Wener is a Director at Pam Golding
Properties (Residential) and the
Area Manager of the Atlantic Seaboard
offices, Cape Town.
Understanding the risks and the
rewards in property investment is
the difference between profit and
There is a common perception that
property investment means buying
a residential property and living
in it. Although this is one way
to create a long-term investment,
there are a number of ways to become
involved in property investment
and many types of investor properties
on the market.
who to go to and how to invest smartly
is paramount to success in this highly
competitive market. In this newsletter,
we talk to investment expert Laurie
Wener about residential investor property.
WHAT DOES "INVESTOR PROPERTY"
This relates to any property that has
the potential to yield an acceptable
rental return and/or capital growth
to the purchaser.
Any property purchased by an individual,
for the purposes of permanent or temporary
use, may be purchased with an investment
purpose in mind, in respect of capital
THE AVENUES TO INVEST IN?
The smaller type of investor who uses
property investment as a secondary means
of accumulating wealth, may typically
purchase smaller lettable units that
tend to yield higher rental returns
than larger more expensive properties,
spread the risk and can usually be liquidated
Purchasing units off-plan is popular
as investors can secure a purchase with
a 10% cash deposit and pay the balance
one to three years later when the building
is complete and the growth in the market
has yielded a good profit even before
they take transfer. Capital profits
of 20% to 30% from date of purchase
to transfer are not infrequent.
The longer the time between purchase
and completion/transfer, the lower the
risk, provided the market remains bullish.
Many purchasers sell on, or even prior
to, transfer and take their profit,
whereas others may elect to hold the
investment, yielding moderate rental
returns or even subsidising mortgages,
confident that the medium to long-term
capital growth will make it worthwhile.
Usually these off-plan sales include
VAT in the purchase price, and the purchaser
does not have to find the cash to pay
Short-term speculation can yield good
profit quickly when the property market
is bullish. For punters who crave the
excitement of higher risk for quick
reward, this is great, but a word of
warning: be sure that if market conditions
become bearish that you can afford to
hold onto the property for the time
it takes to recover.
Medium to long-term investment, from
around three years on, will substantially
lower the risk, but be sure you can
afford to “bank” your investment
without impoverishing yourself.
long-term rental returns range between
4% and 6% and mortgage interest rates
are around 11%, you would need no greater
than a 50% mortgage on an investment
property if you did not wish to subsidise
on a regular basis.
in mind there are levies and/or rates
to pay, interior maintenance and rental
fees if you use a professional company
to source a tenant and/or administer
the property. There is also the possibility,
for whatever reason, of finding yourself
without a tenant for a month or so in
Short-term furnished and equipped properties
may yield higher rental returns, depending
on where they are situated, and they
tend to be seasonal. They attract much
higher agency fees and maintenance costs,
but can be lucrative.
City Residential Re-developments
The worldwide trend for the re-development
of commercial buildings in cities to
residential apartments, offers excellent
opportunities for mixed usage, like
working and/or living in the same building,
either as an owner or as a tenant.
buildings generally retain commercial
zoning, which permits this, although
Body Corporate and House Rules would
specifically prohibit any activities
that compromised the use and enjoyment
fide business activity would permit
certain tax relief in respect of mortgage
repayments and rental. Consult your
accountant or SARS for relevant advice.
Laurie Wener: firstname.lastname@example.org