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How to start investing in real estate in South Africa: 10 ways to get started


Real estate investing can be a rewarding experience if you know and understand what you’re doing, but it can also be unpleasant if you act rashly. We interviewed a number of people who are knowledgeable about real estate investing.

What is the truth about property investment?

They say real estate is the easiest investment field to get into because your returns are guaranteed. This may not be the case because there are numerous factors to consider. To begin, factors such as location, investment amount, property type, property characteristics, real estate market conditions, and so on must be considered.

It is argued that real estate investing is a science, but there is a certain amount of practical and intellectual behavior that must occur before you begin cashing in on your property investments.

Unfortunately, many South Africans believe that as soon as you have some money, you can start buying properties and making money.

As a real estate investor, you will inevitably make mistakes, and those mistakes will cost you money. You will almost certainly make mistakes as a beginner that you will later call stupid.

To tell the truth, I’ve seen people jump from one seminar to the next in order to quickly learn how to make money investing in real estate. The truth is that you must read extensively in order to comprehend what real estate investing entails.

Read about other people’s experiences with real estate and how they got started; there are many books that offer detailed strategies for real estate investing

The current state of the South African real estate market

The real estate market in South Africa is still booming, and there are ways to profit from it, which I will discuss in detail in this article.

ABSA reported that nominal house prices in South Africa increased by 3.96 percent in the first quarter of 2019. When the prices were adjusted for inflation, they fell by 0.51 percent. According to FNB analyst Siphamandla Mkhwanazi, this reflects ongoing pressure on household incomes and a depressed macroeconomic environment.

Property Values

Starting a property investment can be difficult given the amount of capital required to get started.

Is it necessary to quit your job in order to begin investing in real estate? No, it does not. In fact, if you work as a real estate investor, you can do even better. Your monthly salary can go a long way toward earning you the passive income you’ve always wanted, especially at the start-up stage. For example, you may undervalue the amount required to renovate the property you purchased so that your salary can cover such costs.
I believe this article will assuage or eliminate your concerns about beginning your property investment. I’ve compiled a list of ten ways to get started in real estate investing:

1. Make a list of your objectives

You are no longer a child, and what you do with your money is significant. You must write down all of your objectives. Writing down your goals will not only help you remember what you want to achieve, but it will also increase the seriousness with which you approach your work.

Your objectives are critical, and they are the primary reason you are considering investing in real estate.

Your objectives should be long-term, measurable, attainable, relevant, and time-bound. If you want to own an R500,000.00 stand in Midrand and start developing small apartments on it, you must be specific.

Write about how you intend to raise the $500k required to purchase the land. Include how long it will take to collect such funds, as well as a detailed analysis of how you will obtain the funds.

The R500,000.00 required to purchase land should not be a pipe dream; instead, make it a reality.

Either you do what you need to do to get the results you want, or your dreams will die before they even come true.

2. What is your financial stage?

You must understand and accept your financial situation. Knowing your financial status will assist you in determining the viability of achieving your objectives.

Knowing your financial stage will also assist you in determining the best time to leave your job, whether you need to engage a financial institution to jumpstart your investments, or if you need to court a partner. It is possible to begin your real estate career with little or no money; however, you must first know what to do.
If you understand your financial situation, you will know where to begin as a real estate investor; otherwise, you will be unable to begin.

3. Select a your real estate investment strategy?

You must read widely. When I first began investing in real estate, it took me nearly three years of research, going from library to library in Pretoria and reading about real estate, business management, and entrepreneurship.
Because of strategy confusion, I made some poor decisions when I first started. You must choose your real estate investing strategy, which requires knowledge.

Many real estate gurus have written books about real estate investing, and you can learn a lot from them.

Brandon Turner’s book, ‘The Book on Investing in Real Estate with No (and Low) Money Down: Real-Life Strategies for Investing in Real Estate Using Other People’s Money Paperback,’ is one of my favorites. Turner provides strategies for starting a real estate portfolio using various methods of investing in this book.

Brandon Turner has solutions whether you have a lot of money to start, little money, or none at all. This book employs US analysis, which is useful in any market, including South Africa.

Before purchasing any property, I recommend purchasing this book and devoting a few hours to reading the flipping strategies contained within.

At this point, you must select one simple strategy that will assist you in moving from your current financial stage to the next.

Create a strategic plan, set deadlines, and then stick to them.

4. Determine your target market?

In a business zone, you cannot construct a block of student housing apartments. Before you begin investing in real estate, you must first identify your target market. What you buy or build should be well suited to your target market.

There should be no discussions such as “doesn’t that block of apartments look like an office building?” Alternatively, “Have you seen those apartments?” They’re divided up like office space.” You must be precise, and your target market must be satisfied with what you provide.

A questionnaire is the most convenient way to communicate with your target market. Your questionnaire will inform you about your target market and what it truly desires. For example, they may believe they require lodging but are actually looking for a convenient location to sell fresh produce. It is critical to conduct extensive research using a questionnaire.

A questionnaire will provide you with a more objective overview of your target market and should be a tool you use as a first-time home buyer.

Because you know the area so well, consider investing in real estate near your home. If you live in Soweto, for example, it is easier to invest in any Soweto township because you understand the people’s way of life.

You are aware of the zoning structure in Soweto, as well as the placement of schools, churches, shopping malls, residential areas, and parks. You are aware of how rent is collected and charged.

As a small property owner, you may be unable to take legal action against a difficult tenant due to the high cost of doing so (s).

5. What are your investment property criteria?

Choose the type of property investment you want to concentrate on. You cannot tackle the entire real estate market on your own because you must specify the type of property in which you wish to invest.

Choosing a property criteria will allow you to focus and avoid worrying about things over which you have no control. If you want to involve partners or investors, it is critical to choose property criteria that will make things less complicated and more understandable.

This will need to be in writing. You will need to have two categories that must be answered on your investment property criteria. First, consider your target property, followed by your target property terms.

You must include a number in your second category. These figures will include the desired amount you expect to earn on the targeted property, as well as the rate and taxes associated with the property.

6. Create a team

You will need to form a team, and you will be the chair and captain of that team. This is not a full-time team, but rather a group made up of your chosen construction company, conveyances, and other legal or property development experts who will assist you in their areas of expertise.

This means you’ll know who to call if you need assistance. If you are flipping a property, you will need your chosen construction company to inspect the structure and estimate how much it will cost to restore the property to its original condition.

Your team will be divided into three groups: the inner circle, the support circle, and the service circle.

The inner circle consists of those who will be there for you every step of the way, regardless of the circumstances; these are your partners, mentors, and spouse.

In real estate, your support circle is your most important relationship. These are your lenders, real estate attorneys, and accountants.

Last but not least, your service circle will be made up of functional relationships such as home inspectors, electricians, plumbers, painters, and so on.

7. Get finance for your real estate investing ?

You may need a financial facility to start your real estate investing. If you are working, accessing finance from major financial services providers can be a better option.

Depending on how much you are earning and your credit rating, it won’t be difficult to acquire a property loan. You have four options to acquire lending for property:

  • As a sole trader: You can apply for a personal property loan to buy or build the property that you want. If you are working and paying your taxes, this option is most suitable for you. This type of lending is easier to manage. Check out RateWeb Personal Loan Calculator.
  • As a sole proprietor: as a sole proprietor you are the business. If you have side work that you are doing or employed part-time you can apply as a sole proprietor.
  • As a partnership: if you don’t have enough money to start or don’t qualify for a mortgage loan, you can get into a partnership with someone who has a good credit rating and is employed. As a partnership, you will share the loan liabilities according to your partnership interest. It is advisable to draft a partnership agreement before going this route because if you don’t it is assumed that partnership interest is equally shared.
  • As a company: you can start a company and apply for a building loan. This requires some financial activity in the business and is non-negotiable by top banks in South Africa. Banks will require that your company should be 2 years or older to qualify and make a certain revenue in one financial year. This option is probably one of the most lengthy to take.

8. Put money away for a down payment ?

In real estate, you can easily make money from other people’s money however you shouldn’t count on this fact. You may need money for a down payment especially if you are a high-risk borrower so banks will want a certain percentage of the purchase price to be paid by you.

Here are some of the ways that you can use to put a down payment

  • Save- You can save money for a down payment from your salary earnings or from passive income. It is the best way to start for many including myself. Know your targeted loan amount and save accordingly. Have your money in an interest-earning savings account to earn interest. You can earn up to 6.5% on your savings per annum.
  • Get it from a partner: Get a partner to make a down payment for the property you want to purchase. You will need to entice them but rather don’t make promises that you cannot keep. Tell them the whole truth about the investment that they are getting into. A partnership can be very strategic since you will be in a position to get advice from another person who is committed to the project just as you are.
  • Borrow: You can borrow the down payment money. You need to understand the risk attached to this option before moving with it. You can borrow if you know well that you will be able to pay off the amount owed as agreed and on time. If you borrow yet the property is still going to stay a few months either vacant or under upgrades then this is a bad option. Rather save up and pay the down payment with your own money.

9. Create a plan to find deals ?

Great real estate deals won’t come knocking at your door, you need to formulate a plan to get deals. This may require funds depending on how you go about it.

There are many auction houses here in South Africa that you can utilize to find good deals. First, you need to list auctions that you want to visit and choose those that you think you can use. From these, you should be able to find the best deals.

Alternatively, you can make use of estates agents such as Pam holdings or smaller ones.

10. Get your priorities straight

If your priorities are straight you won’t have a problem with procrastination. You will be able to divide your duties.

You will know when to run your real estate business and when to be with family and friends and when to work if you are employed.

In your real estate business, your priorities should include identifying your next actions and projects. This way you will keep up with the market.

Conclusion

We have seen people getting wealthy in real estate, Sol Kerner who made hundreds of millions of Rands if not billions is a case in point.

Anyone can succeed in real estate investing whether you want to start from humble beginnings like building back rooms in your house or starting with a block of apartments, it is all possible even if you want to start from rural or urban.

One thing that will set you apart from an ordinary real estate investor is you reading as many books as possible. Knowledge will build your business acumen, so you need to invest in it.

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