Real estate can be one of the most secure retirement investments because it generates immediate income while growing in value over the long term.
That’s according to High Street Auctions Director Greg Dart, who says the choice of property in which you invest is the keystone to wealth creation.
“Buying up a random selection of properties to pad a rental portfolio is where a lot of investors fall down; lose money and create problems for themselves instead of earning substantial passive income and growing their capital.
“You have to make the money you’re investing into your retirement work smarter rather than making you work harder, and the way to do it is finding real estate in the right location or of the type that will be in demand long term.”
Dart says to create a retirement real estate portfolio you need to look at several deliverables:
- Appreciation: Is the property you’re looking to buy in a good location or an up-and-coming location that is going to show long-term appreciation and provide a hedge against inflation should you decide to sell down the line?
- Income: Every person can work a finite number of hours in the day and what they earn for their labour is active income, which is also finite because it is limited by time. Using that income to buy investment real estate generates passive income, which grows long term. Rental properties are investments that allow you to benefit from continuous cash flow as long as you own them.
- Leverage: Property is a unique investment in that it allows you to use a bank’s borrowed money to grow your own through passive income and long-term appreciation.
- Diversification: Investing in different properties across different markets spreads your risk and helps to grow wealth faster in the short term.
- Bricks and mortar: Property is a tangible asset that has true value because you can see it and touch it. The worth is immediately apparent and it has a market value.
Dart says buying property to add to a retirement portfolio has to tick several boxes.
“In residential property, beach and bush are sure-fire winners.
“A 319m² four-bedroom, four-bathroom beach penthouse in Cape Town is always going to be a platinum investment. When you’re not using it yourself, the rental potential is massive because of the spectacular waterfront location, the luxury finishes and the size.
“Likewise, a fully-equipped private lodge that accommodates six people in the 4 000-hectare Sondela Nature Reserve in Bela Bela is a retirement investment that will serve you well for years. The family can enjoy it now and it will earn a substantial passive income while appreciating in value – especially looking at the plethora of amenities on offer in the reserve itself.”
Dart says the residential corporate rental market in Johannesburg is also performing extremely well.
“Johannesburg is still unquestionably the financial powerhouse of the continent. Most multi-national corporate head offices clustered in the city’s northern suburbs bring in a percentage of international employees, who work in the country on contract for a limited period.
“These senior staff live in secure rental homes for the duration of their tenure in the country, so luxury mansions in Hurlingham, especially 636 m² secure smart homes with five en-suite bedrooms, are in high demand and easily command rentals of between R50 000 and R100 000 per month.
“Double-storey penthouses in Bryanston are also in high demand in this market. For smaller international families, a secure three-bedroom penthouse with an internal elevator and a private deck pool is an ideal short-term home in South Africa and will be rented for a substantial monthly fee.”
Dart says businesses can also be a lucrative addition to a diverse retirement portfolio.
“Investors need to identify properties offering services that will always be in demand. Two that instantly come to mind are storage facilities and wedding venues, because people are always going to need additional storage space, and there’s no question that the institution of marriage is here to stay!
“In terms of storage facilities, rather than running the business itself, why not just be the landlord of a large self-storage complex?
Dart says passive income and long-term returns are the key to a secure retirement, and real estate is one of the most sure-fire avenues to getting there.
“Real estate in a retirement portfolio must serve two purposes – properties have to generate immediate returns in the form of rental income and be likely to show the greatest appreciation in the long term, so buy smart to avoid still having to work hard through your retirement years.”
Writer : Samantha Bartlett