Real Estate Investor Magazine South Africa June 2015

COVER STORY TIPS FOR BUYING • Remember that you make money when you buy. Look for bargains and good deals that certainly still can be found. • Only consider areas with solid capital growth prospects based on a growing population, a strong, future-proof industry or infrastructure development. • Speak to several letting agents in the area to establish the current and predicted future rental demand. • Buy ‘green’ properties or budget for ‘greening’ the property. The electricity and water problems in South Africa will continue for some time, and ‘green’ properties will become ever more highly sought after, even at premium rentals. • Buy newer properties that will require minimal maintenance over the next few years, or budget adequately for maintenance in your cash flow projections. • Be aware that the interest rate cycle is on an upward phase. Ensure that your cash flow can comfortably accommodate a series of interest rate hikes. • Protect your investment by appointing professional property management agents to manage the tenant and the property, and protect your cash flow with rental insurance. ‘Buy land, they’re not making anymore.’ Mark Twain 18 JUNE 2015 SA Real Estate Investor Should you hold? To build real wealth, you need time in the market. The buy-tolet property investment model is a buy-to-hold strategy. The reason is simple – the longer you hold the property, the greater the returns, as the capital appreciation compounds and rental income increases year after year. Given that property is a longterm investment, your investment horizon should be no less than the duration of a mini property cycle - at least seven to ten years. But if you really want to see great returns, keep your investment property for at least a macro-cycle of around 20 years. Ideally, you want to hold an investment property indefinitely, which will bring you the holy grail of investment: infinite returns. Given the current uncertain situation in South Africa, some investors may decide to take a wait-and-see approach, not actively investing in more buy-to-let properties, but not divesting their existing investments. A decision to hold a buy-to-let property investment makes sense when the property price inflation in the area is positive, future capital growth prospects remain solid and there is rental demand. Very few of us would speculate that housing rentals will decrease over time, and regardless of the economic and social environment, people need a place to live. So, if a responsible tenant is in place, the steady monthly income may well justify the decision to hold. Bear in mind, the longer you hold the property, the more of the loan principal your tenants are paying off and the more wealth you are creating for yourself. If you decide to hold your property investments, optimise every aspect of your portfolio. In addition, while holding your direct property www.reimag.co.za

Real Estate Investor Magazine South Africa June 2015 | Page 20