Real Estate Investor Magazine South Africa November 2016 | Page 16

COVER STORY agents, financial planners and the general media. It is not because they intentionally want to mislead you to invest. They often don’t know the inherent advantages of these assets are because of how they were educated, the assets they know well, licensed to sell and how they earn their fees. Unfortunately many international investors fall into the trap of buying many of these overpriced investments when they rely on these advisors for direction.” Muscarello goes onto say, “Historically real estate does appreciate over time in reliable fashion. However, like any other asset like stocks it can be bought and financed badly and cause massive losses for the unwise investor. This is why we are sharing ways to reduce the risk and improve the returns significantly.” US Investments Not everyone wants to invest offshore says, Sean Ryan of Greystone but as long as the investor is aware of the risks and has a long-term approach. The most important thing is ensuring cash flow positive purchases that regular rent keeps rolling in despite the markets then everything should be fine. Offshore offers so much more right now than is available in South Africa. Why is there such a divide between the two? ‘The simple answer is in the can-do attitude and mindset of the investor,’ says Sean Ryan CEO of Greystone Residential a US based end-to-end property developer that sell to investors worldwide. Our investors have to do their homework before they buy as they are based in countries thousands of miles away. UK Investments Warren Brusse an experienced United Kingdom investor from United Kingdom Property Partners says is it is absolutely necessary to invest with expert assistance and trustworthy eyes on the ground. The DIY approach can be costly if you don’t understand what is a good or 14 NOVEMBER 2016 SA Real Estate Investor bad buy, verify if there is actually a rental demand in the area or if you don’t have a good property manager to manage it for you. Brusse says, ‘as investors they target investment properties in specific areas in the UK that generate minimum 20% per annum on a net cash flow return basis, otherwise they simply don’t make the investment.’ Know where the hot spots are For decades London has always been the investment destination of choice in the UK. Brexit has changed the investing dynamics in the UK market to a large extent. There is a huge demand in the North where there is a North vs. South divide both in terms of value and returns. The dividing line starts from Birmingham on the West Midlands to Hull on the East coast of the UK. The old model of investing was finding Below Market Value (BMV) properties where easy credit was available, little or no deposits and the ability to refinance and recycle capital quickly. This was dependent on unsustainable levels of growth What is more important is to understand the micro aspects of the market. Knowledgeable investors are keen advocate of chasing yields and growth in some of the UK’s booming secondary cities, and profitable returns can be made pretty quickly in these markets. Investors are looking for certainty. But which of the UK’s secondary cities offer the most dependable rental yields and exhibit the greatest growth potential. Buy-to-let versus House of Multiple Occupancies (HMO’s) House of Multiple Occupancies (HMO’s) or room rentals as an investment option is getting investors cash flow returns in excess of 15% per annum in many cases and the average investor looks at it and says, ‘it is too good to be true.’ The profits from HMO’s are clearly higher than buy-to-let in the UK simply because the HMO’s have multiple sources of income versus once source of income www.reimag.co.za