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Joburg’s Savoy Estate a 'goldmine' for property flippers
Category Property News
Widespread densification in Johannesburg in recent years has dramatically altered the residential landscape. With most areas now dominated by sectional title or cluster developments, finding accessibly-priced renovation gems is becoming increasingly difficult.
This is according to Howard Hoff, Lew Geffen Sotheby’s International Realty Area Specialist in Savoy Estate, Highlands North and Glenhazel, who says there are now only a handful of desirable suburbs where one can still find older homes that offer investment buyers a solid After Repair Value (ARV), the sum for which a house will sell once it’s been renovated and has the proverbial white picket fence.
Hoff says there are also a few remaining areas where young families can get a foot on the property ladder in a comfortable freehold ‘fixer-upper’ that can be modernised over time, rather than cramming everyone into a small semi.
“One of these scarce hunting grounds is Savoy Estate, where freehold properties can still be found for less than R2 million. And as a bonus for family buyers, besides being close to the first-rate entertainment and shopping hub of Melrose Arch, the suburb is also a catchment area for several good schools,” says Hoff.
“Depending on budget and the amount of renovation a buyer is prepared to undertake, Hoff says older properties can still be found in Savoy Estate for between R1.5 million and R1.9 million. And once they’ve been given some TLC, they can go back on the market for up to R3.8 million.”
Hoff says most of the homes are structurally sound with flowing floor plans, so often new bathrooms and kitchens plus a lick of fresh paint will significantly transform a house.
“Around 80% of the homes in Savoy Estate are still freehold and there is a fair amount of stock available, but since 2015 we have seen investors become increasingly aware of the value to be found in the suburb, and we have sold three older houses in the past three months alone,” says Hoff.
“Until recently, the majority of purchases in Savoy Estate were buy-to-live, but both the investment purchasing and rental markets have gained momentum.”
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, says that when buying a home to renovate and resell, the rule of thumb is that the total cost price should never amount to more than 70% of the ARV for it to be profitable, and in Savoy Estate this is still easily achieved if investors know what they are doing.
He says in order to maximise profits and avert costly hurdles and delays, buyers looking for renovation projects should first do their homework across these fields:
1. Know your local market
Are you buying in an area where property values are increasing, is the property in a transitional or established suburb, what are the demographics and are there amenities like good schools nearby?
2. Make sure you have the right team in place
Time is of the essence in house flipping, and delay is one of the biggest factors that will erode profit. The return diminishes with time because the longer the renovation project, the higher soft and carrying costs such as financing payments, insurance and utilities will be. So do the job well, but do it fast.
3. Be aware of the five common mistakes made when house flipping
Not enough time to complete the project, not enough money for the necessary scope of work, overcapitalising, inadequate skills for a professional finish and, most basic of all, impatience while house hunting that results in costly mistakes. Rather take a bit more time to find the right property at the right price.
“As an established suburb with easy access to a major highway and main arterials, St Mary’s School for Girls, Waverley Synagogue, Melrose Arch, Rosebank Mall, The Zone@Rosebank and the Norwood Mall, Savoy Estate ticks all the boxes for investment buyers,” says Geffen.
He says the planned introduction of the Rea Vaya rapid transit bus service along Louis BothaAvenue will also significantly ease commuting to both the Johannesburg CBD and Sandton, while new office parks are springing up in Waverley and Bramley.
“This is all contributing to the revitalisation and stimulation of the area which, in turn will drive property values. But while this is great news for current owners it does limit the window of opportunity for investors to buy in at the current prices,” says Hoff.
Author: Lew Geffen Sotheby's International Realty