Property remains a great investment and I love the challenges it poses, together with the potential it offers to receive good returns for relatively small outlays.
So today I want to write about my experiences with property during the last few months.
I hope that this will excite some of you and help you make sense of investing in property.
I’d always aspired to be an architect and always loved property.
However, it was only after reading Robert Kiyosaki’s Rich Dad Poor Dad that I got started in all earnest.
Unfortunately the start was late, but I still believe it will provide enough income for a comfortable retirement.
Contrary to popular belief, property is an excellent investment right now. You simply have to apply the correct principles.
Principle 1: Continue to add value: During the past year, I lived in a unit that I originally bought with the intention to rent out.
In that time, I renovated, repaired and improved this unit considerably.
Then I moved out and started renting it out: the net result is that from December 1 the property rental return will go up by 80 percent over previous rental levels.
Few other investments will achieve this. I’m doing the same with the place I’m living in at the moment – the current home gets a new kitchen and extra bathroom which means that in time I can get an increase of 15 percent in rental for this unit. The balance of 65 percent is gained after completion of another unit. The rate of return on additional investment is in excess of 25 percent (over double the home bond rate).
This project and the next is funded from the sales proceeds of another property that was sold and no new lending was required, turning the increase to be pure profit and enabling the remaining bond to be repaid in less than five years.
Principle 2 – Do not get greedy: a good deal is a good deal and may not come by again: My other project started in November and it involves a property that I previously owned. I bought it nine years ago and then sold it during the property boom for a 50 percent profit; in the meantime, the house was repossessed from the new owner by the bank and last year I bought it for a mere 10 percent more than its original 2002 price.
No sooner had I started renovations when I received a new offer – someone wants to buy it from me again. I will be able to make another handsome profit even after deducting the price of renovations.
This property is on a major arterial and has good business prospects. It’s a bargain at 30 percent below the selling price of equivalent properties.
Principle 3: Be charitable to deserving causes without defeating sound business principles: I bought a third property from a deceased estate. It took three years to transfer this property and in the meantime the property market took a dip.
As the property is in a less favoured area, I’m anxious to sell it and move on. Fortunately, a charity organisation has approached me; the organisation is seeking a property in this area for about 20 percent below market price.
Even though I’m selling the property at the low price offered, I’m satisfied that I am still able to make a 25 percent profit and that I am selling the organisation a house that is structurally sound and better than most others in the area.
Principle 4: Start early: My son Derik intends buying his first property within the next six months. He will not live in it but rather rent it out. If he follows the the Rich Dad principles successfully, he will either double or treble the number of properties owned every seven years; by 60 it is possible that he may have accumulated up to 81 properties.
There is not enough space left to investigate all the principles, requirements and risks involved in property investment but I hope it gets you so motivated that you will start your own portfolio with some of your December bonus.
l Deon Hattingh is a certified financial planner and trainer. Visit the website www.makingSENSE, or e-mail [email protected]