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9 things every first-time property investor should know

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Q

Hi Grant, I would like to know how to become a successful property investor. Where do I start? – Mbali

A

Hi Mbali, property investment is an attractive way to make money, but also an excellent opportunity to either lose money or end up with your money stuck in an underperforming asset. It is vitally important that first-time investors understand the risks associated with investing in property, rather than focusing only on the potential upside of their property investment.

First and foremost it is important to have a clear goal before entering the property market. Each property you buy must serve a purpose in achieving your goal: Be it cashflow, capital generation or as a legacy investment. Once you have clarity on your goal you will need to decide on the investment strategy that aligns closely with your goals.

The 4 strategies

Property investment strategies include buy to let, multi let, capital flip, and development. The strategy you decide to employ will then provide you with guidance on the area in which you should be investing. Area selection is important; the old adage “Location, Location, Location!” certainly applies, particularly when employing a specific strategy to achieve your goal.


What you need to know before buying at auction


Understanding your numbers and being able to run these comfortably is extremely important. Property investment is a numbers game: You let the calculator decide, not your head.

Why you need other people’s moneybaby boy with lots of money, rich resize

You must be prepared to assess your resources. Capital, time and knowledge are your most important resources. Capital should be viewed in two parts: Your own capital and other people’s money. Any first-time investor must ensure they are comfortable with utilising other people’s money; in other words, leveraging the property in order to maximise return on investment.

Fortunately, or unfortunately, you pay for your education one way or another, whether in a formal environment, through a mentor or coach, or lastly, by making your own mistakes. It is certainly far more valuable to invest in your property investment education and yourself. By education yourself, you are able to reduce risk when entering into a property deal.

There is no “I” in teamdream team

It is important to build a strong power team of professionals who can assist you in your property business. This power team could include any professional involved in the property investment process: Your builder, attorney, accountant, transferring attorney, estate agents, architect, etc.

Property investment is full of risk but can be lucrative if done right. My last point on risk would be to ensure that for every property deal you assess, you make sure you have a viable and realistic second option should your primary strategy not work out.

Lastly, ensure you are consistently analysing your property portfolio to ensure the return being achieved is consistently optimised.


To recap

#1 Have a clear goal you would like to achieve

#2 Decide on a strategy to achieve your goal, which in turn will help define the area into which you’d want to invest

#3 Make yourself an expert at running the numbers

#4 Get comfortable with other people’s money and the concept of leverage

#5 Educate yourself

#6 Get a coach or mentor that has been successful to help you get started

#7 Build a strong power team of working professionals

#8 Minimise your risk by having a second option if plan A doesn’t work

#9 Ongoing portfolio assessment to ensure you money is working as hard as possible (return on equity)


Got a question about property investing? Email david@hometimes.co.za


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Who is Grant Smee?

Grant Smee, MD and franchisor at Only Realty

Grant Smee, MD and franchisor at Only Realty

Grant Smee, MD and franchisor at Only Realty, has been operating as a property investor since 2005. He has a solid financial foundation gained through tertiary studies in finance and accounting, and experience gained in large international financial institutions. Extensive property investment and rental knowledge has been gained through personal property investments and property business ventures since 2005 in both South Africa and the UK. Smee’s specialties include property investment and rentals in the residential housing market.


Disclaimer: The information above is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by HomeTimes and Only Realty. Any expression of opinion is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.
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david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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