15 November 2012

Zimbabwe: Real Estate Investment for the Ordinary Man


I have been asked on several platforms to give input and ideas on how the so called "ordinary man" can become involved and effective in our local real estate. Normally this question is accompanied by the non-committal reasons why the ordinary man cannot be active in this mode of investment and why it will always be the preserve of the rich.

The usual reasons are put forward and have become a part of our vocabulary which includes a lack of liquidity on our markets, ever increasing property prices and a general lack of sufficient mortgage finance that accommodates all low and high income earners. Armed with this information which is well documented in most of our media, most potential first time property investors loose the critical ingredient needed for real estate investment, which is the ability to start.

The desire to invest in property remains but direction as where to start is what lacks. Real estate offers short term and long term returns depended on the techniques one uses when investing.

Generally, it is a method that offers long term returns making it less appealing to small money spinners. One must always project and speculate on how a certain property will fair in the future.

The indigenous Zimbabwean has several opportunities to benefit in real estate investment.

Real estate in essence is the ownership of land, buildings and all extras on the land, natural or unnatural. As of the year 2000, the indigenous Zimbabwean has had the opportunity to apply to the Ministry of Lands for farm land which in essence is real estate.

Before the redistribution programme, farmland like all real estate was transferable for financial benefit and its deeds where bankable or used as collateral in financing transactions.

In the long term one may speculate that this situation might return and farm title will be bankable. Taking this fact into account, one would have benefited financially bankable collateral from a non financial state benefit.

However farmland still offers short term returns depending on how one utilises the property, any improvement on the farm is value addition to the property.

One may also apply to local city councils for land allocations. A lot of people deem this process to be long and frustrating because of the backlog in land allocations currently bedevilling city councils.

This backlog is not however evenly distributed as the backlog is more onerous in major cities. Pricing and valuations in major cities especially Harare is higher than those in other smaller cities necessitated by the huge demand. It is however still cheaper than open market values for similar land in similar areas.

A historical analysis will reveal that stands that are now fetching considerable amounts where bought for next to nothing in the years following our independence.

With this view it will not be farfetched to assume that satellite areas and towns further away from major cities will eventually command substantial pricing on their real estate.

To project the first areas that are expected to experience a boom, one must zone in on areas that will be affected by current government policy or focus.

Tourism and mining are currently the areas where government is hinging our economic resurgence, therefore purchasing real estate in areas that compliment policy will certainly ensure return on investment.

The advantage at the moment is that most of these areas are not highly active regarding real estate investment, those with foresight and willing to invest for the long term are buying in these areas. There are several benefits that come with decentralisation and those who are investing in commercial areas within these catchments are reaping and will continue to reap the rewards.

A plus is that the real estate is relatively affordable at the moment because of limited demand in such areas.

The other option is to work with what one has. It might be a low income house in a high density suburb or a high income house in a low density suburb. Even when one does not intend to sell, a continuous upgrade of property as if one intended to sell will assist in the knowledge of what is needed to ensure that a property is marketable.

If the property is in a high density suburb a research into the minimum capital investment on a single property that can potentially give maximum returns will certainly assist with on the ground knowledge of real estate investment.

Other skills like landscaping, painting and general property maintenance for investment purposes might be acquired through this method.

The bottom line of profitable real estate investment is practice and any person can be involved.

Vengai Madzima is a property investment consultant and analyst with Wisdom Properties. He can be contacted on 0772 468093 email: vengai@wisdompropertieszw.com

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