Critical Considerations for real estate Investing

1.   Location

In real estate palance location is everything. The location of the investment will determine both its actual value and the rentals one can get. Let’s discuss various aspects of location.

The issue of accessibility is crucial. Some places are beautiful but not accessible. For example one can acquire a great property in Nyanga but will not have the same value as a property in Harare. Even with Harare the level of accessibility of Borrowdale Brooke as compared to  Charlotte Brooke make a  the Borrowdale Brooke more valuable. How easy it is for people to access the location is important.

For most people who work within the CBD areas the concept of proximity is critical. The person who acquires a property in Gunhill will probably attract more clients for rentals than Borrowdale Brooke because of its proximity to CBD and most centres of activity. This would effectively reduce transport costs for these people. Our family recently moved from Vainona to Quinnington and the transport costs in terms of both money and time just escalated. Running errands to pick or drop kids to school becomes a drain as well.

The type of neighbourhood makes adifference on the value of the property. What is the nature and condition of the neighbourhood. These enhance value. For example a beautiful home or property can be affected by a poor neighbourhood. In Harare from example some prime properties in Hogherty Hill closer to Hatcliff are affected because of the closeness of that high density suburb. The presence of neighbouring golf estates, or cluster houses will raise the value as well. I remember seeing a property in Borrowdale which was over designed and well built but surrounded by old unsightly homes and on one side the neighbour converted his house into a children’s day care and play centre. This significantly reduced the value of this great property.

Type of adjacent properties in terms of design, maintenance, e.g. blocks of flats also affect the value of your property.

Always remember that: Everything else about a property you can change except location.

Years ago we built a beautiful home in Marondera as a residential place. We knew that we could have established greater value if we built this in Harare but at that time we were emotionally attached to Marondera. We thought that this was not about an investment but about a residence. Mistake. Every property can be viewed and should be viewed as an investment. Years later we moved out of Marondera and suddenly the property which could fetch aqs much as USD1500 in rentals per month was worth only USD450 per month. We tried to sell the property to transfer the value to Harare and though it was valued at USD100,000 the nearest offer we got was USD65,000. Similar properties in Borrowdale were being priced at about USD350,000. That is the impact of location. Investors however do not mourn over lost opportunities and so we sought a way of reducing our loss. We decided to use the house as collateral fro bank borrowings and therefore extract value out of the property and invest the borrowings into more investments. So far we have been able to borrow through two separate transactiosn about USD180,000. If one was to add the value of the property already at about USD65,000, it means we have just extended the value of that property to USD245,000. Within another year or so we would have been able to extract the value of that property at about its expected value. This way we redeem the original mistake. That is why I love real estate—its versatile.

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  • Reply sandy August 18, 2010 at 3:32 pm

    That’s very true Doc.recently my husband and I we decided to buy another property and we visited one of the prominent estate agencies in town.We told them we had only $45 000 dollars to spend so went around seeing the houses which were within our means, most of the houses were quite pleasant to look at but they were all semi-detached and in Bradfield with very small yards. So we ended up buying a very old dilapidated house in Hillside because the neighborhood and also the fact that it is on 2 acres. I am very positive that if we commit $10 000 towards renovations the value can go up to $100 000 or more because there is more room for expansion. The fact that we have done it before, we now know that even a single coat of paint can do the tricks.

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