Recent research has shown that property prices are expected to deflate over the next 12 months.
This might be a better alternative.
Now, before I have every estate agent in Benoni wanting to bite my head off, I would like to make it clear that I am not against owning property.
In fact, property is the first investment in most people’s “portfolio”.
My aim here is to introduce an alternative property investment to my fellow Benonians, given the current economic environment.
I got burned in the property market, as I bought right at the top of the market.
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Then the bubble burst, and I lost money.
I learned a lot from investing in property, but the most important thing I learned was to find a related investment alternative.
By no means am I suggesting that residential (buy to rent) property is a bad investment.
Some people have been making money for years.
I just needed to find a less labour intensive investment option that could give me the returns I was looking for in a shorter period.
Too much admin
As a property investor I soon learned that being a landlord came with its own problems.
My tenants cost me a lot of money!
I have just sold my last rental property, where I will realise a gain of a whopping 5.1 per cent after five years of owning it.
After skipping payments and ruining my place, my tenants did a runner, owing me around five months’ rent.
The levies and municipal costs were constantly eating away at my “investment”.
I had had enough.
While I became quite skilled at painting and fixing things, it cost me time and money.
Besides, I far prefer spending my time and money drinking craft beer and eating Portuguese-style chicken.
I have had to replace geysers, doors, ceilings and electrical faults while owning my three rental properties and, eventually, I’d just had enough.
Even as the seller, I had to pay an electrician to give the new owner an electrical clearance certificate!
I learned expensive investment lessons from owning buy-to-rent property.
I found listed property instead
Real estate investments on the stock exchange, known as listed property, actively trade on our stock exchange with around 23 companies in the make up listed property index.
A big plus for me is when I want to buy or sell shares in property stock, I don’t need to find an agent or a buyer or a seller or wait for finance approval.
I don’t have to deal with show days and open house days either. It’s a simple click of a button
Investors can get exposure to both local and offshore property, ranging from residential, retail and corporate, to industrial property.
What this means is that you can own shares from the East Rand Mall in Boksburg to Earl’s Court in London.
Not only do you benefit from the revenues these companies generate, but also the growth in their share prices – and you get dividends.
International interest rates are already below zero, so it makes sense that property is a viable investment.
Some local property stocks have assets all over Europe, so they earn their money in pounds and euros.
As a South African investor, as the Rand weakens you eliminate currency risk, too.
The stronger the offshore currency, the better for the local share price.
Listed property also offers you diversification.
If you have other investments, you should have around 15 per cent in listed property.
The South African Listed Property Index is up +18.89 per cent, which is good enough return for me.
In fact, the index is up over 70 per cent in the last six years.
You’d have to rent your townhouse out quite a while to make those sort of returns.
Have a question or suggestion for Robby P’s next topic? Send these to benonicitytimes@caxton.co.za.
