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