on property recycling.
I will endeavour to list ways of making the most amount of money from the least number of properties in the shortest possible time.
Before starting on what I like to refer to as “property recycling” one would need an excellent team to work with, preferably people well versed with market trends and an acute eye for investment property.
The old adage applies here “to make money one has to invest money,” so this article will be mainly for those who have access to disposal finances or those that want to benefit from buying cheap.
Below is a list of three property situations that you should identify when you purchase a property with the intention of offloading it at a higher price.
As Warren Buffett put it across, either find value or create value if you want to be a successful investor.
Discount Properties
As the name suggests, 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 one to five percent of the total number of properties that are on the market at any given time.
They usually surface on the market in numbers after a shift in a nation’s system be it political or economic.
In credit economies they are hedged by changes in the bank base rate (effects on mortgage interest rate).
During the credit crunch, people who were liquid managed to benefit immensely from the whole scenario and purchased for themselves lovely properties at discount prices.
In Zimbabwe discount properties were awash on our market during the dollarisation period, that is 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’ 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 bad, and many others.
These properties are common on our market as a result of the prevailing economic 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.
To these type of seller 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 businesses 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 are: Town houses either to offices, flats to offices or penthouses, office space to retail, vacant farm land 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.
Once a property has been identified under any of these 3 categories, one can then move forward to the next step, which will be detailed in my next article.
l Vengai Madzima is a property consultant and analyst with Wisdom Properties. He can be contacted on 0772 468093 email: [email protected]