Dos and don’ts of property investing

Last updated on 13th December, 2017 at 10:26 am

Clever investing in property can make a difference to your income and even provide for a comfortable retirement. Avoid these pitfalls when building your portfolio.

We all dream of earning passive income – that’s when your money does all the hard work and you sit back and reflect on it from the golf course or the side of the pool. Constant income from rentals (often made easier if your affairs are handled by an agent) is a useful source of earning money passively. “Buying and letting is a practical addition to your portfolio that enables individuals to build up assets that can provide a constant stream of income,” says Koos du Toit, CEO of P3 Investment Club, which specialises in property investment.

Dos

Be patient:

“My strategy is to buy and hold, not buy and sell,” explains Du Toit. “People are inclined to want to get rich quickly rather than being patient and working. You should be looking to replace basic income with a passive income from rentals in 10 to 15 years. So this is the long haul. The principle of gearing (mostly using the bank’s money as capital) means that you always use the minimum of your own money to make your buy-to-let business work.”

Bargaining:

You need to make sure you’re buying at a good price. For the novice investor this may be a bit difficult. Read the classifieds and see what prices properties fetch in the areas you are interested in buying in. Give yourself time to get familiar with the market. Knowledge is power in this arena – if you know the prices of similar properties you will be on a firm footing when it comes to bargaining.

Don’ts

Make hasty decisions:

You should never buy a property on face value alone, but rather on the conviction that it will be an intrinsically good investment property. The age of a building has some consequences for any new owner. The older the building, the more things may go wrong and need attention. Always send a qualified building inspector to investigate the entire building and give you a report on the condition of the property.

Forgetting overheads:

A property investment business has its overheads like any other business. Some of these are out of your hands, such as interest-linked instalments on your bond account or taxes. Others you have more control over, such as levies in a sectional title complex or the fee you pay your letting agent.

By Helen Ueckermann