After more than a decade of tremendous growth, the Cape Town commercial property sector is seeing slow but steady gains. For savvy investors, this means looking long and hard in order to find lucrative opportunities – and value investing is the best way to do just that.
In this article, we’ll take a look at some fundamentals of value investing and how you can use them to find the ideal investment property.
“Price is what you pay – value is what you get” – Warren Buffett
These wise words from the world’s wealthiest value investor are a great starting point when you assess any property investment.
The price you pay for a commercial property buys you several things:
- The property itself
- The property’s location and surrounding area
- The opportunity to make a profit by renting the premises or selling the property at a profit later on.
Value investing is the art of making sure that you get maximum benefit for every Rand you invest. While this approach originated in the stock market, it can be applied to property investment very successfully. Here’s how it works.
When prices rise rapidly, any time is a good time to buy property – and virtually any property is a good buy. But what happens when the market slows down? Now is the time to look for undervalued properties that will perform well over the long term – because they offer value to tenants.
Looking for hidden gems
In the current Cape Town property market, there’s no guarantee that any commercial property you pick at random will make you a profit if you sell it a year from now. That’s why it’s essential to find properties that have plenty of upside potential or room to gain in value.
- Properties that are spacious and in good general condition but a bit outdated can gain considerable value with basic renovations and could be subdivided into shared office space.
- Amenities such as parking space and retail space can bring the property valuable monthly income
- Buildings in areas that have been overlooked by investors and are starting to become more popular may be a good buy – but only if the building itself has potential.
A good rule of thumb for evaluating a building is, would you want to work in this building yourself – and would you pay good money to be a tenant there?
If the answer is yes and the price is right, you may have found your hidden gem.
Team up with us to find value in the Cape Town commercial property market
If you’re looking to invest in Cape Town commercial property, we are waiting to advise you. Contact the Commercial Space team today to schedule a meeting.