Real Estate Market Research: Dave and Julie Aren't Right About This!

by Monica Mutuma

I have a confession to make.  In the Real Estate Millionaire Program that I am going through, Dave and Julie constantly emphasize the need to keep asking questions - doing more market research - no matter how good a property seems to be. I have sometimes thought that this might not be necessary. I figured that maybe they just weren't right about this.
 
Once one has done the numbers and satisfied oneself that the property will pay for itself and provide some income for the buyer I thought that was enough.

Building societies here are currently not giving out mortgage loans.  They will resume once they have dealt with challenges that are currently affecting them.  I now realize that in a way this non- lending is good for me.  It has given me the opportunity, be it a forced one, to keep doing research.  Firstly, to dig deeper into the familiar areas which I started out with.  Secondly, to look further afield.  I am almost convinced that if I had been able to access funding early on in the course I might have been too excited and been tempted to buy a property without doing extensive research.

Further digging in familiar areas has yielded yet another surprise.  Popular areas as I described last time (see Monica's last article: Real Estate Investing is About Location) are preferred by residents for convenience, proximity to central business district and security.  I'd gathered this information from residents.

However, upon further research with local authorities I've discovered that a number of those areas have been zoned for commercial purposes.

This means that properties in the selected areas can also be used for commercial real estate purposes like offices.  A property in this zone has dual use and this is to the advantage of the buyer or the tenant. 
 
There is a common trend here in Zimbabwe for companies to operate from the suburbia.  A lot of people who run small companies now also prefer to work from home.  If the property is in a commercial zone this will make it doubly attractive- it can rented out to a resident or to a business person.  But one still has to consider if a future tenant will be comfortable staying in an area with increased volumes of traffic - both cars and pedestrians.

Some areas, especially to the south/ south west of our city are also zoned for commercial purposes, this time industrial.  What this means for the buyer is that as industry in that area expands, there will be encroachment of industrial activity on the residential properties.  Before buying in such areas, one has to ensure that the buying decision ties up with one's goals; otherwise one might find themselves with a problem that might be costly.

Some areas are zoned for commercial purposes regarding restaurants.  Again one needs to ask oneself if their future tenant might one day wish to stay on a street where there's a public place nearby.

So this time around I felt Julie and Dave had been vindicated.  There is more to property buying than meets the eye.  I now strongly feel that it is better to have enough information, negative and or positive, before making the purchase as there are implications which stretch far into the future.

I also made another major discovery with the issue of zoning with one of the areas to the east of the capital.  This area is about 20 km out of town.  It is fairly new and there is still some developments being carried out on some of the properties.  Land there was sold to buyers at fairly affordable prices and people have managed to put up some attractive homes.

That area is in the rural category and will be like that for more than thirty... yes, thirty years to come!  The implication is that properties in this kind of zone appreciate in value at a slower pace than an urban zone.  This has a direct bearing on the value which will be placed on a house if one decides to sell. To me this was mind boggling and when I discovered this I couldn't stop wondering how many people knew this when they bought.

One resident also pointed out that despite the fairly large and beautiful properties that became available for rent in this area, potential tenants always pushed for low rentals - they argued that they would have to spend considerably more on transportation.

I know for certain that I would prefer the other areas close to town where even small properties fetch good rentals based on proximity and convenience.

It is not easy to obtain information for future plans for urban areas but from the brief pointers I have outlined above, it is worthwhile to continue digging.

Meanwhile, happy searching and (wise) buying.

Published on December 10th, 2009

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