admininvestors in Zimbabwe to heavily invest in the real estate market as it is more assured of a return.
This is not only in terms of profit but as the best sustainable value retention method.
Buy-to-let properties potentially offer a double return for investors; on one end are rental payments as profit while on the other is the option of profit on sale.
Buying-to-let is currently one of the safest investment methods because of our country’s current housing shortage and lack of competitive mortgage finance. It is, however, subject to external influences like all other investment methods. It is prone to policy constraints like rent freezes which affect the potential return one may attain from an investment property.
Like all other investment models, it is linked with the general economic performance of a country, where the economy undergoes hardship, this will be reflected by the rental prices (especially of commercial spaces in our particular economy) which normally reflect general market performance. Like with all other real estate investments, one is encouraged to think carefully about the type of property one intends to invest in.
As most buy-to-let properties are potentially long-term investments, it is imperative to acquaint oneself with legislation or by-laws that may affect your investment in the long term
At this juncture if one intends to buy with the possibility of converting to other use so that they may benefit from maximum rental return, an investigation with the relevant authority responsible for that area or field will enlighten the investor on the plausibility of the intended plans. An investigation into imminent or future developments expected to be undertaken in the area of potential property is useful.
This will not only provide information for projections for pricing values and rental demand in area, but is also useful for speculation on future rental prices whether in the positive or negative. Major developments like malls or industry may increase housing demand in particular area which inevitably will increase rental value.
A look at mismanaged properties may prove worthwhile. This is critical when one intends to invest in commercial property. Some properties do not produce maximum return as a result of mismanagement.
These properties normally go on the market for less than their worth as current owner might not be aware of the properties rental potential.
It is common in some properties that rental return might be far higher than price demanded when calculated over a 10-year period.
These properties are ideal as buy-to-let investments since low initial investment will produce high future returns. Tenants play a crucial role in the buy-to-let process as they are vicariously the custodians of the investment and their actions will ensure whether the investment is profitable or not.
The tenant selection process is never to be undertaken indifferently as it ranks at the top in the buy- to-let process.
A tenant may cause loss or damage to the investment. Since buy-to-let properties are long-term investments, the tenant has a long period to either improve or damage the property. When a tenant improves the property they vicariously increase its value in the long term.
Timely rental payments ensure that the landlord is benefiting from investment profits in the short term.
Where the tenant is cantankerous and refuses to pay, the investment may be classified as a bad investment.
Tenant selection in my view must be the job of property managers as they are experienced with tenant issues.
Buy-to-let properties are normally ideal for financing other projects one may have.
Where tenants pay on time, they offer a constant income that can be projected against intended need.
They are also good collateral for bank finance. One may cede their deeds to the bank while using borrowed money for other projects and still be in a position to enjoy rental benefit from the property.
Vengai Madzima is a property investment consultant and writes in his personal capacity. He can be contacted on 0772 468093 email: [email protected]
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