INVESTMENT SERIES
PART
2 First Time Investor Guide
ALL THAT GLITTERS
Knowing the difference between a good and bad investment
BY MONIQUE DU TOIT
B
efore jumping into an investment , it ’ s important to be aware of your options . When we talk about real estate or property , several types of investments are implied . The main ones are :
Residential be it houses , apartments , townhouses , or vacation homes , residential property is one where someone pays you to stay in it .
Commercial this could mean anything from an office to a skyscraper . An advantage to commercial property is the typically longer leases , meaning long-term security .
Industrial think warehouses , distribution centres , or storage units . These have been particularly popular of late , with the distribution industry booming due to the rise in online shopping . As with commercial properties , industrial property typically comes with a longer lease .
Retail shopping malls ( big or small ) can be good investments . With a slow-growing economy and less consumer spending power , retail investments have become more risky of late . A distinction must be made , however , between a large mall and a grocery store .
Mixed-use a combination of any of the above in a single development . These have become increasingly popular , particular in fast-growing areas where location and convenience come at a premium .
REITs Real Estate Investment Trusts are becoming particularly popular with investors . When investing in a REIT , you ’ re basically investing in a development ( or developments ) by the company you ’ re investing in . This is a good way to diversify your portfolio , but does come with tax complications .
While these categories remain , there has also been a surge in demand for niche properties , most notably student housing and affordable accommodation .
Student housing
When investing in student housing location is essential . Look for properties as close to campus and transport as possible . Additional amenities like laundry facilities , safe parking , and easy access to shops are also incredibly important in this market . Look for versatile properties , such as two bedroom apartments or old houses that can be converted . This increases your returns , since you ’ re able to accommodate more than one tenant .
Affordable accommodation
We ’ ve seen a marked increase in demand for affordable accommodation within city centres . Tax subsidies have been put in place by the state to encourage the redevelopment of inner cities , offering an excellent opportunity for investors and developers . When choosing a property , look for areas that are central and in the process of developing . Cities are notoriously congested , so ensure the property is close to major routes or modes of transport .
Holiday homes
Those looking to invest in holiday accommodation need to pay attention to trends of the tourism market . Pre-2010 world cup , many South Africans ventured into the guesthouse industry … many didn ’ t have the desired success . Before buying , weigh up the costs and potential income , taking into consideration peak seasons . Areas along the coast seem to be most popular for this , but that doesn ’ t mean you can relax too much . Look for houses that can be converted into several self-catering units , once again increasing your returns .
HOW DO I FIND MY INVESTMENT PROPERTY ?
Your first step to finding the property is doing your homework . Which area are you looking to invest in ? Which type of property is the best choice for this area ? Do your research regarding values of similar properties in the area , find out about occupancy rates , and possible issues pertaining to crime . Once you ’ ve decided what you want to invest in , compare several properties to determine your options .
If you have any questions about your own property investment journey , send them through to editorial @ reimag . co . za or visit reimag . co . za
20 NOVEMBER 2017 SA Real Estate Investor Magazine