6 Steps to Score a Property Deal Before You Buy

By Renier Kriek

Great properties can make poor investments. Renier Kriek shows investors how to test the fit, interrogate the numbers, price the risks and know when to walk away.

INVESTOR INTELLIGENCE

Property investing has an emotional problem. You see a property online, walk into a viewing or spot something that appears undervalued and immediately start imagining what it could become.

The renovation. The tenant. The rental income. The negotiation. The capital growth. Property is tangible in a way that shares, bonds and many other investments are not. You can walk through it, touch it and imagine owning it. That is part of its attraction.

It is also why investors can fall in love with a property before establishing whether the deal actually makes financial sense.

In Part 1 of this series, I argued that the first asset an investor should analyse is not the property, it is the investor.

Once you understand your objectives, finances, available time and appetite for risk, the next step is developing a repeatable process for evaluating individual opportunities. You don't need a complicated spreadsheet to screen every property. You need a disciplined way of deciding whether a deal deserves deeper analysis.

Here are six steps I use.

STEP 1: MAKE SURE THE PROPERTY FITS THE INVESTOR

Before asking whether a property is a good investment, ask: Is it a good investment for me?

Different investors require different properties. Someone with a demanding career and little spare time should think carefully before buying an investment requiring renovations, furniture, cleaners and constant management of short-term guests.

Someone with construction experience may see opportunity in precisely that type of property.

A retiree needing immediate income should evaluate a property differently from a high-income professional able to absorb temporary negative cash flow while pursuing longer-term capital growth. Start with yourself.

Ask:

  • How much cash can I invest without exhausting my liquidity?

  • How much monthly shortfall could I comfortably absorb?

  • How stable is my existing income?

  • How much time can I realistically give this property?

  • How long can I leave the capital invested?

  • What level of gearing am I comfortable carrying?

  • How does tax affect the investment?

  • Am I looking primarily for income, growth or both?

  • Does this investment suit my temperament?

The same property can be an excellent investment for one person and an expensive headache for another.

INVESTOR ACTION

Before analysing the deal, write down your investment strategy in one sentence.

For example: “I want a low-management residential property producing sustainable long-term rental income with limited monthly cash-flow risk.”

Now test every potential acquisition against it.

STEP 2: ASK THREE QUESTIONS BEFORE YOU TOUCH THE NUMBERS

Before building a financial model, reduce the investment decision to three questions.

1. Would I want to own this property?

This is about the underlying asset. Ask:

  • Is it in a location where people want to live, work or trade?

  • Is there sustainable tenant demand?

  • Is there likely to be resale demand?

  • Is the building fundamentally sound?

  • Is the area improving or deteriorating?

  • Is the property relatively easy to maintain?

Will there be a broad pool of potential buyers when I eventually exit?

Importantly, this does not mean asking whether you personally would live there. Your tenant is not necessarily you.

2. Would I want to own it at this price?

This is where a good property and a good investment can become two different things. A beautiful property can be a poor investment if the asking price already prices in years of future growth.

An ordinary property can become compelling if the price adequately compensates you for its weaknesses. Price changes the investment.

3. Would I still want it when something goes wrong?

Don't test the investment only against the best-case scenario.

Assume:

  • A vacancy.

  • A non-paying tenant.

  • An interest-rate increase.

  • A special levy.

  • Unexpected maintenance.

  • Higher rates and taxes.

  • A renovation overrun.

  • A delayed transfer.

  • Lower-than-expected rent.

If a R100,000 renovation becomes R150,000, does the deal survive? If the property only works when everything goes right, it probably doesn't work.

INVESTOR ACTION

Before making an offer, write down three things that could go wrong and calculate whether you could financially survive them.

STEP 3: SCORE THE DEAL OUT OF 30

Now turn judgement into a repeatable process. For an initial screening, score every property from 1 to 5 across six categories.

  • 1 = serious concern

  • 3 = acceptable

  • 5 = unusually strong

That gives you a first-pass score out of 30.

THE 30-POINT PROPERTY DEAL SCORECARD

FIT

What you're testing: Does the property suit your objectives, finances, time and temperament?

Score: /5

PLACE

What you're testing: Is the location likely to support tenant demand and resale demand?

Score: /5

PROPERTY

What you're testing: What are you physically buying and what problems come with it?

Score: /5

INCOME

What you're testing: Is the expected rental income credible and resilient?

Score: /5

PRICE

What you're testing: Does the return justify the purchase price and risks?

Score: /5

PRACTICALITY

What you're testing: Can you finance, manage and execute the strategy?

Score: /5

TOTAL: /30

But don't worship the score. The explanation next to the number is more important.

  • Place: 4/5 — excellent tenant demand but poor parking. This tells you considerably more than simply writing “Place: 4/5”.

  • Property: 2/5 — attractive purchase price, but the body corporate appears underfunded. This identifies the actual risk.

The score creates discipline. The explanation preserves judgement.

INVESTOR ACTION

Create this six-factor scorecard on your phone, spreadsheet or notebook and use the same process for every property you seriously consider.

STEP 4: SEPARATE FACTS FROM THE SALES STORY

Property deals arrive surrounded by stories.

  • “You could easily get R18,000 a month.”

  • “Everyone wants to live here.”

  • “The body corporate is sorting that out.”

  • “They're building a shopping centre nearby.”

  • “Short-term rentals in this area are making a fortune.”

Maybe. But before putting any assumption into your investment calculation, ask: How do I know this?

  • A signed lease is evidence.

  • Several genuinely comparable rentals are evidence.

  • Municipal accounts are evidence.

  • Body corporate financial statements are evidence.

  • Actual historical operating costs are evidence.

An agent saying, “You should easily get...” may be useful market intelligence, but it isn't the same thing.

Property investors have a dangerous ability to turn anecdotes into assumptions and then assumptions into cells on a spreadsheet. A precise spreadsheet does not turn a guess into a fact.

INVESTOR ACTION

Beside every important number in your deal analysis, write:

SOURCE:

If you cannot fill in that blank with credible evidence, treat the number as an assumption and stress-test it.

STEP 5: PRICE THE RISKS YOU CAN'T SEE

One of my more expensive early lessons came from comparing a fixer-upper in Durbanville with a completed, immediately lettable property in Bellville.

The fixer-upper appeared to be the clever deal. It was cheaper. The defects were visible. And the potential increase in value appeared comfortably greater than the renovation budget.

The temptation is obvious: Buy cheaply. Renovate. Unlock the value. Pocket the difference.

What I had not adequately priced was everything surrounding the renovation. The hidden renovation equation. I should have asked:

  • How long will the property produce no rent?

  • What happens if the contractor discovers additional problems?

  • How much of my own time will the project consume?

  • What will financing cost while the property produces no income?

  • Where will the renovation capital come from?

  • Is the scope of work genuinely complete?

  • What contingency should be added to the budget?

  • What if the completed property is worth less than projected?

  • What return am I demanding for taking the additional execution risk?

The completed property looked less exciting because there was less obvious value to unlock. In retrospect, that was partly its virtue.

Had both properties been scored using the same process, the fixer-upper might still have won, but only after lost rent, financing costs, execution risk and my own lack of experience had been priced into the decision.

INVESTOR ACTION

For any renovation or value-add investment, calculate:

Purchase price + transaction costs + renovation + financing costs + lost rent + contingency + your time = true investment cost.

Only then calculate the potential return.

STEP 6: CHANGE THE DEAL — OR WALK AWAY

This may be the most valuable lesson of all: A poor deal doesn't necessarily mean it's a poor property. Sometimes the deal is wrong.

Consider a property offered at R1.8 million. Perhaps it scores only 19/30 because the roof needs work and the initial yield does not compensate for the capital required.

At R1.6 million, with the seller repairing the roof, perhaps it scores 23/30. At R1.5 million, perhaps it becomes genuinely compelling.

The property hasn't changed. The transaction has.

Investors often treat the asking price as though it were fixed. It isn't.

The variables you may be able to negotiate include:

  • Purchase price

  • Repairs

  • Occupation date

  • Occupational rent

  • Existing lease arrangements

  • Deposits

  • Fixtures

  • Timing

  • Sometimes financing

A scorecard shouldn't merely tell you whether to say yes or no. It can tell you: “Not at these terms.” That is extremely valuable information.

INVESTOR ACTION

When a property fails your scorecard, identify the two or three things that would have to change for the investment to become attractive.

Then negotiate those variables. If they cannot be changed, walk away.

KNOW YOUR OWN INVESTMENT BLIND SPOT

Different investors make different mistakes.

THE OPTIMIST

Be suspicious of aggressive rental forecasts, renovation budgets and capital-growth assumptions.

THE BARGAIN HUNTER

Remember that cheap property is often cheap for a reason.

THE PERFECTIONIST

Don't reject a financially sound investment because of cosmetic defects that can be fixed economically.

THE SPREADSHEET INVESTOR

Not everything valuable fits neatly into Excel. A good street, natural light, sensible proportions, parking and general desirability can materially affect tenant and resale demand.

THE ENTREPRENEUR

Don't underestimate how much time “one small project” will consume.

THE PASSIVE INVESTOR

Be careful not to buy an operating business disguised as passive property investment.

Short-term rentals, student accommodation and rent-to-rent strategies may be excellent businesses. But they are still businesses requiring execution.

The useful question isn't simply: What type of investor am I?

It is: What kind of mistake am I naturally inclined to make?

Build your investment process around protecting yourself from it.

THE FINAL RULE: KNOW WHEN TO STOP

Property transactions develop emotional momentum remarkably quickly.

  • You've attended the viewing.

  • Your partner likes the property.

  • You've spoken to the bank.

  • The agent says another offer is coming.

  • You're already imagining the new kitchen.

  • You've spent evenings analysing it.

None of those things improves the investment. The money and time spent investigating a bad deal are cheaper to lose than the money you could spend owning the wrong property for years.

That is one of the most useful functions of a repeatable scoring process. It gives you permission to stop before emotional momentum becomes financial commitment.

Experienced investors often appear to make decisions quickly because years of experience have compressed their analysis into instinct. Until you have accumulated that experience, a scorecard gives you discipline.

Use it repeatedly. Say no repeatedly.

Score the property. Challenge the assumptions. Price the risks. Change the deal if you can. And have the discipline to walk away when the numbers don't work.

Because successful property investing isn't about finding a reason to buy. It's about developing a process that prevents you from buying for the wrong reasons.

In Part 3, the series can move from first-pass deal screening into the deeper financial analysis required before capital is committed.

SOURCE & DISCLAIMER

Original article: 6 Steps to Score a Property Deal Before You Buy
Author: Renier Kriek
Publisher: REI Magazine — Real Estate Investor Magazine
Publication: September 2026 edition
Original source: https://publuu.com/flip-book/1018740/2626843/page/70

This article was transcribed from a supplied copy of the magazine. The wording should be checked against the original publication before use, as some text was extracted from scanned pages. Publication on the Osher Property Solutions website is subject to obtaining the necessary permission from the copyright holder.

The information is provided for general informational purposes and should not be regarded as financial, investment, legal or tax advice. Readers should obtain appropriate professional advice for their circumstances.