Real Estate Investor Magazine South Africa Real Estate Investor Magazine - May 2017 | Page 60

and attention-seeking people vying for your attention
with conflicting advice and fake news. Investors tend
to get information from mainstream media, financial
news, friends, family or even co-workers. Most
investment advice given is made up of very dangerous
half-truths, dished out mostly by individuals and
businesses looking to serve their own interests.
Some experts advise you to pay down all your debts
because it is bad, while others say leverage as much
debt as you can. Other experts say the stock market
(trading currencies and bitcoins) are where you make
the most money while others say real estate. So, who
do you believe and trust has the right information and
what is the best vehicle?
One of the biggest property lies that we are told is
that there is one single unified property market and
that we can only get average returns that the market
experts suggest. Financial education is necessary
to ensure we learn about the reasons behind the
investments, the assumptions, the markets and the
analysis. We need to verify and check information
sources, statements, investments and statistics and
take full accountability for our financial futures.
Lesson Four – Have a plan and strategy
Put together a strategy based on your own unique set of
skills, values and resources and take full responsibility
for your own financial future ‒ nobody else will. To
begin, set your goals, know where you are, identify
what is important, know what you want to achieve,
make a ‘to do’ list, set priorities on each activity, focus
on the highest priority first and work on it until it is
done. Invest no matter what the market is doing but
continually vary your strategy.
There is a myth out there that it is
difficult to find good property deals.
If you don’t make an effort to find
them you won’t find them, however
they are definitely are out there.
Decide whether you want to invest in residential,
commercial or offshore properties. There are no
secrets and no one-size-fits all investment strategy
as each investor is unique. International investor and
author Dolf de Roos’ 100-10-3-1 rule is an effective
way to measure your progress when starting to
invest. Essentially you should look at and analyze
100 properties, make offers on 10 (with conditions),
arrange financing for three and maybe purchase one.
Many financial and investment experts make
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MAY 2017 SA Real Estate Investor
statements like, “diversification is a good strategy”,
while others say it is “deworsification”. Property
investor and author Robert Kiyosaki says,
“diversification is protection against ignorance. It
makes little sense only if you know what you are
actually doing”. This should be the fundamental
function of your personal investment strategy – know
what you are doing and why!
Lesson Five – How to find good property
deals
There is a myth out there that it is difficult to find
good property deals. If you don’t make an effort to
find them you won’t find them, however they are
definitely are out there. There are multiple places to
find and source properties. You can start with estate
agents, property managers, property owners, property
developers, attorneys, banks, online advertisements,
print classified advertisements, online property
listings, designing your own advertisements, property
networks or other investors. Once people know that
you are a serious investor the deals will start coming
to you.
The good deals should fit into one of the 5 D’s,
which are regular occurrences and generally caused
by disasters, such as death, debt, divorce, departure or
downsizing, which could equal the Big D ‒ or Deal ‒
for you. People continually die, get into debt, depart
provinces or the country, divorce or downsize their
lifestyles. Because of their circumstances, they mostly
CASH ON CASH RETURN EXAMPLE
- 2 BEDROOM ONE BATH FLAT
R500, 000 Purchase price
R50, 000 Deposit
R0
Transfer fees
R450, 000 Bond @ 10, 5% interest rate = R4, 493 per month
MONTHLY
EXPENSES
R4, 493 Bond instalment
R800
Levies
R200
Rates and taxes
R300
Maintenance budget
R5, 793 Total Expenses EXPENSES
PER ANNUM
R53, 916
R9, 600
R2, 400
R3, 600
R69, 516
MONTHLY
INCOME
R7, 000 Rental Income
R1, 207 Positive cash flow INCOME
PER ANNUM
R84, 000
R14, 484
CASH ON CASH RETURN 28, 96%
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