Cheaper houses make more money

by | 20 Aug, 2021 | Investment by foreigners

Are you ready to buy a property with a buy-to-let objective?

Real estate investing has in recent years become a very popular topic. During the boom years, many property buyers opted to make a quick buck by flipping (buying & selling) property, but true real estate investors are long term investors preferring a good monthly return by renting out the property. The possibility of making profit on the eventual resale of the property is still there but this is not the primary objective.

Although the economic law of supply and demand suggests that the higher the demand the higher the price, this is not the final word on renting out property. Smaller towns, including Swakopmund, in general have less employment possibilities and as a result, salaries tend to be lower (supply and demand again). This creates a situation where rent amounts are limited by a “ceiling” created by the lower salaries. Higher earning individuals are few and they often already own their own homes.

This follows that a property worth N$2,000,000 may rent for N$7,000 per month whereas a property worth N$4,000,000 may rent for say N$ 9,000 p.m. Enough reason for an investor to rather consider buying two properties of N$2,000,000 each than buying one for N$4,000,000.

Making a capital profit is also more likely on cheaper properties as you can easily add considerable value by making minor improvements. Re-selling will then still be in a price category where more buyers are shopping and more properties are sold making your investment more liquid.

An added advantage is that all your money is not tied up in only one property. Should the need for cash arise, you can sell one of the properties and still keep one foot in the property market.

So, when you choose this route, ask your property broker to highlight properties that would offer a great return on your investment.

Johan Cilliers

Phone: +264 811284678