Steinhoff - Another one for Property Bashers?
Category Newsletter: HeadOffice
Steinhoff - Another one for Property Bashers?
The recent demise of Steinhoff, a darling amongst the listed equity pundits and investment advisers, adds to a growing list of spectacular corporate failures and the self- confessed shortcomings of a company like KPMG who should be on the investing community’s side by ensuring “the fact and not the fiction” once again reaffirms that careful and calculated investments in property is and always will be the cornerstone of wealth creation and, importantly, where this wealth is always held firmly in the control and protection of the actual owner themselves and not with an independent third party.
A carefully selected residential property investment gives you a fixed and bankable monthly income stream that grows every year and is unlike an investment in shares in a listed company that may or may not earn dividends depending on the decisions of a few that you have no control over and, a carefully selected residential property investment will realise bankable and steady capital growth over the years and is unlike an investment in shares in a listed company which is massively prone to price fluctuations at any time and whose price is susceptible to the actions of its board and directives of some of its shareholders that you have no control over as in Steinhoff and also recently, African Bank.
Even purchasing your own primary residence, if done correctly, is an investment as it will give you a capital growth over the years. But now consider this – it’s an investment and you physically live in it too! You make your memories in it, you use it as your base and as a springboard to take over the world, it’s a nest for your family and a safe-haven for your children and importantly, you even use it for those important weekend braais. You certainly cannot physically do all this “in” an actual share certificate, can you? Those property bashes will then say but actually a primary residence cannot be a good investment as the actual cost of the investment include maintenance costs, rates & taxes or levies, insurances etc. Really? as if these guys who have only share certificates in their hands have got no living and accommodation expenses at all you see.
So, once you have made the decision we would like to offer you some advice on the purchase of residential property as an investment:
- Preferably, purchase in a sectional title or gated cluster development that has a strong and strict management committee that upholds and enforces the rules and regulations of the complex. This is important on order to keep up the standard of the development and eliminate deterioration of the physical attributes of the buildings and to ensure that the owners/occupants adhere to a pleasant standard of ethics, respect and accountability to one another and each other’s investment. Keeping up this standard ensures that the complex will always be in demand and be highly desired and the higher the market demand, the higher the value obtained of each unit. (This is your capital gain).
- Preferably, purchase in an established area that is conveniently situated with regards to the proximity of schools, shopping centres, medical facilities and transport hubs and try and avoid outlying “newish” developments that may take many years to become “convenient”. The more convenient a dwelling unit is with respect to location and surrounding facilities, the more in demand it will be now and in the future. (This is capital gain).
- Ensure that your prospective tenant is screened through all available channels (credit rating agencies, criminal records, work history, references, interviews, etc.) and that a sufficiently high deposit is paid (at your discretion and maybe more than the norm of only 1 month’s rental). This is to ensure that the tenant has a significant personal stake in the upkeep of the home and comply with the lease conditions especially the payment terms. (This is your monthly income stream)
- Property should always be a medium to long term investment and never short term and therefore should be kept for a minimum period of 5 years, however, if invested as described in the points prior, one should endeavour to hold onto these type of property investments for the very long term and even to be passed onto beneficiaries on your passing.
Hindsight, especially in property investments. is always the perfect science but in summary, we believe that a mixed investment portfolio is the way to go but being property people, we strongly believe that you should have a bias towards property over equity because ultimately, you have control over it and your investment does not depend on the decisions of a CEO and his board that you have never met, have no control over and who may mischievously be interested in their own lot only.
Century 21 Real Estate is comprised of approximately 7,400 independently owned and operated franchised broker offices in 78 countries and territories worldwide with more than 111,000 independent sales professionals. The CENTURY 21 System provides brand marks, marketing, communications and innovative technology solutions that help enable its franchisees and their independent agents to attract and engage prospects, nurture customers, and deliver a positive real estate transaction experience.
Author: Century 21 South Africa