With property values being as high as they are, it can be challenging for young buyers to enter the homeownership space, let alone to consider the possibilities of building a property investment portfolio within their lifetime.
Although it may be a daunting goal, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa says that it is achievable for those who put in the work to develop a plan and have the tenacity to stick to it.
“Building a property portfolio will take careful planning and strategic financial management. For most, it will most likely also require some sacrifices in lifestyle and some diligent saving habits. If you are serious about turning this dream into a reality, then set up appointments with industry experts, including a financial planner and a real estate professional, to start working out an action plan that you can follow,” Goslett recommends.
READ: Becoming a property mogul in South Africa
Craig Mott, Business Development Manager for the Rawson Property Group, also shares the top 4 techniques used to build these high-performance portfolios that deliver mogul-worthy returns.
Goslett says, although the path towards achieving this goal will look different for each individual, RE/MAX of Southern Africa shares a few golden nuggets of wisdom that could help any young property investor start on their journey towards becoming a property mogul…
- The key is to start small. Begin with lower-cost properties to minimize risk and gain experience. Focus on up-and-coming areas with potential for appreciation rather than established, expensive markets. Affording your first property will always be the most challenging. Thereafter – because of house price appreciation and the home’s ability to generate income – each property you add to your portfolio becomes just a little easier to afford than the one before.
- To be a successful real estate investor, you need to be there at the right time, right place. This is where developing a close working relationship with a reliable real estate professional is crucial. As the local expert, real estate professionals are able to share market insights and trends which can help investors spot the right opportunities that will suit their risk appetite and budget.
- Part of being successful is the ability to act when the right opportunity arises. This means working out in advance how to finance your next property purchase. There are several ways to afford this. For example, you could use the equity from your existing properties to finance new purchases; you could team up with friends, family, or other investors to pool resources; or you revert to traditional home finance if you can afford to do so. Work closely with a financial advisor to find out which option works best for you.
- As with any investment, diversification will help to minimise risks. It is better to invest across different geographic locations to mitigate suburb-specific downturns. It might also be prudent to invest in a mix of residential, commercial, and industrial properties to help spread risk across different sectors of the market.
“By following these tips and remaining disciplined in your approach, you can build a robust property portfolio that provides both income and growth potential over time,” says Goslett.
READ: Becoming a property mogul in South Africa
Mott says, some of the world’s wealthiest individuals founded their empires on property investment.
Don’t overlook an opportunity
“The best property investors keep a constant finger on the pulse of the property market,” says Mott. “They’re constantly on the lookout for optimal conditions and aren’t afraid to leap when an opportunity presents itself.”
Currently, Mott says the market is ideally positioned for portfolio expansion, with excellent lending rates and a wide variety of stock available.
“We’re seeing a lot of savvy investors using this time to fill gaps in their portfolios and implement strategic expansion strategies,” he says.
Build strategic partnerships
Becoming a property investment expert doesn’t happen overnight. That’s why most successful investors have a property professional on their team.
“Building a relationship with an experienced real estate and/or rental agent opens a lot of doors for you as an investor,” says Mott. “Not only can you get early access to prime, as-yet-unlisted properties, you also get up-to-the-minute advice on the latest investment best practices, legislative updates and property trends.”
Understand what success looks like
Bigger isn’t always better when it comes to property investment. According to Mott, the key metric to look out for is not overall portfolio value, but rather whether your total returns equal or exceed those of equivalent monetary investment funds.
“If, for argument’s sake, the same money would have performed better in a money market – before capital appreciation – you can’t regard that investment as being successful,” says Mott. “Of course, property investment is a long-term venture, so don’t be overly swayed by individual properties’ short-term performance. At the same time, don’t put all your eggs in the capital appreciation basket – investment properties shouldn’t need to be sold before they deliver profits.”
Never take performance for granted
Done right, Mott says property can dramatically outperform almost any other asset class. If it’s not living up to its full potential, it’s time to update your strategy.
“There are always going to be properties that don’t perform as expected, and these can drag the overall returns from a portfolio down,” he says. “Don’t fall into the trap of hanging on to this ‘dead wood’. The most successful investors do regular checks of each and every property’s performance. Those that consistently deliver below expectations, and cannot easily be remedied, should be sold to increase cash flow or finance more promising new investments.”
READ: Five property investment strategies for the novice investors
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