Real Estate Investor Magazine South Africa February 2014 | Page 22

GETTING STARTED

BY KOOS DU TOIT

Why Invest
In Property?
It’s the simple, understandable
alternative, that’s why!

F

ew investors follow sage advice from the
world’s most successful investor, Warren
Buffett: “Never invest in something you
don’t understand.”
Instead, most investors pay dearly for
investment “advice” regarding risk tolerance,
asset allocation strategies, securitisation,
hedging, offshoring, intrinsic values and
valuations, liquidity, price-earnings ratios,
market volatility, return targets, risk premiums,
growth assets and risk assets, bulls, bears
and bubbles… and then face the intricacies
of assembling all these complex factors into a
coherent investment strategy that will, hopefully,
deliver returns above inflation given the many
uncontrollable risks involved.
Looking for an investment alternative that
will allow you to follow Buffet’s advice? Many
investors are surprised to discover just how
simple buy-to-let property investment is. It
is really simply a matter of understanding a
common sense strategy and implementing a
proven system: acquire a well-chosen property,
rent the property out to a good tenant, get a
professional rental management company to
manage the tenant and the property for a fee,
and then watch your relatively small investment
grow into a passive income stream for life as the
property produces an inf lation-linked rental
income month after month, while also producing
capital growth year after year.
Used to the complexity of the world of investments,
investors often have a range of objections to the
simplicity of this investment alternative, but – as can
be expected from such a simple strategy – there is a
simple solution for every objection.
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February 2014 SA Real Estate Investor

Buy a property
The first objection most investors pose is that
they can’t afford to buy a property. The solution
is simple: using “gearing” or “leveraging” by
borrowing the money to acquire the property
through a home loan.
The next common objection is that they already
have a home loan, so they can’t get another one. The
solution is simple: set up a trust, which falls outside
the ambit of the National Credit Act, and obtain a
second bond through the trust.

Rent it out
The obvious next objection is that they can’t afford
to pay a second bond. Again, the solution is simple:
use the rental income from the property to pay
the bond and the other property expenses. Of
course, this means access to the passive income
the property generates is delayed. It is, however, a
temporary situation, because the rental increases
each year, while the biggest monthly expense, the
bond repayments, remain static (barring interest
rate movements). Within a few years, the growing
rental amount will exceed the property expenses,
and the investor will start receiving a monthly
income from the property. And once the bond is
settled – and it is possible to do so in as little as 11
years – the monthly rental becomes an ongoing,
inflation-linked passive income for the investor
that will continue for as long as the property is held.

Use professionals
Another objection is a lack of property knowledge
and experience. Another simple solution is to join
a professional property investment organisation,
such as P3 Investment Group, which will provide
access to pre-screened, pre-selected properties;
custom-designed software investors can use
SUBSCRIBE

to check each investment option and compare
different options; as well as step-by-step assistance
and a personal mentor.
Some investors will still argue that finding a
good tenant is almost impossible and that there is
too much maintenance involved. But the solution
is simple: use a professional rental management
company that, for a reasonable fee each month,
will find, thoroughly screen and manage a reliable
tenant, as well as take care of the maintenance
of the property. In addition, rental insurance is
available to ensure that the investor receives the
rental each month on time and that delinquent
tenants are evicted at no cost to the investor.

Repeat
Once an investor has acquired one buy-to-let
property and successfully tenanted it, it is a simple
matter of duplicating the process to acquire another
buy-to-let property, creating yet another income
stream and yet another source of capital growth.
This simple system can be duplicated as often as
the investor’s cash flow [