Guarantee your Offshore Positive Income Cashflow

Private Property South Africa
Scott Picken

Australia is a progressive country with one of the most politically and economically stable economies in the world. It is also the first country to have shown signs of coming through the Global Financial Crisis and provides an excellent opportunity for a South African looking for a foreign investment with a positive cashflow, an offshore insurance policy and a Rand Hedge.

Imagine being able to invest where you can fix you income, fix your expenses and make sure you are investing in areas with the best capital growth prospects.

In property there are only three variables you need to focus on:

  • Your income,
  • Your expenses, and
  • Your capital growth.

There is a way to fix the first two in Australia and ensure a cashflow positive income, along with ensuring that the properties are in the areas with the most potential for growth.

How do you fix your income?

IPS has partnered with Oz Invest, a company which was started in 1987 to help Australian Defense Force employees invest in Australian property. Whether they are on a boat in the Mediterranean or in a tent in Afghanistan, their sailors or soldiers have an end-to-end solution.

The first problem their clients face is the management and maintenance. They therefore created their own management company, which will ensure the effective and efficient management and maintenance of the property is taken care of. The second major issue was what happens if the tenant doesn’t pay, or pays late and you don’t live nearby. They designed their 10 Year Leaseback Guarantee. Basically, Oz Invest rent the property from the property owner and they guarantee a market related rental will be paid on the 10th of every month. If there is no tenant in the property or if the tenant pays late – it is not your problem - your income is guaranteed.

Many people ask, “This sounds too good to be true, how does it work?” Basically they have over 1000 units under management and they charge each client $15 a week, which is a kitty of $15 000 a week. With their own very efficient management company and with vacancies of less than 1%, they tend to only have between 4 and 8 properties un-let. This kitty money can be used to pay for these un-let properties. They use economies of scale to ensure this profit, which is the reason they like to extend it after the 10 years. There are also no penalties should the client want to cancel before the 10 years is up should they want to sell the property or go and live in the house.

This is not a developer who is giving you a rental guarantee, overcharging you for the property and then paying you back your money over a couple of years. This is a win-win strategy which provides the ideal solution for a property investor, particularly if you are based internationally.

There is also another very important understanding. In the normal situation a developer sells you a property and although they often give indications of the intended rentals, once you take the keys they take their profit and it is the buyers’ problem to let the property. With Oz Invest you sign a legal lease agreement with them before you buy the property and therefore they put their money where their mouth is. If you buy in an area where they can’t let it out – it costs them money. It is a magnificent safety net to ensure they are doing their research into the best areas, and help clients invest in these areas.

How do you fix your costs?

In Australia you can fix your mortgage for 5 or 10 years. The interest rates have come done by 64% in the last 5 months and are starting to reach the bottom of the curve. It provides a great opportunity to fix your mortgage costs and ensure that your property is cashflow positive from day one.

How do you ensure you’re buying in the areas with the best growth opportunities?

As explained above, Oz Invest put their money where their mouth is. Richard Dunn is the full time acquisitions manager and it is his mandate to ensure that he is finding the best investments in Australia, in areas with the best rental demand and the best capital growth.

For example, they don’t focus on Perth as the property market has dropped there and is expected to drop further. They don’t focus on Sydney as the prices are high and rentals are not comparable and therefore the yields are lower. They don’t focus on cities where the fundamentals of infrastructure growth and population growth do not indicate long term growth trends, cities like Adelaide and Canberra. And finally they don’t do apartments as they do not rent as well houses, as the average Australian family wants to rent a 3 or 4 bedroom Australian home.

They are constantly researching these markets, but at the moment the best opportunities are in Brisbane and Melbourne and even specific market segments and growth corridors in these cities. IPS along with Oz Invest has done R1.5 million worth of research in the last 6 months to ensure that each IPS client is given the best advice as where to get the best returns on their money!

Conclusion

According to Scott Picken, CEO of IPS, there are three very important things to consider with property in Australia.

“Firstly, Buying property in Australia prior to relocating has huge advantages for tax, immigration, credit ratings and ultimately buying your dream home.

Secondly, I think it is imperative to understand how important this investment is to you and your family’s future. More than 90% of middle to upper income families in Argentina, Russia and Zimbabwe were directly and materially affected when their currency fluctuated. The only ones who didn’t were the prudent ones who had diversified their assets and invested offshore in other currencies.

Thirdly, before you invest there are 3 fundamentals which you should know and are essential. You should not invest without this knowledge. We will teach you these first.”

Go to www.ipsinvest.com for more information.

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