2. Infrastructure Development

In choosing your real estate investment the infrastructure needs to be considered. This covers state of roads, availability of water, energy, telecommunications, and security. Poor road networks would cause damage to vehicles and limit accessibility. In Harare for example the roads to Hogherty Hill are a nightmare currently and so investing there would require an all terrain vehicle and related costs. Purchasing a property in Glen Lorne or Greystone Park in Harare currently poses challenges because of poor water supply – this increase costs as one would need to have boreholes and consequently have a powerful generator that can support the borehole. Consider the costs of fuel as well to power the generator. In these areas for example there is almost a 70% lack of municipal water supply. In some areas for example one would have challenges accessing cellular telephony.

Consider for example Borrowdale Brooke Estate versus Borrowdale West  in terms of security, street lighting, and water.

3. Quality of Construction

Architecturally designed  properties normally have greater value than those not designed. A clear example in Harare is Eastgate Complex whose lighting, north facing site orientation, road frontage, entertainment area are all value enhancing propositions.

Quality of construction matters in terms of materials used and contractor credibility. Watch out for fly by night developers who develop for quick money. Many would be investors have been hood winked by developers who usesubstandard materials and methods to develop cheap houses – only to discover serious structural issues once someone has purchased. The other challenge especially in Zimbabwe is that very few people do a structural assessment on the property before purchasing. This is a carry over form the “burning days”. Any investment requires due diligence.

As I write this a developer in Bulawayo has been flighting ads in the Press for cheap housing scheme where one pays less than USD200 per month. On checking them out there are a number of issues that would cause someone to be concerned. Without prejudging them let me highlight some of these – as what an investor would look for. They claim they are now in Phase Two of the project but they would not show the people who inquired the site or the completed units – not even pictures were available in their offices. The advert was slightly misleading in that it made it look very easy but when one inquired there was now a deposit which was significant and a one day deadline. Both these crucial details were missing in the advert. It was not clear how they are funding the project – in most cases there would be a bank that funds a project like this. The lack of transparency would cause someone to be concerned about investing. Developers and investment sellers should provide clear and transparent information. The one day imposed deadline would compel someone to make a hurried decision without due diligence and without viewing the site, asking for proof that project is approved by Municipality and that the stands have been serviced etc. Let me clearly point out that I am not saying this is not a bona fide investment opportunity – I am just stating that it does not provide enough information for someone to make an intelligent investment decision.

I close this with some observations from an Australian real estate investor:

Avoid the following types of off-the-plan projects:

• That may present a risk of not satisfying bank pre-sale requirements. If the developer can not obtain the funding, the project will never get built.Strategy: Confirm sources of funding for the project and be sure it is fully funded to completion

• Which are built by “amateur developers” who can not obtain the right funding or building price to complete the project. Strategy: Check the credibility of the developer. Ask them to name other projects they have completed, and go and inspect them personally.

• Where the project does not have a builder “attached” at the time of your purchase. Strategy:You need to know the contractor who is doing the building and their reputation. Most professional developers will have finalised the builder and construction contract price within the first three months of entering the marketing phase of the project. If they have not engaged a builder, you run the risk that a rise in the construction price will make the project too risky or unprofitable for the developer and the project will never get built.

• Which are not marked to being constructed within eight months of commencing the marketing phase. A friend purchased some land in Bulawayo about a year or so ago. The developer is now asking for more money and changing goal post because they seem to have run out of development funds to service the properties. Be wise and prudent. Even large developers can run into problems and decide not to proceed with their project. If the project does not get finished, you will lose money due to the transaction spent on purchasing the property.

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  • Reply drtaffie August 20, 2010 at 10:51 am

    The Art of War by – Sun – Tzu is a must for all Japanese MBA and corporate employees and there is a number of lessons we can learn:

    Settle on the best plan, Exploit the dynamic within each deal.

    If he is relaxed, Harry him.

    One needs due diligence when making real estate purchases, however one has to know were this piece of real estate sit in your master plan for financial freedom.

  • Reply sandy August 20, 2010 at 3:44 pm

    i agree with you Sir, we once went through that hurried decision but anyway Thank God it was a Zim dollar era and the structure and the location of the house is ok but the plumbing and some finishing touches were something else because they ended up using cheap materials. I would like to believe that you once passed by Meyrick garden flats in Malbereign.But for now I can safely say the developer lost out big time due to inflation although we had top up for electricity. For us it was a way of disposing our savings and putting them to good use, it is our second home when we visit Harare. As for the roads, i would like to think that the Harare city fathers will do something. Thank you once more for those wise words.

    • Reply nurturingchampions August 23, 2010 at 3:06 pm

      Thanks Sandy. That is one exciting thing about real estate. There is more room to upgrade or correct upward the value of the investment. During hyperinflationary times it becomes an excellent store of value. I look forward to your adding value to your investment so as to increase your wealth by doing simple things.

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