Real Estate Investor Magazine South Africa October 2013 | Page 42

STRATEGIES

BY JASON LEE

More Rights

More Value

A

couple of years ago a conveyancer
with whom I have done a number of
deals called me and asked whether
I would advise her husband with regards to
a commercial property he was interested in
acquiring. I agreed and will always remember
how this deal unfolded at the meeting and in
the years that followed.

loan terms before even factoring in the rental
income from the rentable space in the property.
The truth is that I actually got it horribly wrong.
After the signage rights were in place, the
gentleman did not get R30 000 per month from
advertising fees as I’d predicted; he managed
to sign a signage deal with a major brand for a
staggering R88 000 per month.

At the meeting, the gentleman showed me
plans for the building and told me that the
seller was looking for around R2.7 million for
the property. I then asked him to describe the
location of the building. After he told me where
it was, without hesitation I told him to sign the
deal that day and get it done. I could see he was
quite surprised by this, as he was expecting me
to start pulling out graphs and spreadsheets
and giving detailed advice. But here I was,
blurting out that he must buy the building
five minutes after the start of the meeting.
My thinking on this deal was very simple. The
building was located in a commercial node with
huge visibility from a major freeway. This, to
my mind, translated into enormous potential
signage fees once he was able to get the signage
rights in place. At the meeting I estimated
that the potential advertising revenue from
the signage alone would be around R30000
per month. This would be enough to cover
his monthly bond repayments on commercial

This deal has always stood out in my mind as a
fantastic example of how more rights in property
translate into more value. Without the signage
rights in place, the building was barely worth
the R2.7 million he paid for it. With the signage
rights in place, not only was the property a cash
cow in terms of monthly income and cash flow,
but the value of the property also tripled in value,
based on the signage income alone.

40

October 2013 SA Real Estate Investor

Even if you never intend using the additional
rights you procure for yourself, these rights may
have enormous value for a potential buyer of
your property. Additional rights can include:
• getting plans drawn and passed at council
for an extension to your property or to add a
second storey to a single-storey house;
• getting a zoning scheme departure in place
to r un a business from a residentia l
property;
• getting the rights in place to operate a
guesthouse or backpackers’ lodge

from your property;
• getting the rights in place to open a crèche
or playschool from your house;
• getting plans and permission in place to
demolish your existing house and
develop townhouses or apartments on the
land;
• getting the rights in place to subdivide your
garden into more than one plot.

Are you adding value?
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