Inner city investment is tempting to many property investors. We reached out to TUHF to find out what it takes to make a success as a start-up property investor. Over the past 15 years, they’ve financed nearly 33 000 units of inner city property, scattered in all eight metros of South Africa. Their work enables real estate investors from all walks of life to purchase, refurbish, or convert property and, with a little luck, get started on a long and successful property investment journey.
1. Selecting an inner city area First, consider where you would like to invest: weigh up existing and planned infrastructure, especially access to transport including bus stops, stations and highways. Also bear in mind which neighbourhoods offer amenities like schools, shopping and healthcare. Last but not least, make sure you know where the UDZ (Urban Development Zone) boundaries are to see if the area you are considering qualifies for tax deductions.
2. Identifying specific opportunity Now it’s time to identify an exact property. You can get a feel for the market by attending auctions, scouting online property websites or talking to local estate agents. The best way to identify opportunities is to walk the streets of the area you are interested in. Talk to the people around and find out what opportunities are available. Don’t be in a rush to get going, make sure you are making an informed decision before you commit anything to paper.
3. The essentials of the site Once you’ve pinpointed a suitable property, identify the owner or agent and request more information regarding that building or site. Make sure you are familiar with the zoning of the property as well as the standing of the property’s accounts with local municipality. In doing so, you’ll be positioned to find out the worth of the property and the amount of capital needed to acquire the space.
4. Partner up
Now comes the point at which you would need to apply for finance if you are not self-funding the project. In TUHF’s case, a minimum of 20% equity of the total project cost is required. If you’re unable to come up with the full amount, they do offer a possible solution through the Intuthuko Equity Fund. Before deciding to go ahead, you’re going to need a feasibility
document. Here, you’ll consider rental averages and operating costs in the area, review construction costs and purchase
costs. It makes sense to speak to the experts to ensure you get accurate information and guidance.
5. Bond registration, transfer and construction Considering all goes well with your finance application, the property will be transferred into your name. Once all compliance requirements, including plan approvals, have been met, construction can commence. It’s important to have partners to assist in decision-making concerning building contractors and identifying credible and qualified service providers.
6. Rent up
Once the refurbishment of your property has been completed and you have received your occupation certificate, it’s time for rent up and ensuring any final construction snags are taken care of. Make sure you have proper credit and background checks in place before you allow a tenant to move in and ensure you have strict payment controls in place for collecting monthly rent.