Open letter to South Africa’s students‚ universities and government‚ represented by Minister in the .
The property market frenzy may have substantially slowed down, but investors can still look forward to nearly a decade of serious money making.
So says Andrew Schaefer, managing director of residential property at Trafalgar.
"But investors will have to re-learn the traditional investment rules," Schaefer says.
He says there are five golden rules investors must follow.
"Firstly, property is a long-term investment. Focus on building your wealth over decades rather than months or years. Steady and compounding growth in income will make that wealth certain."
Schaefer's rule two is concentrate on income rather than on capital growth.
"Having a piece of land worth X rands is not wealth. Having steady income in your back pocket from a portfolio of flats is."
He says investors must concentrate on the income and the capital will look after itself.
Schaefer says though returns on flats are rarely above five percent and high-risk inner-city flats returns are below 10percent, it is still more income than an empty piece of land.
His third rule is to accumulate and not to rush because if you accumulate a low-risk portfolio, you will have a decent living.
"You could make quick money by buying off plan when prices were rising by 30percent a year. But now you must take your time."
Choosing a niche and becoming an expert in it is Schaefer's rule four.
"It can be a small area like a city suburb or even a street of shops and flats."
Because the property market is imperfect due to information not being easily available, Schaefer believes one can quickly dominate your chosen territory.
Schaefer's fifth rule is that a home with a big bond is not an investment.
"People tend to buy bigger houses and take on bigger bonds as their jobs improve. But they are paying large monthly instalments - after they've paid tax."
He believes one will make much more money living in a smaller house, buying rented flats or townhouses with tax-deductible bond payments.
But he says one can use one's house to a limited extent to raise a deposit to buy an investment property.