How to Invest In the Property Market

Private Property South Africa
Private Property Reporter

The uncertain international economic situation and the global downturn which preceded it urged many investors to re-evaluate their investment strategy. However, the best way to ensure a solid investment return in the long haul is still to diversify your investment portfolio. Financial advisors recommend that investors should not put all their eggs in one basket and that shares, unit trusts, property and cash should all form part of your investment portfolio. Over the past months the local property market struggled to recover from the impact of the recession. Property prices are still under pressure and some believe buying to rent is not a good option at the moment. However, there are numerous ways of investing in the property market besides buying a house for sale and waiting for the market value to increase or gathering an income from a property to rent. While buying a property is still a good investment, you will need a large initial investment amount and in most cases fixed assets like property are much more difficult to sell than shares. In some cases it can take months before you actually receive the proceeds of a property sale. If you are interested in traditional property investment, but don’t have a R1 million to buy a house for sale, you could form a joint venture or partnership and buy the property in conjunction with other investors. You would need fewer funds, but make sure that you enter such an agreement with reliable partners. Another option is to invest via property syndication. This option allows investors to invest in an unlisted investment scheme in conjunction with other investors. It can be quite risky because of the uncontrolled environment and many investors have lost thousands in these schemes. Make sure you are aware of the pitfalls before you part with your money. Property investors could also opt for a property investment on the Johannesburg Stock Exchange (JSE). There are numerous property options available and it might be a good idea to approach a financial advisor to recommend the most suitable investment for you specific needs and risk profile. The advantages of such investments are that you won’t necessarily need a large initial investment and the environment is closely regulated. In most cases you will also be able to access your investment quickly after you decide to sell the shares. Exchange traded funds (ETF’s) are collective investment schemes which follow a property index. This environment is also regulated and you may usually invest a relatively small monthly amount in these funds. However, because this type of investment is not actively managed and follow an index, investors who prefer an active hands-on approach might not like such an investment. Property investors could also consider buying property in a foreign market. This is a good diversification strategy, but is also a riskier type of investment. Make sure you understand the regulations and legal implications and that it is really a quality product and not just a fly by night investment scheme. If it turns out to be a swindle, it will be much more difficult to get your money back from an overseas company, that is if you manage to track it down.

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