fbpx

10 steps to investing in real estate in South Africa 2022

If you know and understand what you’re doing, real estate investing in South Africa may be a lucrative experience, but it can also be unpleasant if you act rashly. We spoke with a number of folks who are well-versed in real estate investing.

What is the truth about property investment?

Real estate is said to be the simplest investing industry to enter because your earnings are assured. This may not be the case due to the multiple aspects that must be considered. To begin, evaluate criteria like location, investment amount, property type, property attributes, real estate market circumstances, and so on. It is stated that real estate investing is a science, but there is a certain degree of practical and intellectual conduct that must occur before you can start profiting from your property investments.

Unfortunately, many South Africans assume that you can start buying homes and making money as soon as you have some money. As a real estate investor, you will undoubtedly make mistakes that will cost you money. As a beginning, you will almost surely make blunders that you will later term foolish. To be honest, I’ve seen folks hop from one seminar to the next in an attempt to learn how to make money investing in real estate quickly. To truly understand what real estate investing requires, you must study extensively.

Read about other people’s real estate experiences and how they got started; there are several books that offer thorough real estate investing ideas.

The current state of the South African real estate market

The South African real estate market is still thriving, and there are ways to benefit from it, which I will explore in depth in this post. According to ABSA, nominal property prices in South Africa rose 3.96 percent in the first quarter of 2019. When adjusted for inflation, prices declined by 0.51 percent. This, according to FNB analyst Siphamandla Mkhwanazi, demonstrates persistent pressure on household incomes as well as a weak macroeconomic climate.

Property Values

Given the amount of funds required to get started, starting a property investment might be tough. Is it necessary to give up your work to start investing in real estate? Nope, it doesn’t. In fact, you can do much better if you work as a real estate investor. Your monthly pay can go a long way toward providing you with the passive income you’ve always desired, especially if you’re just starting out. For example, you may undervalue the cost of renovating the property you bought so that your wage can pay such expenses.

This essay, I feel, can soothe or erase your anxieties about starting your property investment. I’ve developed a list of ten ways to begin investing in real estate:

1. List your objectives

You’re no longer a child, and what you do with your money matters. You must put down all of your goals. Not only will writing down your goals help you remember what you want to accomplish, but it will also raise the seriousness with which you approach your work. Your goals are essential, and they are the major reason you are thinking about investing in real estate. Your goals should be long-term, measurable, reachable, timely, and relevant. You must be particular if you want to acquire an R500,000.00 stand in Midrand and begin putting modest units on it.

Write about how you plan to raise the R500,000.00 needed to buy the land. Include how long it will take to collect such monies, as well as a full breakdown of how you intend to obtain them. Make the R500,000.00 required to purchase land a reality rather than a pipe fantasy. Either you do what it takes to attain the results you want, or your dreams will die before they even come true.

2. Review you financial status

You must comprehend and accept your current financial status. Knowing your financial situation will help you determine the possibility of accomplishing your goals. Knowing your financial stage can also help you decide when is the right moment to leave your job, whether you need to work with a financial institution to accelerate your investments, and whether you need to court a partner. You can start a real estate job with little or no money; but, you must first know what to do. You will be able to begin as a real estate investor if you understand your financial status; else, you will be unable to begin.

3. Build a real estate investment strategy

You must read extensively. It took me about three years of research to get started in real estate, going from library to library in Pretoria and reading about real estate, business management, and entrepreneurship. When I originally started, I made some terrible mistakes due to strategy confusion. You must select a real estate investing strategy, which necessitates information. Many real estate gurus have produced books about investing in real estate, and you may learn a lot from them. One of my favorite books is Brandon Turner’s ‘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.’ In this book, Turner offers ways for creating a real estate portfolio utilizing several types of investing.

Brandon Turner has solutions whether you have a large sum of money to begin with, a small sum, or none at all. This book uses US analysis, which may be applied to any market, including South Africa. I recommend obtaining this book and dedicating a few hours to reading the flipping ideas included therein before acquiring any property. At this point, you must choose one basic method to help you transition from your current financial stage to the next. Make a strategic plan, set deadlines, and then follow through on them.

4. Determine your target market

A block of student housing flats cannot be built in a business zone. You must first determine your target market before you can begin investing in real estate. What you purchase or construct should be well suited to your target market. There should be no “doesn’t that block of apartments look like an office building?” debates. “Have you seen those apartments?” is another option. They’re partitioned off like office space.” You must be exact, and your target market must be satisfied with your offerings. The most convenient way to communicate with your target market is through a questionnaire. Your questionnaire will provide you with information about your target market and what it genuinely desires. For example, individuals may feel they need lodging but are really looking for a convenient place to sell fresh food. It is necessary to perform extensive research with the use of a questionnaire.

As a first-time home buyer, a questionnaire will give you with a more objective perspective of your target market and should be one of the tools you employ. Consider investing in real estate near your home because you know the neighborhood so well. If you reside in Soweto, for example, you will find it easier to invest in any Soweto township because you are familiar with the people. You are familiar with Soweto’s zoning system, as well as the locations of schools, churches, shopping malls, residential neighborhoods, and parks. You understand how rent is collected and charged. Due to the significant cost of taking legal action against a troublesome renter as a small property owner, you may be unable to do so (s).

5. Choose your investment property criteria

Choose the type of real estate investment you wish to focus on. Because you must select the type of property in which you desire to invest, you cannot tackle the entire real estate market on your own. Choosing a property criterion allows you to concentrate and avoid thinking about aspects over which you have no influence. If you want to involve partners or investors, you must select property criteria that make things less confusing and more understandable.

Choose the type of real estate investment you wish to focus on. Because you must select the type of property in which you desire to invest, you cannot tackle the entire real estate market on your own. Choosing a property criterion allows you to concentrate and avoid thinking about aspects over which you have no influence. If you want to involve partners or investors, you must select property criteria that make things less confusing and more understandable.

6. Create a team

You will need to organize a team, and you will be the team’s chair and captain. This is not a full-time team, but rather a group comprised of your selected construction firm, conveyances, and other legal or property development professionals who will assist you in their respective fields. This means you’ll know who to contact if you need help. If you are flipping a house, you will need your selected construction company to assess the structure and estimate the cost of restoring the property to its original condition.

Your group will be split into three sections: 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 journey, no matter what; these include your companions, mentors, and spouse. In real estate, your most crucial relationship is with your support group. These are your mortgage lenders, real estate lawyers, and accountants. Finally, your service circle will include functional relationships such as home inspectors, electricians, plumbers, painters, and so on.

7. Get finance for your real estate investing

To begin your real estate investing, you may require a financial facility. Accessing finance from big financial services providers may be a better alternative if you are working. A property loan will not be difficult to obtain, depending on your income and credit rating. You have four alternatives for obtaining property lending:

  • 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. Prepare deposit for a down payment

You can easily make money in real estate by using other people’s money, but you shouldn’t bank on it. You may require money for a down payment, especially if you are a high-risk borrower, so banks will expect you to pay a set proportion of the purchase price.

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

Excellent real estate deals will not come knocking on your door, you must devise a strategy to obtain transactions. Depending on how you go about it, this may necessitate the expenditure of dollars. There are numerous auction houses in South Africa where you might discover good offers. To begin, make a list of auctions that you wish to visit and select those that you believe you will be able to use. You should be able to find the finest discounts among these. Alternatively, you might hire estate agencies like Pam Holdings or smaller ones.

10. Prioritize

Procrastination will not be an issue if your priorities are clear. You will be able to divide your responsibilities. You’ll know when to run your real estate business, when to spend time with family and friends, and when to go to work if you’re employed. Priorities in your real estate firm should involve determining your next activities and projects. You’ll be able to stay up with the market this way.

Conclusion

We’ve seen people become wealthy through real estate, with Sol Kerner making hundreds of millions, if not billions, of Rands. Anyone may thrive in real estate investing, whether they start small, like putting rear rooms in their homes, or they start large, like with a block of apartments. It doesn’t matter if they start in the country or in the city. Reading as many books as possible will set you apart from the average real estate investor. You must invest in knowledge if you want to improve your business acumen.

10 steps to investing in real estate in South Africa 2022

Staff Writer

2 thoughts on “10 steps to investing in real estate in South Africa 2022

Leave a Reply

Your email address will not be published.

Scroll to top
%d bloggers like this: