Real Estate Investor Magazine South Africa March 2013 | Page 17

FEATURES
formal education. Some started out as lowwage labourers while others learnt about
property investment from their parents. The
entrants also work in a range of industries,
from medical professionals and estate agents
to small business owners and micro-business
owners, making a living from selling airtime
and chickens.

The property portfolios
There is no correlation between any of these
demographic variables and the size or success
of the property portfolios, which range
from five entry-level residential properties
to portfolios consisting of 68 properties,
including residential, small retail and medium
industrial properties, as well as office park
units.
A striking common factor is the success of
the various property portfolios, regardless of
size and composition. As just one example, one
property portfolio consisting of 30 residential
properties is generating an ongoing, inflationlinked passive income of R400 000 a month!

“Not only are these
real-life investors a source
of inspiration, they are also
trailblazers who light the
way for those of us who
have not yet bought that
first investment property,
or the next one.”
Types of properties
While the majority of the entrants invest in
residential property, the properties vary widely
from one-bed cottages to four-bedroom
homes. The most popular properties are one
and two-bedroom entry-level units in security
complexes which, as one entrant explained:
“limits risk because of permanent occupation
due to affordability and guarantees return
on investment”. Rental properties for lowerincome tenants, catering for the R2 500 per
month to R4 500 per month rental bracket,
also featured strongly.
Some investors focus on multi-income
producing properties, by selecting properties
www.reimag.co.za

with two, three and even four units, semihouses or garden cottages.
The consensus seems to be that residential
properties are the easiest to manage, and
provide scope to renovate and bring to bear
property management expertise to increase
potential income, by for example, adding more
rooms or a garage.
Never theless, a number of investors
owned entire blocks of flats and townhouse
complexes. Others have already branched
out into the commercial property sector,
investing in office complexes, small retail
properties, industrial stands and workshops. It
is interesting that in the portfolios containing
commercial properties, the focus was also
on the lower end of the market, with rental
properties aimed at small and medium-sized
owner-operated businesses and industrial
properties catering for start-up and small
businesses.

Areas
Just as diverse as the types of properties and
the investors themselves, are the areas in
which our investors focus. This confirms that
the buy-to-let property investment model
works in any area. Most of the entrants focus
on a specific area, notably Boksburg,
Kempton Park and Benoni on the
East Rand. The investors tend to
own multiple properties in a specific
town or city, noting that they prefer
to focus on an area they know,
in which they are familiar
with property values and
conditions, and from where
they can keep an eye on their
investments. Nevertheless,
there are some investors who
have por t fol ios t hat a re
w idely spread across the
country, from Mpumalanga
to Gauteng and the Western
Cape.
While most investors prefer
to invest in close p roximity to
home, all agreed that the most
important factor is the location
in relation to amenities: medical
fac i l it ie s , p ol ice st at ions ,
schools, shopping centres as
well as easy access to main
transport routes and public
transport.

Property selection criteria
The property selection criteria used by our
investors differ widely too. Some prefer
sectional title units in new developments to
avoid paying transfer and other costs outof-pocket, while others avoid complexes,
citing poor workmanship and too much
rental competition. Some investors look for
neglected and even vandalised properties to
pick up at a bargain price, renovate and rent
out, while other have fixed and f lipped as
many as 70 properties allowing them to build
up significant investment capital.
A number focus solely on properties that are
cash flow positive, while yet others are willing
to subsidise a shortfall for a few years to obtain
a quality property. Most of the investors
believe that income generating potential is far
more important than capital growth, and that
investing for the long-term – benefitting from
both passive income and capital growth - is
the best approach.
Our investors also use a range of strategies
to select the right properties. Some like to
drive around an area to keep up to date with
what’s available, others use the Internet and
newspapers, while others have a professional

March 2013 SA Real Estate INVESTOR

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