There is a lot of economic doom and gloom in SA ( and in the world ) right now . If you consume enough daily news you might be convinced that the world really is falling apart . Many say another economic collapse is imminent so stand back and wait . The economic downturn will eventually pass , however , most seasoned investors do the opposite in poor economic circumstances otherwise they would not invest and always see opportunity when others see disaster . This brings up another question , which is , where to invest in the world now given the weak local economy , fluctuating currencies , lack of finance for investors , a possible credit downgrade and political uncertainty here in SA . Investing your hard earned money is not always easy . The decision you make today will determine your future results either good or bad .
“ Make yourself sheep and the wolves will eat you ” – Benjamin Franklin
Some investors have forgotten the fundamentals of investing which is , ‘ the action or process of investing money for profit ,’ according to Wikipedia . Real estate internationally has the key advantage of being used as a dwelling space , having the ability to borrow against the security of the asset , rental income , depreciation , costs that can be tax deductible , profits sheltered and indexed against monetary inflation . Too many property investors regularly return from their experiences by losing money and coming back with war stories and battle scars . They blame poor economy , timing or on choosing the wrong asset . The more educated savvy investor who invests on the market lows return from their exploits with a different view . Normally it is suitcase full of advice and a portfolio of positive cash flow investment properties generating excellent rental returns .
According to FNB the estimated pace of selling buy-to-let properties in SA remains low , suggesting still-low levels of financial stress and pressure in the market . A lack of exuberance in this market may become supportive of this market , constraining growth in supply of available homes for rental . This coupled with the expectation of increase in demand for homes to rent , could contribute to strengthening in the rental market in the near term . Compared to 2004 where proportion of buy-to-let purchases were 25 % of the total purchases today it is only 7,6 %. So clearly while there are signs of poor performance in the SA market there are normally great opportunities . This coupled with lack of bank finance locally is forcing many investors to invest offshore in a more stable environment .
It is always good idea to stick to the principles of investing according to international investor and my good friend Dr . Dolf de Roos , which is :
• You make money when you buy
• Always buy from a motivated seller
• Never be the first to name a figure
• Fall in love with the deal not the property
• Be counter cyclical
• Buy with zero or little money down
• Seldom sell
• The deal of the decade comes along once per week
Why the move to offshore investment ? It becomes a symbol of success when your property investment business starts investing abroad . But you also know when to make the leap and why you want to make the leap .
There are lots of considerations to take into account before you invest offshore such as :
• Impact of Currency fluctuations
• Setting up a legal entity in the country you plan to invest
• Opening up bank accounts
• Getting good tax advice
• Finding the right investment property
• Having reliable partners on the ground
• Managing your properties from a distance
• Getting finance
• Time zone differences
• Having good communication channels in place
• Understanding local property lingo and the culture
• Understanding the local property buying process and legal implications
With all that stress why even go global at all ? You can hand your cash over to somebody else to invest for you without all the hassles . Many investors prefer this . Hands off investors like these tend to invest for capital growth in stable , safe haven big city destinations such as London , Sydney , New York , Munich , Dubai and even European countries like Portugal , Germany and Spain in some cases . George Radford , Director of IP Global Africa says , “ Real estate investors from South Africa and other African countries like Zimbabwe , Botswana , Zambia and Kenya have consistently shown a healthy interest in the UK and Australia mainly due to shared historic connections .”
According to Linda Muscarello former President of Real Estate Investment Association ( REIA ) in the US says , “ Real estate is a unique asset that is largely misunderstood by most investment advisors , estate
www . reimag . co . za NOVEMBER 2016 SA Real Estate Investor 13