You only have to scan the rich lists to see the number of South Africans who made huge fortunes by investing in real estate.
Here's how you to can get started on building your own real estate empire.
Record low interest rates and falling house prices have made property investment much more affordable and ideal for smart investors.
Risk is one of the biggest factors to consider with each investment. Wisely balancing risk and reward will enable you to keep investing in your portfolio. Experienced investors will always tell you to reduce the risk and look to increase the reward.
Managing risk and reward is not very easy to do, but here are some tips to get you started in the right direction:
1. Look For Properties That Are In Good Shape
Novice investors usually start off looking to buy rough diamonds believing they’ll add value by renovating. This often leads to many delays and unwanted problems. Instead, look for properties that are in good shape, and get your rental income coming in as soon as possible.
2. Buy In Less Popular Areas
Properties in the best locations such as beach areas, CBDs or wealthy neighbourhoods, generally have negative cash flows. Their value is in their capital growth. As a small or single investor your focus is on collecting many positive cash flow generating investments that put money in your pocket.
Moderately priced properties in up and coming areas are the real gems; they have less appealing locations but great cash flows.
3. Buy Properties With Quality Tenants
Nothing beats buying a property with great tenants already in place.
4. Look For Low Vacancy Areas
Vacant units cost you money, and are more likely to be vandalized or robbed.
Visit interesting areas during the evening, after sunset, and during supper time to get an idea of how many homes are vacant.
5. Long Term Investment
The true value of real estate investment is realized over long terms - at least 5 years. During that time your focus is to increase your cash flow and reduce risks. After 5 to 10 years your investment will really begin to produce amazing returns. This will give you more leverage to go after bigger investments.
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