Having deep pockets can certainly help you build wealth with a property portfolio but you will need a specific set of skills to better your chances of ensured success.
Praven Subbramoney, CEO of Private Bank Lending at FNB says the ability to maximise assets and expertise that you already have at your disposal is often what leads to significant opportunities and wealth creation.
The 7 skills that will make all the difference.
#1 The ability to recognise the importance of specialisation
Identifying the types of properties and market you want to target is vital. If you are in the business of leasing to students, it makes sense to acquire multi-tenant properties situated next to universities, whereas if you focus on renovating and reselling for a profit, finding distressed stand-alone properties which are sold below their market value may be ideal for you. However, as you progress in growing your portfolio, you can then consider property diversification.
#2 Knowledge and understanding of market trends
Research underpins your success in this sector. Understanding where to buy, when to buy, how much to offer for a property and knowing the right time to sell an underperforming asset will determine your success.
#3 Respect for the value of starting small
The biggest mistake you could make when starting out is overstretching yourself financially by going for properties that are beyond your reach. Start investing in more affordable property and build your way up. For example, if you are in the student accommodation market you can get flats in Braamfontein, Johannesburg next to major universities from as little as R350,000 for a one bedroom flat to R1,3m for a three bedroom flat. Thus, depending on your strategy, it may be risky to go for the R1,3m flat when you have limited cash flow.
#4 The ability to maximise your assets
Leveraging the existing equity in the properties that you currently own can help you take advantage of viable opportunities. Lenders are also able to provide you with a range of solutions tailored for your needs, with a competitive mix of rates, flexibility around repayment options as well as capital access. You can, for example, look at refinancing your current property and use the equity to take advantage of new opportunities or use a combination of securities that you currently own to raise a loan.
#5 The wisdom to not underestimate the importance of cashflow management
Like in any other businesses, cash flow is the lifeblood of your property portfolio. Not only is keeping track of money coming in and out of your portfolio essential for making strategic decisions, lenders may also require your cashlow statements to approve loans in the future. Monitoring your cashflow will also help you identify properties that are over and underperforming in your portfolio.
#6 The ability to take advantage of technology
Innovative digital tools can give you access to valuable information about a property, instantly at a click of a button.
#7 Recognition of the importance of lasting professional relationships with the right industry experts
While this may not be essential when starting out, you should consider investing in a team of professionals as your portfolio grows. Depending on the type of portfolio you are pursuing, you need a list of qualified experts, such as tax practitioners’, estate and rental agents, attorneys, builders, renovation contractors, electricians, plumbers and valuators, amongst others.