Real Estate Investor Magazine South Africa March 2015 | Page 33

3

STRATEGIES

Strategies
for a good

Property

Investment

I

f you are looking into investing in real estate, your
strategy is likely to be to earn wealth on your
investment based on the risk you are taking, and
minimising the time attending to the investment. In
order to accomplish this, you need to make some smart
choices from the word go. Your ultimate goal must be
to get as close as possible to these three elements:
1. Fair cash-on-cash return
When you buy property you are taking money out of
your liquid financial assets and investing it into a very
illiquid asset (a security or other asset that cannot easily
be sold or exchanged for cash without a substantial loss
in value).
As you were earning a rate of return on your financial
assets, you must endeavour to earn a fair cash-on-cash
rate of return on your real estate. To do this, you need to
document deals and buy positive cash-flow properties
that earn you decent returns.
2. Choose the right risk
All real estate is high risk. Development of real estate,
land, Tenant-In-Common (TIC) investments, private
real estate funds, renovations, etc., all have much higher
risk than just simply buying an established cash flow
investment property. In many of those investments, so
many things can go wrong, the risk is too high and you
many never see a return.
So if you want to own real estate as a means for
wealth accumulation, do the proper due diligence,
analyse, test, review reports, etc., to make an educated
www.reimag.co.za

How to make
smart choices
BY JASON VORSTER

decision, and purchase a property with the least risk
possible.
3. Minimise time management
Some properties require too much time, effort and
management to make them great investments. For
example, vacation rentals, low quality properties in
bad areas, varsity