Historically, property has been the second-best performing asset after shares, and as such is a must for any investment portfolio. Investors must be aware, however, that the full potential of property investment is only realised in the long-term. While there are certainly profits to be made in an immediate sense, the serious wealth is only achieved in the long haul.
When considering any investment, it is essential that one gain as much knowledge, information and know-how as possible to avoid scams. When the property syndication schemes made headlines for all the wrong reasons it highlighted the high-risk that may be involved with certain property investments. When it was revealed that Sharemax, amongst others, had lost investors hundreds of millions of rands and mis-selling, dishonest ethics and behaviour was exposed, many investors lost confidence in schemes and property investment.
It is important to note that there are high and low risk investments that can be made within the property market. To truly discover an investment opportunity, one must look outside one’s own home or holiday home. These cannot truly be considered investments since any capital growth on the property is likely to be cancelled out by interest payments and maintenance costs, and as such cannot be considered a means for financial gain. In real terms, homeowners may secure a cash return by downgrading to a retirement or smaller home.
There are some basic points to keep in mind when considering property investment, and some useful tips to guide you in the right direction. Firstly, make sure to develop relationships with estate agents and developers so that you will be informed of new developments that may, and usually do, provide excellent investment opportunities. It’s also a great idea to keep an eye on repossessed properties and properties for sale on auction, as you will often be able to buy property for a bargain price.
Next, make sure to build up a readily available reserve of capital in the likely event that an opportunity presents itself and the developer requires a deposit to secure a sale. It is also wise to obtain a pre-approved home loan to ensure that you know exactly what you can afford in terms of investments. In this same vein it may be wise to consider forming your own property syndicate or closed corporation with friends or family. This way you will not carry all the risk and expense on your own.
Finally, it is a good idea to enlist the services of a good property management company to manage the letting of your property. The company will be responsible for finding suitable tenants, drawing up the contracts, regular inspection of the property as well as the collection of the rent and the payment of the levies on your behalf.