Get into gear

Private Property South Africa
The Roosting Venus

Sustainability is a busy word these days, popping up everywhere from the supermarket to the shoe shop, and while I’m not one for jumping on bandwagons very readily, sustainability is a concept I do feel we need to take seriously.

First off, I agree that the planet and everything that goes with it could benefit from some great doses of sustainability in the bigger sense, and secondly, I think that as individuals we need to deal with it in a smaller sense too. And that means business. “Always plan for the worst case scenario,” say the wise, and that’s rather sage advice.

As almost any business is at risk of sudden loss due to unforeseen elements, political, environmental, social, legal, economic, just for starters, it’s always better, as someone else wise once said, not to have all one’s eggs in one basket. Yet, in reality while one (or one’s Other Half) is working as hard as possible, to make a nest egg, it can become difficult to divide that attention span up into enough parts to look after more eggs. Especially when the Other Half is not a born multi-tasker and, as in my case, is developing a soft spot for a siesta. Hence my investigation into passive income – and some insight into how property investment can efficiently make money while you do something else.

A buy-to-let investment is generally regarded as a gradual but positive long-term investment. Not only does the property itself increase in value, but over time as the rental increases and the bond decreases, so the return on the investment becomes more impressive.

As a second option, gearing is rather more exciting if done with sense. By borrowing the initial investment instead of using capital, while the owner may at first have to make up the shortfall between the rent and bond repayment, it amounts to far less than a total out-of-pocket investment. After a few years, as rental increases and the shortfall decreases, gearing can offer a very attractive return on investment.

  • Clearly a dynamic property portfolio is far more lucrative than just one or two investments, and for those who don’t have oodles of spare cash or infinite credit, the option of investing with a number of other partners is attractive too. When choosing partners, it’s important to clarify goals, contributions and desired outcomes in writing before you start. Do create a set of rules, and dispute resolution procedures too!

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Joining a group of like-minded investors, and participating in regular discussion and reading (magazines, Internet) can help widen your understanding of the market, of trends and developments, and lead to further opportunity. For property investment advice from Private Property, click here.

  • Aim to stay focused on the bigger picture, and not be tied down by the tiny detail. Gathering a team of competent professionals who can take care of the smaller details for you – estate agents, bond originators, attorneys and conveyancers, rental agents – will not only free you up, but can also introduce you to further openings.

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And of course, start small.

Knowing what we could afford, and ready to learn little by little as we progressed, my next step was to wake the sleeping.

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