Real Estate Investor Magazine South Africa March/April 2019 | Page 66

INSPIRATION
Crafting your business legacy
F
our property industry experts share their insight into thriv-
ing in the property investment arena
Building a war chest for business and growing a strong
personal balance sheet to build a legacy of generational wealth
is a challenge that all entrepreneurs and business people face.
Investing in property is an effective way of achieving this, but
where do you start?
Entrepreneurship To The Point, the entrepreneurship network
hosted monthly by Property Point, the Growthpoint Properties
initiative, shared insight from four industry experts to equip
entrepreneurs with the ability to own equity, whether in bricks
and mortar or listed property shares.
George Muchanya, Head of Corporate
Finance at Growthpoint Properties, has 27
years of experience in the property industry
spanning engineering, management, and
consulting.
The questions that I am most often
asked are ‘should I be invested in property
at all?’ and if so, ‘should I invest in ‘bricks-
and-mortar’ property or listed property shares?’
Property is a long-term play; that’s the only way to look at it.
You cannot invest your money and expect returns on day one. So,
if you are a long-term investor, property is a good fit.
Property asset classes typically include offices, shopping
centres, industrial property, warehouses, retirement villages,
hospitals and so on. Listed property is a proxy to access in these
properties.
Most people, however, don’t have the capital required to buy a
building on their own. However, for R1,000 you can buy shares on
the stock market. Buying shares in listed property gives everyone,
even if they only have a small amount to invest, the opportunity to
own property. Investing in listed property helps you to start saving
and earning returns in modest amounts.
A key factor of investing in listed property is liquidity. Property
shares have greater liquidity than fixed property investments;
selling and buying them is quick, easy and hassle-free. When you
invest in listed property shares it is lower risk, because you aren’t
investing in a single property but rather a diverse multi-property
portfolio. You don’t have to worry about maintaining a property
and finding tenants, the professional management teams of listed
property companies are responsible for this. Also, most listed
property companies pay regular dividends to their shareholder
every six months.
On the other hand, physical property is less volatile than
listed property over the short term; the value of shares on the
stock market change on a daily basis. Fixed property also has
sentimental value because you can see it; it makes us feel good to
see what you own.
Ipeleng Mkhari, CEO of Motseng
Investment Holdings, is also the current
President of the South African Property
Owners Association (SAPOA). She says:
Operating in the commercial property
sector can be quite intimidating because
when you enter this industry any asset that
you would want to buy would be a large
asset with a big price tag. One of the things that we have learned
along Motseng’s journey is that this is a long-term journey, buying
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MARCH/APRIL 2019 SA Real Estate Investor Magazine
properties is not something that you do on day one, certainly in
our view. We used the model of self-creating and basing our
growth on an annuity income for 10 years, and continually
building that up. Once we’d built a small balance sheet, we could
start acquiring.
The value of wealth creation lies in building up your personal
balance sheet, and that personal balance sheet does lie in property.
You can start either by investing in listed property shares or SA
REITs (real estate investment trusts) or buying a property asset –
one apartment or one building – and then build from that. There
are a number of ways to do this, but it does take time.
One of the real benefits of investing in property shares is the
liquidity. For instance, a Stokvel that saves money every month
could invest in a particular listed property share out of the 30-
plus listed on the JSE, and the beauty is that they would receive
dividends every six months that they can reinvest in the very stock
that they already own or diversify into other REITs. That in itself
could be sufficient to enable the Stokvel to build up enough to
buy a small plot of land or a physical property asset.
Sandi Mbutuma, Managing Director of
Azzaro Quantity Surveyors, is the former
Chairperson of the Women’s Property
Network and serves on the board of the
Property Sector Charter Council. She says:
One of the most important factors
is identifying the asset classes and
understanding them first. For example,
Residential property is very popular with people who want to
enter the market. If you have a primary long-term liability with
the banks you can build up a credit profile, which allows you to
access a secondary bond and this enables you to enter the buy-
to-let market.
Fractional property ownership, be it owning one room in a
hotel or shares in listed property, has proven to be successful and
resilient.
When people enter the property investment industry it is
generally not by buying a block of flats, but rather starting with
investing in one apartment at a time. In an office development,
perhaps they would start by owning a 150sqm sectional title
office.
Property has been stable and resilient over the long term, and
the optimistic view is that going forward there will be positive
movement.
Dr Sedise Moseneke, Executive
Director of Vukile Property Fund, is also
the non-executive chairman of Encha
Property services. He advises:
People tend to make decisions about
buying property on an emotional level,
but when you are an investment property
owning entity you have to be removed from
the emotion. Our decisions are commercially based.
We won’t go into making an investment decision without
doing two things. One, we go and kick the tyres, so to speak. We
get out there to see the property, touch the ground that it is on and
learn about the people in the area. Two, we won’t touch a property
unless we do a proper study of the area and the location. Only
once you have done the study and touched the soil do you get a
good picture of the property.