Real Estate Investor Magazine South Africa March 2015 | Page 28

ACQUIRING

The Business of

Buy-to-let
A tried-and-tested business model
By Koos Du Toit

B

uy-to-let property investment is a low risk, but
highly profitable, business opportunity and
investment alternative.
The success of the buy-to-let property business
model is clearly evidenced by the ongoing stellar results
produced by listed property companies.

shortfall between the rental income and the property
expenses. However, if the right property - in a good
area with high rental demand - is selected, the monthly
rental generated by the property must cover most, if
not all, of the monthly property expenses, including the
bond repayments. When there is a shortfall between

The business model used by listed property companies
is quite simple. They acquire a quality portfolio of
properties and rent these out to tenants. The acquisition
of the properties is often financed through property
finance. Professional property and asset managers are
appointed to place and manage the tenants, as well
as the properties. The monthly rentals generate an
ongoing income, while the escalation clauses in the
lease agreements ensure inflation-hedged income
growth. The long-term capital appreciation of the
properties increase the asset value of the portfolio.

“The long-term capital
appreciation of the properties
inc