The art of applying functional property investment understanding

Here is seven aspects to property investment that I have found to be helpful over the years:

Look at the big AND small picture
Property should be viewed from both a macro and micro perspective, taking into account the big picture and micro activity within the suburb or immediate geographical area. For example, the general demand and future (improved) rights within a property zone over the next 5 years.

Correlate the investment value and the rental income
The emphasis for an income-producing property should be on the correlation between the investment value and rental income vis-à-vis a higher purchase yield (ceteris paribus). It should preferably be a case of the higher the rental income, the higher the capitalised value. Naturally, other factors play into the decision analysis, though this correlation can be quite often forgotten or under-estimated in value (excuse the pun).

Property value within the NODE
The ever sounding adage, compare apples with apples is emphatically area bound as well as for the type of property and future rights reserved therein. This assimilation is more than the physical appeal and the cosmetic appearance and can only be objectively ascertained (or objectively subjective, since there is no such thing as absolute objectivity). An emotional investment without the required professional advice is done for all the wrong reasons and will prove as such. Therefore, property value is node specific.

Allow for adequate expenses Prospective buyers should be alerted of the necessary property expenses i.e. rates and taxes (payable on the market value and potentially over-valued), maintenance and costs to prepare the property for resale purposes. Both the buyer and seller should carry knowledge of the costs, with the latter informing the former.

Empirical knowledge
There is nothing quite like it.

Availability and application of data
Ample property data is available in our advanced electronic era, but sadly the raw data is sold to the man in the street as being authentic and applicable for investment decisions. This misrepresentation of data has caused many a poor investment while the data is always sold subject to unreasonable caveats (small print), only to protect the seller rather than contributing towards a quality solution.

Value drivers
Make a list of the value drivers and monitor them religiously.