Real Estate Investor Magazine South Africa September 2016 | Page 15

real estate is around 4 – 6% average for international
investment. It all depends on share selection.
2 More liquidity – you can easily sell your shares
and cash out within 24 hours. Real estate can take
anything from a month to six months to cash out
which can drain cash flow for an investor.
3 Low transactional costs – share costs vary from
0,32% - 1,7 % brokerage fees value of transaction,
small admin fees, Securities Transfer Tax (STT) of
0,25%. Real Estate can be anything from 5 – 7,5%
agents commission, 10% deposit, transfer fees, stamp
duties, plus other fees.
4 Less work and passive income – if you have bought
properly shares can generally be left alone for a
long period of time. Real estate takes constant
management of tenant and maintenance issues.
5 More variety making it easy to diversify with
multiple shares – In stocks you can invest in any
category, sector or country. In property you can only
invest as to what you can afford. Properties in New
York, London, Marbella, Sydney, San Francisco, etc.
tend to be too overpriced for the average investor.
6 Tax benefits – it is easier to lower your marginal tax
rate with shares and not as easy with property
7 Hedging can be easier – you can buy ETF’s to reduce
risk while with property you need to have insurance.

Why investing in direct property is better

Owning your own home can be the ultimate investment
but as Rich Dad author Robert Kiyosaki says your house
is not necessarily an asset as it is not putting money
into your pocket but taking money out. You are at the
mercy of the economic cycles, interest rates, getting
finance, raising deposits, however there are many ways
to overcome that and the medium to long-term benefits
outweigh the short-term ones. As an investor you need
to understand what the drivers of real estate return
fundamentals, leverage, currency, equity and debt are?

Here are the reasons why property is such a
great asset to invest:
Why investing in shares is better

Stock market investors will tell you that the time
to invest in stocks is now. If you have enough cash
then all you need to do is learn the ropes and invest
directly in the market, which can be very rewarding for
an investor. With a stock you receive ownership in a
company. When times are good you profit and when
they are bad you lose.

Here are the big reasons why shares are
good:

1 High rates of returns over a long period of time –
real returns for stocks are around 8% per year while
www.reimag.co.za

1 More control over your investments – You can
renovate the property, refinance, rent it out, sell
it, rezone it but still remain in control of wealth
optimizing decisions
2 Use other people’s money – banks, financiers or
investors love to finance real estate or use real estate
as collateral or security. Unlike a business you can
raise finance against the value of a property.
3 Leverage your debt – a 10% cash on cash return can be
redeemed in a year and the benefits of compounding
the capital value and get a rental income.
4 Tax benefits – you can deduct all expenses against
the property mean more tax-free profit depending on
which entity you use.
SEPTEMBER 2016 SA Real Estate Investor

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