Real Estate Investor Magazine South Africa November 2019 | Page 25

Always do a full inspection of a property to look for structural
damage and the like before putting in an offer to purchase.
Understand ‘sectional title’ versus own ‘title
ownership’
According to Benhard Wiese of Cape Coastal Homes, own title
ownership involves full ownership rights and responsibility
for a piece of property, such as a free-standing home, cluster
house, or a small holding. These rights and responsibilities
extend to the property, its improvements, and the land it is
built on.
Sectional title ownership on the other hand entails separate
ownership of a unit or section of a building on a common
property within a complex or development. Townhouses, flats,
apartments, and semi-detached homes are all examples of
Sectional Title Units.
If you buy into a sectional title scheme, you will own a
common property and share all the rights and responsibilities
for that property with other owners. This means you will pay
a monthly levy towards the upkeep of the property, which
will cover insurance premiums, security, cleaning staff wages
and salaries, and water and electricity for the running of the
common property. You will still have to pay for your unit’s rates
and taxes and your monthly water and electricity consumption,
but the rest of the property maintenance costs are shared.
10 practices of a great investor
According to Michael Mauboussin, Director of Global
Financial Stretegies at Credit Suisse, the top ten attributes
of great investors include the ability to:
Understand numbers
Understand value
Assess strategy
Compare
Think probabilistically
Update their views effectively
Acknowledge behavioural biases
Know the difference between information and
influence
Understand the importance of position sizing
Read
rental income to cover as much as possible of your bond
payment and other expenses. According to Gert Van Staden of
P3 Investment Group, while you don’t need every investment
property to be a bargain, you should also never pay too
much for an investment property either. A CMA will help you
determine the right price for a property.
It is important to understand the pros and cons of each
ownership type before buying or investing in either – so be
sure to do your homework. “Look at what comparative properties in the area have been
sold for. Look at the values of similar properties in other, similar
neighbourhoods,” advises Van Staden. He agrees with Van Den
Berg that property investors should always keep a lookout
for ‘motivated sellers’, which he describes as owners needing
to sell quickly, whose main motivation won’t be price. These
include sellers in financial trouble, deceased estates, or sellers
who are emigrating or relocating. His final tip: always negotiate
for a reduced price with a seller.
Finding your first property investment Determining potential rental income
The experts advise the following for your investment property
journey: A good investment will be a property in a good area with a solid
rental demand. There are many external factors that can cause
an increase in the value of a property, with rental demand and
supply being one of them. When supply in a desirable location
slows, property prices increase and investors can sell or rent
out a property at a more profitable rate. It’s also true that when
both supply and demand are high, prices can increase too.
The purchase price of a property is key. Determine the
price you are willing to pay and stick to it.
Look for properties that can be subdivided or
renovated.
The ability to add a flatlet to the property at relatively
low cost will increase its rental income.
The income potential of a property is more important
than its capital growth potential.
“Searching for undervalued properties makes perfect
sense, and targeting distressed sellers is an excellent strategy,”
advises Pierre Van Den Berg of ThanksToProperty. Van Den
Berg cautions investors against getting overly emotional or
excited about the first bargain property they find: “You will
do extremely well for yourself if you manage to stay calm and
patient, and supress the hype. Look at as many properties as
possible and do lots of homework.”
He also maintains that it is important to determine to what
degree you can be assured of a constant and above-average
As an investor you want to buy a property that will have
a high rental yield. To work out what this might be you will
need to know what your total property cost figure will be for
a house. This figure will include the market value of a property,
legal fees, loan costs, etc. You then also need to know what the
ongoing expenses on that property might be: this includes
repair and maintenance costs, insurance, mortgage interest
repayments and the like.
The formula to then use is:
Net rental yield = [(Annual rental income – Annual
expenses) / Total property cost] x 100
SOURCES P3 Investment Group, ThanksToProperty, Which
Mortgage, Standard Bank, My Bond Fitness, Just Property,
Cape Coastal Homes, MSN, UFS, Mortgage Choice
SA Real Estate Investor Magazine NOVEMBER/DECEMBER 2019
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