Real Estate Investor Magazine South Africa May/June 2015 | Page 31

NEALE PETERSEN’S

means that in 40 years’ time, when you retire, you will
be able to buy with your R22 million retirement fund
what you can buy with R850,000 today. Even if the
inflation rate averages at a low 5% over the next 40
years, R22 million will have the purchasing power of
just R2.9 million today.

Hedging the risk
The third step in managing the risk is to choose
investments that provide a hedge against the ravages
of inflation. For buy-to-let property investors, this
crucial third step has been already been taken care of.
This is because buy-to-let property investment
is one investment that has proven to outperform
inflation. Firstly, property price growth, while
experiencing short-term fluctuations, continues to
keep pace with inflation over the long term. In fact,
it is widely recognised that inflation boosts physical
asset prices like gold, silver, oil and property. Secondly,
and similarly, the monthly rental income generated
by a buy-to-let property keeps pace with inflation
year after year, as the rental increases annualy by the
amount stipulated in the lease – generally 10% - or at
least the inflation rate. This means that the income is
hedged against inflation and will still have the same
purchasing power - the rental of an average property
– in seven years’ time, in 14 years’ time and in 70 years’
time.
Buy-to-let property provides a real hedge against
inflation, ensuring the value of your investments do
not halve every seven years, but rather maintain and
grow their value, regardless of what the inflation rate
may be.

RESOURCES

P3 Investment Group
www.reimag.co.za

MASTER MENTORING

PROGRAMME

YOUR
EXCLUSIVE
ACCESS TO
MENTORSHIP!
“Formal education
will make you a living;
self-education will make
you a fortune”

Jim Rohn
For more info contact 0861 ACT NOW!
www.nealepetersen.com
MAY 2015 SA Real Estate Investor

29