International Investing - Why you can’t afford not to act - NOW

Private Property South Africa
Scott Picken

Life is all about decisions and most importantly also the timing of these decisions. Scott Picken, CEO of International Property Solutions (IPS) believes it is very important to understand the opportunities which are available offshore in countries like Australia and also why it is so important to act quickly.

The first element is the Exchange rate

With the current exchange rate, to buy your dream 4 bedroom investment house in Australia you need a minimum of R700 000 (deposit & all costs). If the Rand was to lose 10% against the Aus Dollar, this amount would increase R70 000 or more. Now honestly, even in the next 2 months, what are the prospects for the Rand, taking these 4 elements into account:

  1. In a recent article from the Economist, South Africa was portrayed as the most exposed economy globally, based on a statistical analysis, and therefore one of the most vulnerable currencies in the global environment.
  2. Interest rates are coming down in South Africa to stimulate the economy and growth, which means South Africa looses appeal for international investors who are looking for higher returns, and there is a concern of a foreign investment flight from South Africa.
  3. On the 22nd of April we will proably have a new president who is seen as populist and left wing, with heavy influence to the SA Communist Party and COSATU. Although hopefully this will not change government policy substantially, in the eyes of the world it is going to take a long time to prove this, and in the mean time our currency will suffer. Imagine this with Trevor Manuel resigning....
  4. The ANC and COPE want to reduce the Rand to US Dollar exchange rate to R12 to the $1, a decrease of 25%, in order to improve exports and sustain jobs.

Based on all of the above, a 10% decrease in the Rand over the next 2 months is actually a very conservative estimate, and it could be closer to 25%. This will mean the same property will be 25% more expensive or R177 000 more on the cash you have to input, as well as affecting your affordability for the mortgage.

Secondly, why it is so important to own offshore assets? Would / Should you want one?

The world is becoming a global village and it is very important to diversify your asset base and ensure you are taking advantage of other markets. Investors from all over the world are taking advantages of this in all asset classes. However, and more importantly for South Africans who live in an economically and politically challenging environment, (I love it, as it presents opportunity) we must be astute and invest part of your wealth in more economically and politically stable environments. This not only provides a Rand hedge which is vital, but also acts as an insurance policy should the unthinkable happen – you have to move.

I believe it is fantastic to live in South Africa, but it is a fundamental necessity to accumulate foreign assets. It is not only wise, but is prudent and essential.

Thirdly, understanding you want to invest, what is stopping you from acting now?

“I want to go to Australia to choose the right investment”

IPS, through their strategic partners has done all this research for you. Scott Picken, CEO of IPS, has spent a substantial amount of time exploring all the states, cities and projects and also reading all the research to determine the best investment properties.

Do you have the time, contacts or the knowledge in a quick trip to Australia to be able to make this type of analysis?

“I am worried about the management and maintenance of my investment property. It is so far away, what can I do if there are problems?”

Once again, IPS who have offices in South Africa and work with strategic partners in Australia and the UK, provide an end to end solution. Through Oz Invest, they provide a 10 year Leaseback Guarantee, where Oz Invest will manage and maintain your unit as well as guarantee your rental will be paid on the 10th of the month, each and every month for 10 years? All you will need to do is expect your rental money each month!

“What happens if the tenants don’t pay my rent, how can I afford my mortgage?”

Through the Leaseback Scheme, Oz Invest charge $15 a week to all their clients. They have over 1000 properties under management which equates to $15 000 a week and ensure they can not only always pay the rent, whether or not your unit has a tenant, but they also make a profit. Your rental is market related, guaranteed for 10 years and covers all your expenses being cash flow positive from Day One!

“What happens if interest rates go up?”

Investing is all about managing the variables. In property there are 3 variables, the rent, the interest rate and also the capital growth. For this investment the income is guaranteed, you can fix the interest rates for either 5 or 10 years and therefore eliminate the variables. It just leaves the capital growth and for this see below.

Fourthly, understand the market

Capital Growth - you need to ensure you are investing in areas with the right fundamentals – population growth, infrastructure growth, employment and transport nodes, etc. This is what IPS puts so much time into investigating and delivering to our clients. It is important to invest in the right sector of the market and the best capital growth and rental yields are being found in the sub $500 000 range where IPS is focusing. IPS, with its partners and thorough market knowledge has sourced the best opportunities in Australia.

What to do next?

So with an understanding of what is important, what do you do next? Basically there are a number of options. Come to our next Australian Investment event. Go to www.ipsinvest.com to find the details. Book an appointment – contact us on 011 463 0588.

As with everything in life, you often regret the things you do not do the most.

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