Real Estate Investor Magazine South Africa Real Estate Investor Magazine - August 2017 | Page 61

Business Principle #1 - Strategy
Develop a systematic plan of action designed to
accomplish specific goals. The seven simple steps to
creating a successful strategy are:
Step 1 - Imagine
Imagine where you would like your real estate investing
to take you. It might be to spend time on a beach
location with lots of sun, maximum time with the
family or even working with your favorite charity.  
Step 2 - Financial goals
Define what it will take to realize those dreams in wealth
and cash flow. Commit to a date for accomplishing this
goal.
Step 3 - Cash flow target
Calculate what you currently have in cash flow and
assets less liabilities now, which is your current net
worth.
Step 4 - Current wealth
Identify where you are today. List liquid cash available
such as savings, credit card balances for investment,
home loan access bond amount available, shares,
policies that can be cashed in, etc. In terms of long-
term real estate, business or any royalties earned,
etc. Do not list your cars and jewellery ‒ only money
available to invest.
Step 5 - Vision, mission & values
Make a specific plan to reach those dreams. Be specific
about the type, area and price range of the real estate
you will be buying and your criteria for choosing those
investments.
Step 6 - Investment niche
You need to identify if you are going to invest in
residential properties (such as flats, townh ouses,
freestanding houses, estates, city apartments, and
land or family homes), or commercial. If you invest
commercial then you need to decide industrial,
hospitality, offices or retail.
Step 7 - Investment Criteria
This is the final and most important part of your
strategy and needs time. It will save you from making
costly mistakes. Here are a few examples of criteria that
you need to consider:
Minimum gross yield 15%; Minimum capital
appreciation per annum 10%; Minimum cash on
cash return 20%; Price range R500, 000 – R900,
000; Minimum deposit R100, 000; Maximum time
www.reimag.co.za
commitment per week 1 hour; Location of investment,
Western Cape, South Africa.
Business Principle #2 - Team
You need to have a group of individuals that can
help you build your team. For example, you need an
estate agent, property manager, attorney, accountant,
structure specialist, quantity surveyor, architect,
construction specialist, etc.
Business Principle #3 – Accounting
• Good accounting leads to good reporting, which
leads to good decisions.
• Purposeful accounting – accurate and useful
• Accurate bookkeeping – income and expenses,
detailed data entries, journal entries.
• Consistency – same entries monthly
• Frequency – don’t fall behind, a weekly report is
good for updates.
• Online Banking – check income and expenses
weekly
Business Principle #4 – Reporting
All professional investors understand the importance
of managing their business by metrics of day-to-day
measures such as:
• Statement of Cash Flows – activities
• Ratio analysis – Cap rates and Return on Investment
(ROI)
• Comparison reports – Comparative Market
Analaysis (CMA) reports and rental reports,
including fees, expenses, levies, rates and taxes, etc.
Business Principle #5 – Taxes
To make an immediate impact on your real estate
portfolio, you need to play close attention to the tax laws.
• Tax strategy – get a good adviser
• Entity and Structures – Pty, Trust, etc.
• Expenses – travel, meals and entertainment
• Depreciation
• Documentation
Kiyosaki says one key tip is patience. Investment is all
about patience and there is absolute no need to rush
into any investment in any market despite all the
pressures that agents, brokers, attorneys and financiers
put on you.
SOURCES
Rich Dad Poor Dad; Real book of real estate;
Financial IQ
AUGUST 2017 SA Real Estate Investor
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