‘You can’t go wrong with prop­erty’

But do your home­work to avoid costly mis­takes

Weekend Argus (Saturday Edition) - - PROPERTY - PHIL OAKES

WHEN I re­ceived my first salary cheque I phoned my fa­ther to tell him the good news. He asked how I planned to spend it. I knew not to tell him the truth (“on a week­end of de­bauch­ery”), so I said I was go­ing to in­vest it.

“I don’t care what any­one tells you,” he said, “you can’t go wrong in­vest­ing in prop­erty.”

A few years later, when I’d fi­nally out­grown de­bauched week­ends, I took his ad­vice and “in­vested” in a beau­ti­ful flat on the top floor of a build­ing with a spec­tac­u­lar view of Joburg’s sky­line.

I did my sums, put down a sub­stan­tial de­posit, and worked out that what I made from rent­ing it out would cover my bond and I’d be bond-free af­ter six years. Then I’d have pas­sive in­come, which I would use to buy another flat. I was a land­lord on the road to wealth.

I phoned my fa­ther. “I’m a home­owner.”

“Good,” he replied. “You can’t go wrong in­vest­ing in prop­erty.”

He was wrong. I did go wrong. Fast for­ward three years: both of my ten­ants ab­sconded, ow­ing months of rent and leav­ing mas­sive rates and elec­tric­ity bills for me. In my sums, I hadn’t fac­tored in the levies.

When I bought the flat, the build­ing was oc­cu­pied by re­tired peo­ple, but they had sold (or died) and younger peo­ple who liked to party had moved in.

I put the flat on the mar­ket – but flats in Yeoville were no longer in de­mand. I sold it for less than I had bought it for.

But my old man was right – prop­erty is a good in­vest­ment, if you don’t make the mis­takes I did. Learn from my mis­takes so you don’t have to make your own.

Ac­cord­ing to real es­tate ex­perts, in­vest­ing in prop­erty can be very lu­cra­tive, but the key to suc­cess is do­ing your home­work. “Re­search, re­search, re­search” is the new “lo­ca­tion, lo­ca­tion, lo­ca­tion”.

Louise Martin, of the Es­tate Liv­ing, says be­fore you in­vest ask your­self what you hope to gain from your in­vest­ment: are you want­ing to buy and sell and make a profit quickly? Are you look­ing for high rental re­turn? Or are you not in a rush, and would like to rather grow the cap­i­tal in­vest­ment?

“Once you es­tab­lish what you want, you can re­view the ad­van­tages and dis­ad­van­tages of each op­tion,” she says.

Sandy Gef­fen, of Lew Gef­fen Sotheby’s In­ter­na­tional Realty in South Africa, says in the cur­rent eco­nomic cli­mate, prop­erty is one of the most se­cure in­vest­ment op­tions.

If looked af­ter, prop­erty ac­crues value. “Un­less you’ve bought badly in an area that is bound to de­te­ri­o­rate you’re go­ing to make money on prop­erty. Prop­erty is a medium- to long-term in­vest­ment of at least five to eight years, not a quick fix. When you hold your in­vest­ment over the long term, you’re able to ride the peaks and troughs of the mar­kets.”

Adrian Goslett, CEO of Re/Max of South­ern Africa, says over the long term a home should out­strip most other in­vest­ments. “Pur­chas­ing the right prop­erty can be a true as­set that out­per­forms other fi­nan­cial ve­hi­cles and pro­vides a solid re­turn on in­vest­ment,” he says.

Jason Shaw, Pam Golding Prop­er­ties na­tional sales ex­ec­u­tive, says prop­erty is a pop­u­lar in­vest­ment be­cause it can ap­pre­ci­ate in value and has the po­ten­tial to gen­er­ate rental in­come. He says a good in­vest­ment prop­erty ide­ally has good rental, low main­te­nance cost and high cap­i­tal ap­pre­ci­a­tion.

The trick, though, is to in­vest in a sought-af­ter area rather than gam­bling on a sub­urb.

Tony Ketcher, Se­eff ’s Regional gen­eral man­ager in the Cape, says be­fore de­cid­ing where to buy, study ar­eas and con­sider what has hap­pened there. “Ask what the av­er­age house price in the area is, whether you can af­ford to in­vest there, what his­tor­i­cal cap­i­tal growth shows about the area and what kind of rental is achiev­able,” he says.

Her­bie de Klerk, prin­ci­pal of Jawitz Prop­er­ties Kuils River, calls prop­erty a “safe” in­vest­ment be­cause of cap­i­tal growth and po­ten­tial monthly rental in­come that es­ca­lates yearly, of­ten be­tween 8% and 10%.

He says “nor­mal fam­ily homes” are in de­mand and sup­ply/de­mand drives prop­erty value.

Mike Gre­eff, CEO of Gre­eff Christie’s In­ter­na­tional Real Es­tate, be­lieves prop­erty is a good in­vest­ment be­cause it’s a vi­tal com­mod­ity.

“Need­ing a home is not a pass­ing fad. What’s also sig­nif­i­cant is cur­rent in­vestor sen­ti­ment: with cur­ren­cies and eq­uity mar­kets on a roller-coaster world­wide, in­vestors view prop­erty as a solid and re­li­able sec­tor, and it is seen as a vi­tal ad­di­tion to any port­fo­lio.”

Gre­eff ad­vises in­vestors to look for ad­di­tional fea­tures which may push up a sell­ing price such as pools, ten­nis courts and cot­tages.

What type of prop­erty should in­vestors steer clear from?

“If you think the main road a house is po­si­tioned on will put off buy­ers, it prob­a­bly will,” he says

Homes in Som­er­set West are good in­vest­ments. Be­fore buy­ing any­where, ask ques­tions about the area, in­clud­ing what kind of rental is achiev­able.

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