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The Biggest Wealth Transfer Ever RESIDENTIAL

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Dr. Dolf de Roos is an investor, author and property educator on property investment worldwide. Dolf has written more than 8 books on real estate including the New York Times no. 1 seller, “Real Estate Riches”, part of the Rich Dad Poor Dad Series.

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EDITORIAL EDITOR-IN-CHIEF Neale Petersen

CONTENTS JUNE COVER GUIDE

SOUTH AFRICAN REAL ESTATE INVESTOR MAGAZINE

COPY EDITOR Angie Redmond CONTRIBUTORS Monique Terrazas, Jonathan Smith, Koos du Toit, Hedi Kemper, Rudolf Nieman, Willem Potgieter, Tony John, Mike Smuts, Mike Spencer, John Roberts.

write to us:

14 The Biggest Wealth Transfer Ever

www.reimag.co.za

editorial@reimag.co.za

RESIDENTIAL

Tenants Demand Security

COMMERCIAL

Lifestyle Centers At A Premium

DESIGN / PRODUCTION Melissa Europa

OFFSHORE

PHOTOGRAPHY Stock Exchange, Dreamstime

PSYCHOLOGY JUNE 2012

FINANCIAL MANAGER Marisa George

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WEB ADMINISTRATOR Brent Fisher

ADVERTISING National Angelique Edwards 021 674 5026 Paul Stubbs 021 674 5026 Johannesburg Eugene Naidoo 074 539 2959 Charl van den Berg 071 419 8708

48

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ONLINE What’s New On The REIMWebsite New on REIM TV

5

INVESTOR TALK The Greatest House Buying Opportunity American rental homes

8

INBOX Ask An Investor Specialist Getting started

12

MASTER INVESTOR Hennie BezuidenhoutDEN

subs@reimag.co.za

14

INVESTOR INTELLIGENCE Breaking Into The US Property Market

20

CASE STUDIES Good, Better & Best

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Page 42 Lifestyle Centers At A Premium Page 48 Movers & Shakers Of 2012

Steve Jobs, Quotes For Business & Life

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Page 28 Tenants Demand Security

42

International Movers & Shakers Of 2012

TRAFFIC Juanita Heilbron

to advertise:

30

Page 14 Breaking Into The US Market

14 I WANT YOU TO BUY US PROPERTY

24

GETTING STARTED Proffesional Property Investment: Mastering the art of networking

26

STRATEGIES Property: The UltimateBusiness Your roadmap to wealth

28

MANAGING Security And Parking

30

FINANCING Leaving Your Lease Early? Cancellation fee's explained

32

IMPROVING Increase Your Value Simple steps for tiling success

38 LIVE WHERE YOU WORK AND PLAY

PUBLISHED BY REAL|E MEDIA Neale Petersen (CEO), B.Taylor

www.reimag.co.za All rights reserved. No portion of this publication may be reproduced or used in any form without prior written consent and permission from Real Estate Media. The publisher gives no written guarantees or assurances and makes no representation regarding any goods or services written or advertised within this edition. Prospective investors should always consult their attorneys, advisors or accountants. Copyright © Real Estate Media cc

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June 2012 SA Real Estate Investor

Contributors

ALSO PUBLISHED BY REIM

Angelique Redmond is our talented in-house copy editor. With a passion for words and music, her pink earphones are a permanent fixture.

Mike Smuts is an author, and property investor, he is the owner and managing director of Smuts and Taylor, a London based investment firm

Scott Picken is the CEO of IPS, Offshore investment specialists who have been helping people invest internationally with confidence for many years.

Monique Terrazas is a freelance property writer, investment writer, and works with Freelance Writers SA on a regular basis. She is a treasured REIM contributor

John Roberts is the CEO of The Just Property Group, a dynamic property company born from the motivation to create a property industry leader

Koos du Toit is the CEO of P3 Investment Group that offers hope and guidance to anyone looking to build a successful investment portfolio

www.reimag.co.za


INDEX

June 2012

How to use REIM Digimag REIM has introduced links to websites, videos, gallery photographs and instant access to information on our digimag. When you see the icon on the printed page it indicates the extra content available in the digimag.

ut

COMMERCIAL

OFFSHORE

35

COMMERCIAL INVESTOR News And Industry Update Updates and property hear say

47

OFFSHORE INVESTOR News And Industry Update Updates and property hear say

36

INDUSTRIAL Solid Returns In Tough Time Industrial property stays steady

48

FINANCE Movers And Shakers 2012 Rich List

50

48

LIFESTYLE CENTRES Live Where You Work & Play Lifestyle centres on the increase

AUSTRALIA Time To Invest In Australia

40

RETAIL European Retailers Will Add Value With the right knowledge

44

FACILITIES MANAGEMENT Protecting Your assets Access control, security and parking

PSYCHOLOGY 54

56

LESSONS Don't Hold Back INSPIRATION Just Like Jobs

EXTRA 44 PAGE DIGITAL CONTENT

CLICK HERE 48 2012 UK RICH LIST

56 JUST LIKE JOBS

ABC APPLE ...................................................................................56 BRANDSTORM ..................................................................54 BROLL ...................................................................................40 BROLL ...................................................................................41 COURTWELL CONSULTING ..........................................44 COURTWELL CONSULTING ..........................................45 DEF DOLF PROPERTY TOUR .................................................4 ELAN .....................................................................................10 ELAN .....................................................................................11 GHI GUNSTON ATTORNEYS .................................................23 HOUSECHECK....................................................................8 IMPROVON .........................................................................36 INTERNATIONAL PROPERTY SOLUTIONS ..............47 INTERNATIONAL PROPERTY SOLUTIONS ..............52 INVEST IN PROPERTY CROATIA ..................................50 IPD .........................................................................................35 JKL JHI ..........................................................................................35 JONES LANG LASALLE ..................................................47 JUST PROPERTY GROUP ...............................................28 JUST PROPERTY GROUP ...............................................29 KOOPLIEDE ........................................................................43 LANDLORD ASSIST..........................................................7 LEAPFROG ..........................................................................8 LEAPFROG ..........................................................................23 LIFESTYLE PROPERTY MANAGEMENT ....................12 LIFESTYLE PROPERTY MANAGEMENT ....................13 LIGHTSTONE PROPERTY ...............................................33 LIVEWIRED..........................................................................36 LIVEWIRED..........................................................................42 LIVEWIRED..........................................................................52 LLOYDS TSB INTERNATIONAL ....................................47 MNO MARTO LAFITTE & ASSOCIATES.................................30 MDA PROPERTIES ............................................................39 NICOR ...................................................................................43 OOBA ....................................................................................8 PQR P3 Investment Group.....................................................24 P3 Investment Group.....................................................25 P3 INVESTMENT GROUP ...............................................26 P3 INVESTMENT GROUP ...............................................27 PAM GOLDING ..................................................................38 PAM GOLDING ..................................................................39 PARAGON LENDING SOLUTIONS ..............................35 PASSPORT TO PORTUGAL ............................................51 PERISCOPIC PROPERTY MANAGEMENT .................42 RAWSON PROPERTIES ...................................................23 RODE AND ASSOCIATES ...............................................35 STUVWYZ SABLE GROUP ..................................................................51 SIGMA...................................................................................53 SMUTS AND TAYLOR ......................................................47 SMUTS AND TAYLOR ......................................................48 SMUTS AND TAYLOR ......................................................49 SPIRE PROPERTY MANAGEMENT ..............................46 TPN ........................................................................................34 TPN ........................................................................................37 TRAFALGAR........................................................................43

FREE

John Lloyd is a business growth strategist, award-winning marketer and speaker. Get a copy of his book Smart Thinking for Crazy Times at all smart bookstores.

www.reimag.co.za

Jonathan Smith is the Director of Courtwell Consulting and has extensive experience in property and consulting, including educational programs

2011 HANDBOOK

Offshore Handbook In July Issue June 2012 SA Real Estate INVESTOR

3


Why are Billionaires Buffett and Trump confident in USA real estate right now? You have to understand why...


INVESTOR TALK

The Greatest House Buying Opportunity How you can benefit from American rental homes

S

ome of the best investment advice people have been given is to invest into buy-to-let property, using a tried-and-tested system. Some people have followed this advice to the letter and have been hugely successful. Others have gone their own way and have been caught on the losing side, because they over-geared or jumped in without really understanding the market cycle. The great news is that, even for those who were not successful, the time to make a comeback has arrived. And the stage for this comeback is set in the US, where REIM was born. We have visited the US on a number of occasions, we heard stories from a handful investors already active in the market, we closely followed the good and the bad news and we listened to the commentators, but still we needed to get to the real nitty-gritty of how to take proper advantage of the opportunities in this complex market from a distance. To do this, we needed an in-depth investigation into what the US property market really looks like today, to witness the opportunities fi rst hand, to speak to the experts on the ground and to establish partnerships with companies we could trust and who could deliver real value to SA investors. Following this in-depth investigation, we can report back to you, our readers and investors, in great detail as we have in our cover story, but the short and simple conclusion is: get invested in the US today - it is a once-in-a-lifetime opportunity to get great value in a leading fi rst world housing market. Rentals are booming in the US Due to a range of issues - from difficulty to obtain mortgage f inance to a growing psychological resistance to homeownership - America is rapidly becoming a nation of renters, and this is creating huge opportunities for property investors that are

unlikely to ever be repeated again in history. Due to a housing market flooded with foreclosures and depressed by the unavailability of mortgage funding, rental homes can be bought at discounts of up to 60%. As our good friend RJ Palermo, a specialist REO seller in the US says, “It is a recession when it happens around you and a depression when it happens to you." Americans already hold $4.2 trillion in rental properties. Of the 38 million households that rent in the US, 17 million live in apartment buildings, leaving a balance of 21 million households that require rental housing provided by private individual property investors. It was this reality that fueled the decision to get a view from the ground by visiting seven US cities in 11 days - from New York to San Diego, San Diego to Phoenix, Phoenix to Atlanta, Atlanta to Memphis, Memphis to Orlando, and back to New York. What we saw is that the opportunity is real: the US is indeed the land of opportunity, and it is open for business to anybody who wants to take advantage of the prospects that await in this dollar-based offshore economy. We must advise our readers and investors against "going it alone" in such a complex market. The main challenge for novice realtors and investors in the US is the distortion of house values. To define real value and to arrive at a competitive property purchase price, investors need to understand thoroughly the specifics of a particular area and to consider distress sales prices, cap rates, square meter building costs and the costs to fi x and rehab properties. But with the right partners, the rental industry in the US, which is growing into a national enterprise, is indeed a lucrative opportunity for individual investors or small businesses building a property portfolio or for those looking for a part-time career in property investment. Buying right and retiring rich require

extra digital video content action. Read about the intricacies of how to get in on the investment action in the US on page 10. Hennie Bezuidenhout, our Master Investor, also invests offshore and has built a massively successful international property portfolio through partnering with astute, equally vested partners and full service turnkey service providers. Buying houses is easy, he says, but buying and developing houses for predictable cash flow and growth is an art. Prosperous investing

Neale Petersen EDITOR-IN-CHIEF

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June 2012 SA Real Estate INVESTOR

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ONLINE

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WATCH REIM TV

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June 2012 SA Real Estate Investor

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INBOX

ASK THE PROPERTY EXPERTS

Kura Chihota, Leapfrog www.leapfrog.co.za

John Graham, HouseCheck www.housecheck.co.za

Luyanda Noto of Bloemfontein asks:

James King of Cape Town asks:

I am currently a tertiary student with a scholarship of R 90 000 per year. I Intend to save R 60 000 for the next 3 years. My intention is to enter the property investment field. However I lack experience so I want to know which is best, building a new building for rental or buying an existing building and renting it out? Luyanda Lunga Noto

Kura Chihota of Leapfrog says:

If I buy a house voetstoets, what does that mean, and what should I be wary of when looking at the house? Does the law protect me from unscrupulous sellers when the house is sold voetstoets and can I insist on a thorough house check and full inspection prior to making an offer?

John Graham of HouseCheck responds:

The property investment field is wide open for the entrepreneur! Your inexperience isn’t a hindrance because you can learn and earn at the same time. Start small and work your way up. I suggest you start by looking at an existing property with a rental as existing properties offer up to 30% better value than building new. In other words you will get more “bang for your buck” buying an old building than building a new one. When you are considering buying vs. building finance also plays a role. It is also easier to raise finance for an existing building than raising a bond to build a new one. Banks will lend you up to 100% on an existing property if you buy from Quicksell or any bank programme while getting a building bond they will only lend you 50-60% of the money you need. The application process is quite simple with a good mortgage originator to help you through the application process.You can increase your returns to your property purchase by adding value by doing additions like upgrading the bathroom and kitchens to attract higher rentals. Start small and use your profits to increase the size of your next deal. You will fi nd your skill will grow and fi nd the best get rich slow scheme in the world is investing in property. Good luck!

Buyers should be very cautious about buying voetstoets (“as is”). Voetstoots means that the buyer agrees that the seller is not responsible for the condition of the house. The only exception being if it can be proved that the seller deliberately concealed information about a defect which could not easily be spotted by the buyer pre-sale. The CPA does not apply to private sellers, if there is a voetstoets clause, and the buyer finds problems after the sale which cannot be resolved amicably with the seller, then the buyer’s only option is to go to court and try to prove that the seller deliberately deceived him. It is therefore best for the buyer to simply refuse to sign any sales agreement containing a voetstoets clause. Instead the buyer should make the offer to buy conditional on a favourable home inspection. That way the buyer is far less likely to make an expensive mistake. If the seller is reluctant to remove the voetstoets clause and agree to an inspection, then the buyer should ask himself : What is being concealed? Particularly in this current “buyer’s market”, where sellers are often desperate to sell, buyers should resist being bullied by sellers, their attorneys or estate agents into accepting a voetstoets clause. Such a clause clearly favours the seller at the expense of the buyer.

Yvonne Viljoen, OOBA www.ooba.co.za Arthur Makhaza of Namibia asks: I currently live and work in Windhoek, Namibia. I am interested in buying a f lat for investment purposes in Cape Town. I would like to know the posibility of doing this and what financing options are at my disposal, I would also appreciate any recommendations of renowned agents to utilise who specialise in flats in that area?

Yvonne Viljoen of OOBA responds: As it is not clear what your Nationality is I assume you to be a Namibian Citizen holding a Namibian Passport. However, should you be a SA Citizen living and working in Namibia the same would apply. As Namibia forms part of the Common Monetary Area for lending purposes in South Africa, you would benefit to be treated as a SA Citizen in terms of SA banks lending policies. Dependant on the purchase price, Your affordability as calculated by the banks calculator and also dependant on individual bank policies, you could be considered for between 70% and 100% mortgage financing of the purchase price, however it is always advised to have a deposit often up to 30%. Bear in mind you would also need additional funds in cash for all associated Legal Fees. I would suggest you contact one of the experienced consultants at SA’s leading mortgage originator OOBA in order to assess your affordability and assist with a Mortgage Pre Approval and also guide you and assist in the mortgage application process. I also recommend you visit propertygenie or private property, which is a property website that gives you access various real estate within all geographic areas of SA.

Do you have a burning property investment question you need advice on? If so, post it on ASK THE EXPERTS on www.reimag.co.za or email editorial@reimag.co.za or post it to: Ask the Experts, P.O. Box 858, Howard Place, 7450


BOOK REVIEW In Different Thinking By Luke Dormehl

On 26 May 2010 Apple Inc. passed Microsoft in valuation as the world's largest technology company. Its consumer electronic products - ranging from computers to mobile phones to portable media devices, not to mention its iTunes, iBook and App Store - have influenced nearly every facet of our lives, and it shows no sign of slowing down. But how did Apple - a company set up in the back room of a house by two friends, and one that always marketed itself as the underdog - become the marketplace leader (and the world's second largest company overall), and is it a good thing to have one company hold so much power? In "Different Thinking", Luke Dormehl shares the inside story of how Apple Inc. came to be; from the formation of the company's philosophies

Everyone’s Guide to the South African Economy By André Roux Recession, inf lation, interest rates, income tax, exchange rates … one is bombarded with these terms every day – by newspapers, the radio, TV and the internet – but what do they actually mean? And how do they impact on ordinary people? The book clearly explains and evaluates a wide range of economic occurrences – from the budget and the rand/dollar exchange rate to the role of the South African Reserve Bank and the balance of payments.

and user-friendly ethos, to the "iPod moment" and global domination, leaving readers with a deep understanding of how it was created, why it has flourished, and where it might be going next. Available soon

read extra digital content

Price: R200 For More Book Reviews go to

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at the sub-Saharan African economy, and explores human development issues in South Africa and their implications for policy-making. Th is is essential reading for every South African consumer and taxpayer.

read extra digital content

Price: R180 For More Book Reviews go to

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This landmark tenth edition investigates the causes and consequences of the 2008/2009 global fi nancial and economic crisis, looks in more detail

The Happiness Advantage By Shawn Achor Most people want to be successful in life. And of course, everyone wants to be happy. When it comes to the pursuit of success and happiness, most people assume the same formula: if you work hard, you will become successful, and once you become successful, then you'll be happy. The only problem is that a decade of cutting-edge research in the field of positive psychology has proven that this formula is backwards. Success does not beget happiness. Based on the largest study ever conducted on happiness and human potential (a survey conducted by the author of more than 1,600 students), Harvard lecturer Shawn Achor shares seven core principles

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of positive psychology that each one of us can use to improve our performance, grow our careers, and gain a competitive edge at work. He reveals how happiness actually fuels success and performance, not the other way around.

read extra digital content

Price: R195 For More Book Reviews go to

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June 2012 SA Real Estate INVESTOR

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MASTER INVESTOR

BY NEALE PETERSEN

First Find Out Why

Not To Invest!

Understand the market and secure committed partners

extra digital video content

Hennie Bezuidenhout PERSONAL STATISTICS AGE: 57 MARITAL STATUS: Married CHILDREN: 4 children

CLOSE-UP MENTORS: Peter Veenstra, an engineer, played a huge part in his life. He was head of Telkom Property Division for many years and also developed the Total Facility Management Company (TFMC), as well as student accommodation. Anton Rupert also made an impact on his life and Hennie learnt a great deal from Rupert's business prowess. Rupert never took a majority stake in a business, since he believes a passionate owner who believes in himself will never sell a majority stake in a good business WHAT ARE YOU READING AT THE MOMENT? The principles in “Rich Dad Poor Dad” by Robert Kiyosaki made an impact on him, as did the book “The monk who sold his Ferrarri” by Robin Sharma. WHAT IS YOUR LIFE MOTTO? Don’t just be average - take on whatever you can, do your best, excel at everything you do and be proud of it. Life's got an expiry date, so enjoy the ride!

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June 2012 SA Real Estate Investor

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ennie Bezuidenhout heads up a ver y s uc c e s sf u l prop e r t y c omp a ny t h at specialises in rolling out commercial properties in the day clinic arena - a major priority in the country, which is endorsed by government. The company establishes strategic partnerships with healthcare operators and then acquires and develops customised buildings, while the operators provide the medical services. The company has also expanded into residential property development in both local and international markets. While his successes are impressive, Hennie prefers to keep a low profi le. He was born and bred in the Free State and attained a master’s degree in Plant Sociology at the University of the Free State in Bloemfontein. However, his true ambition was to have his own business. He had no money at the time, so he joined Old Mutual as a sales consultant. He quickly became one of the top 25 consultants in South Africa and, in his second year, he was selected as one of the top brokers in South Africa.

opened up a wealth of new opportunities, as well as challenges, since medical day clinics are a highly specialised f ield, requiring, for example, close collaboration between the architects, operators and doctors, as well as approval from the Department of Health. Nevertheless, the company dominated the sector, developing numerous day clinic properties. A not her major development by Li fest yle Management Property was commercial office blocks and a hospital next to UNITAS Hospital in Pretoria, a one-stop medical facility with a focus on eye care, hearing aids, pathology and a theatre. The demand for medical property evolved and grew and the development of a 40 000m2 building and a 14 000m2 facility offering auxiliary medical services followed.

At the time, the company launched a new health insurance product and Hennie started investigating the market and developing his own medical aid and healthcare product in conjunction with Munich Reinsurance. The product was designed to cover the gap between medical aid and insurance, and within two years it was taken up by 500 000 individual

medical aid members. Hennie was also involved in the development of clinical management tools for Sanlam Healthcare and was a pioneer in the managed healthcare field. He eventually sold the business to Absa.

The big property adventure Having conquered the operational side of the healthcare business, Hennie moved into the property development side, specialising in day clinics. Th is

www.reimag.co.za


Residential development Hennie has also partnered with developers in the residential development sector in affordable housing areas in South Africa. He says that the key to success was partnering with experts who understand that market. Many developers simply build and sell, missing an opportunity to tap into the huge rental market constituted by those earning between R8 000 and R14 000 per month. To take advantage of the opportunity, Hennie and his partners invested in and developed sectional title units, selling only half of the units and renting the rest, to ensure they keep control of the Sectional Title Scheme.

and you have to know the nitty-gritty. Hennie's advice is to partner with international companies who know the area well and to work closely with them. Hennie started investing in Australia in 2006 and has invested in seven different markets. He selected Australia for two reasons: the language is not a barrier and the country is close to China. In 2007, Hennie started a residential development in the $300 000 to $500 000 market. Since then, the company has achieved a 20 – 30% return on investment on numerous developments in Australia.

The company also tapped into the opportunities created by the demand for industrial and residential developments in, for example, Newcastle and Lephalale (Ellisras), close to the new power station. Here they developed affordable residential units, with around 150 units per development.

1. Be part to be of the action, be a director, not a passive investor. 2. Co-invest, because it takes the risk out of development. 3. Ensure that the rights for the land are secured and the pre-sales and funding are in place.

International diversification Hennie notes that international investment is a normal risk diversification strategy, but it took about five years to investigate the models and markets properly. The one lesson Hennie highlights from his experience is that you cannot simply fly in and out of a country, hoping to capitalise in offshore markets or to do successful property development there. Each town and each suburb in every country is different

LESSONS LEARNT FROM AUSTRALIA

The lessons learnt are based on hard experience, since not all the propert y developments in Australia were lucrative. The company invested in a big development in Brisbane, based on the information in the memorandum of agreement. The deal went sour and the company suffered losses amounting to millions of rands, because the company did not have sufficient local knowledge to identify that the project was simply too big and that the timing was wrong, and because it was a passive, not an active, investment. Similar lessons were learnt during a venture to launch discount pharmacies in Australia. Investment insights Hennie cautions against going after very high yields, because high yields also means high risk. Generally, 12% is a good return, so always investigate the reasons why very high yields are promised, because it is crucial to balance yield and risk. In this respect, Hennie follows the example set by Warren Buffett, who pays agents who can convince him not to invest. Hennie suggests fi nding someone really knowledgeable to explain to you why not to invest, so you always go into an investment with the full facts. Henn ie feels st rongly about educat ion, particularly in light of the fact that so many youngsters today cannot find jobs because they lack practical experience. He is passionate about preparing the youth to go into a fast changing world.

www.reimag.co.za

HENNIE'S KEY INVESTOR TIPS: 1. Learn about a property market first, understanding that it differs from country to country, from region to region and even from town to town.

2. Really understanding a market is around a five-year process.

3. F ind a property niche and excel at it.

4. Don’t try to eliminate the risk, but ensure the risk and the yield are in balance.

5. Don’t put all of your eggs in

one basket - spread your risk.

6. The biggest stumbling block is being too comfortable - beware the comfort zone!

7. Don' t be scared to sell out and move on: give yourself new challenges.

8. Making the first million is the most difficult

RESOURCES Lifestyle Property Management www.lmproperties.co.za

June 2012 SA Real Estate INVESTOR

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INVESTOR INTELLIGENCE

I Want You To Buy A USA Property Today!

BY NEALE PETERSEN


COVER S

TORY

Property and prices every investor has been waiting for

T

he United States of America (USA) is broke. The biggest global financial crisis the world has ever seen continues to bite deep into the pockets of financially-strained and distressed US consumers. The collapse of Lehman Brothers in 2008 unleashed mayhem, tipping a row of dominoes that included countless bankruptcies, layoffs, massive debt, bank foreclosures on properties and multiple wipeouts of retirement nest eggs, leaving many people desperate and homeless. The effect on US citizens has been dire. But US consumers are not the only ones suffering from the crash - the effects thereof rippled worldwide, including right here in South Africa. Someone has to pay the price for the banking mess and that someone is the consumer, who, in the aftermath, continues to face massive financial distress, with less income, higher living costs and little or no assets. At the same time, inflation is taking its toll in the form of higher food prices and increased energy costs, while taxes are rising and threats of property foreclosures are looming as massive debt shortfalls result in desperate bullying tactics from out-of-pocket creditors.

Opportunity in chaos

As the Chinese say, “In chaos there is opportunity”. And in the midst of the financial chaos in the US, huge once-in-a-lifetime opportunities await investors ready to take advantage thereof. It is time to take action to secure your own future because, as the recent financial events have proven to us, no one and especially not the government, the banks and the financial institutions - is interested in growing or protecting your wealth, except you. Massive new wealth transfer

"A massive new wealth transfer is about to take place for those that grab the opportunity in the next six to 36 months,” says Scott Picken of IPS (International Property Solutions). Investors www.reimag.co.za

outside the US have an opportunity to break into one of the most sophisticated fi rst world real estate markets at discounts ranging from 40% to 60% in residential property. If you are on the right side of the transaction and make the right moves with a knowledgeable team supporting you, this opportunity can yield great wealth in a very short time,” says Picken. However, Picken warns that this opportunity is not only about capital growth. "Sophisticated investors always focus on the yield or income returns. The most exciting aspect of this opportunity in the US is the fact that even if the property market never recovers - which is unlikely as property prices are currently pegged at less than 50% of replacement value - strong yields continue to provide solid passive income, the perfect security blanket for property investment." Picken has more than 15 years of experience in successfully investing in and marketing United Kingdom and Australian property to South African investors and understands the fundamentals and pitfalls of directly investing in property offshore. IPS has assisted more than 2 000 people to invest over R1, 6 billion internationally. Due to the solid market fundamentals in the US, the demand that is creating incredible opportunities, and the partnerships with trustworthy IPS partners on the ground in the US, Picken is now focusing

Australia, New Zealand and Canada have already benefited from taking the plunge into the US market. South Africans with Rands to invest can capitalise on lucrative cash deals in US residential real estate. Those investors who have not taken the step have an estimated two-year window of opportunity to build their long-term wealth from US property." Picken adds: “An Australian Property Fund raised $100 million on the Australian Stock Market - with all its compliance regulations - and bought 130 properties through IPS’ partners based in New York. This should provide an indication of the size of the opportunity!” Types of properties

Single-family rental houses, multi-family units, condominiums (individually-owned apartments) and blocks of apartments are available at massively discounted prices with positive rental cash f lows. “These prices, in conjunction with competitive rentals, will never be seen again in our lifetime,” says RJ Palermo of REO Properties operating in Tampa, Florida and Atlanta. Essentially, the glut of foreclosures around the country is weighing down property values. Picken notes that a 10% or 20% deposit or down payment for a similar property in London or Australia is an equivalent of the full purchase price of a US property. These low entry-level prices can secure immediate positive

Global Financial Crisis: (noun)

Def: is considered by many economists to be the worst financial crisis

since the Great Depression of the 1930s.It resulted in the collapse of large financial institutions and the bailout of banks by national governments.

all his efforts on promoting US properties to South Africans. He is doing so in conjunction with Brendon Brown of USA Propert y Investment, a Johannesburg-based offshore investment company marketing US properties exclusively to South Africans. The time is now

“The US international investment buyers' market is starting to bottom out and the time to buy is now. Th is opportunity could be lost quickly if you don’t move fast,” comments Brown. "Many investors from Brazil, China,

rental income yields coupled with significant capital gain in a short period. Even for South Africans investing in Rands (approximately R8 to every $1), these US investments are extremely affordable with returns unmatched anywhere else in the world right now. In fact, there is more value in the US right now than in South Africa. ROI in black and white

According to Brown, the opportunities in the US residential market are a no-brainer for investors who understand the fundamentals June 2012 SA Real Estate INVESTOR

15


INVESTOR INTELLIGENCE of proper real estate investing. He is hugely optimistic after returning from his recent comprehensive 11-day 8-city US property investigative tou r w ith Picken and in conjunction with REIM. “We are dealing with the best, most knowledgeable and most trustworthy partners on the ground, who offer a one-stop turnkey service to ensure we have the best bargain properties wrapped up for South Africans,” explains Brown. “For example, in Memphis, Tennessee, you can purchase a 3-bedroom, 1 ½-bath house for $29 000, with a monthly rental net income of around $650. Th is property was sold for $52 000 in 2007, which means that there is already a possible 32% cash-on-cash return. The numbers are in, the analysts are out, and the key fi gures for a typical entry-level property speak for themselves." KEY FIGURES FOR A TYPICAL ENTRY-LEVEL PROPERTY ACTUAL CURRENT PROPERTY EXAMPLE IN MEMPHIS, TENNESSEE Purchase price $29 000 Closing costs $920 Insurance premium $112 Current market value $52 000 Gross annual rent $9 300 Gross cash-on-cash 32% Net rental profit $6 568 Net cash-on-cash 23% Two year exit receipts $65 136 Profit $36 136 ROI 125% Don’t go it alone

“South African investors are not advised to jump directly into the market without a locally-based expert to guide them,” warns Scott Picken of IPS Invest. Around 80% of South Africans have lost money investing offshore because they were dealing with agents or companies in another country who are more interested in capitalising on the commission of the sale and less concerned about the real needs of the investor. "It basically comes down to two things: partners and information," says Picken. "Our partners have helped over 1 100 people invest in the US and they are currently enjoying yields of 21.1% and vacancies of less than three weeks per year." It is not uncommon for US homeowners in foreclosure to express their anger and emotional trauma by ransacking homes before 16

June 2012 SA Real Estate Investor

they move. Distressed homeowners go to extreme lengths, ripping out cabinets and light fi xtures, removing appliances and destroying walls and carpets. From the outside or from photos on the Internet, unsuspecting investors would never be the wiser. Obviously, this drives down property prices in some neighbourhoods, sometimes more than a standard foreclosure would. In many cases, these properties are marked up and sold as is via the Internet or through a third party agent to ignorant investors who believe they acquired a bargain property. Only when they take transfer do they realise that they have bought a damaged property with huge repair costs and outstanding taxes. “Th is is what we protect South African investors against. Our partners on the ground get inside - even if they have to break the doors down! - and inspect every properly thoroughly,” says Picken.

Break in to the World's Hottest Property Market

Do it like this

Brown has already invested in the Orlando, Florida, market and has already made a substantial capital gain on this property, with impressive monthly positive cash flows. He is on his way to buying a second property right now. “For those who think it is easier to jump on a plane and invest directly themselves could be in for a surprise,” says Brown. The fi rst time around he made more than 12 different offers on different condominiums in Florida at different escalating price points before an actual sale was made over a threemonth period. "Buying at the listed prices on Internet on sites like zillow.com or realtor. com will never result in a competitive deal. All those property prices are completely off the mark and out of touch with reality. They have been marked up substantially without any guarantees that you will in fact get your property," adds Brown. "If you do not understand the complexities of the US bidding process, the fundamentals of the market, property valuation and pricing at source, you could be pushed around from pillar to post without any result and end up losing your investment. You could also end up paying a minimum premium on a property, which is often marked up as much as 20% to 30% by realtors, banks or REO sellers. While figures play the most important part in an investment calculation, the area experts are the ones who can identify if a property has been renovated

and whether it is in fact rentable in that area." To avoid the possibility of losing money, Brown encourages South African investors to use their services and leverage the experience of their US partners, who have been vetted thoroughly. "We have geared our business to provide South Africans with the best source priced properties in the most lucrative areas in the US. All properties have already been through a thorough due diligence, ‘rehabbed’ or renovated, and have a tenant management scheme in place as soon as transfer takes place." Renter nation

More Americans rent homes, and fewer own them. Th is is not news to anyone who follows the US housing market, but a new report from the Census Bureau recently put an historical exclamation mark on the trend. The share of www.reimag.co.za


makes the investment process far quicker than possible through any loan process. The opportunity to refi nance will return in a few years, so the idea is to hold onto the property and allow it to grow in value while enjoying the benefit of a strong rental income. In future, the property can be refi nanced to purchase a second or third property, or the investor can simply cash out. Where are the best places to invest?

The United States has 50 states and over 300 Metropolitan Statistical Areas (MSA) such as Cape Town, making it a minefield for anyone investing in the US market for the fi rst time. Not all states offer opportunities and each has its pros and cons in terms of taxes, laws, type and age of properties - all of which can impact significantly on your investment. As one of IPS' US partners confirms: "You can buy a great investment in a war zone like Detroit, with its properties built in the 1950’s, but it still remains a war zone.� The global financial crisis turned some states into war zones, with derelict boarded-up properties and a nonexistent tenant market. Dolf de Roos, international investor, author and educator, chooses to live closest to where he gets his best returns. He is based in Phoenix, Arizona. He not only invests in high capital growth areas but also in those areas which offer high rental yields. Some of the areas he invests in and recommends include Phoenix, Nevada and Florida. US household renting reached a 15-year high, and homeownership reached a corresponding 15-year low. The US homeownership rate rose to a record 69.8% in 2004 when George W. Bush, running for re-election, called for expanding home loan availability to create an “ownership society". The current rate of 65.4% matches the average since 1965, when the Census Bureau began reporting the figures, according to data compiled by Bloomberg. But foreclosures have resulted in an escalating renta l market. Many of these prev ious homeowners need a place to stay and the rental market is growing. "The people who lost their homes to foreclosure, are repairing their credit, or who have just decided they don't want to be owners of properties anymore, are our clients," www.reimag.co.za

conf irms a propert y rental management company in Memphis, Tennessee. These people will also be tenants of South African investors who purchase property in the US. It is a massively growing market, which makes it more lucrative.

Many investors buy properties for cash flow and this revenue can replace your monthly salary from your job. If you know how much monthly income you want in retirement, you can determine how much money you need to buy enough houses to replace your income. For example, if a house will net you $800 a month

Investors are not advised to jump directly into the market without a locally-based expert to guide them Cash buyers only

All investments are cash only, as American banks are loath to extend loans to offshore investors. Even local investors use cash, which

and you want $8 000 a month income, you need to acquire 10 houses. If these houses cost, say, $110 000 each, you will need $1.1 million to purchase 10 houses. June 2012 SA Real Estate INVESTOR

17


INVESTOR INTELLIGENCE The five states with the highest foreclosure rates were: 1. Florida (12.1%) 2. New Jersey (6.6%) 3. Illinois (5.4%) 4. Nevada (4.9%) 5. New York (4.9%)

Nevada and Florida offer great opportunities, while opportunities in the other states are limited due to high taxes, tight laws and older properties. The ideal is selfsustaining homeowner-type neigbourhoods that offer proximity to workplaces, with a strong community, good security and wellmaintained schools, churches and shops. Identified Hot Spots • Phoenix, Arizona • Las Vegas, Nevada • Orlando, Florida US Investment Hot Spots Report

“Now is the greatest time, maybe ever, maybe in history, to buy a house in the USA.” Property Billionaire, Donald Trump De Roos is now also working in conjunction with Picken and Brown to help South African investors enter the US market for the first time. “It is critical to work with specialists in the various areas to maximise the opportunities," explains Picken. “Fortunately we have multiple area specialists who review each property in each area very carefully before selling them to a South African investor. In fact, we are arranging property visits with Dolf de Roos to help South Africans take the plunge directly into the offshore property market.

to look at the square meterage cost of building versus investment costs to see if you have a good deal." US Hot Spots The five states with the largest number of completed foreclosures for the 12 months ending in March 2012 were: 1. 2. 3. 4. 5.

California (150 000) Florida (92 000) Michigan (62 000) Arizona (58 000) Texas (57 000)

De Roos’ expertise, complemented by the best-of-breed experts on the ground, limits the basic investment mistakes that many investors make."

While these five states account for 49.1% of all completed foreclosures nationally, not all these states necessarily represent the biggest opportunities for investors.

Palermo says he focuses on buying the right houses in the right areas so that investors can have a profitable exit plan as opposed to buying on price and hoping for returns. "We just have

A t h o r o u g h u n d e r s t a n d i n g of t h e fundamentals of each market is required to reveal that Arizona and Florida are very lucrative markets for investors.

18

June 2012 SA Real Estate Investor

Some of the more lucrative markets are analysed in detail in the digital version of REIM. Visit w w w.reimag.co.za to read the fascinating assessment of va r ious markets based on local knowledge, fi nancial performance, key returns and key factors such as laws, taxes and government-subsidised rentals in certain neighbourhoods. extra digital content Invest in property via a LLC

Investors are advised not to invest in US property in their own names. Neal Hanna a LLC specialist details the steps to set up an LLC below. A Limited Liability Company (LLC) is the best vehicle to invest in US propert y and not in your own name. It removes you from your investment to protect your name and your assets should you be sued for any reason in the USA. It has the added benefit of acting as a pass-through entity for tax purposes, allowing the investor to distribute the taxable income to the members and in so doing, legally minimizing the tax liability of the members. Neal Hanna an LLC Specialist Attorney gives the following steps to set up a Limited Liability Corporation (LLC) for South Africans: 1. Register the LLC with a registered US attorney or qualified CPA in person only. Alternatively you can use IPS services below here in SA.

www.reimag.co.za


2. Decide on a name for the LLC 3. Decide on members of the corporation with passport used as method and proof of identification 4. Prepare the articles of organization of the LLC which is a one page document 5. This must get stamped and registered 6. An operating agreement is formalized and prepared 7. Contact the IRS telephonically to register as a tax payer and get an Individual Taxpayer Identification Number (ITIN) which is registered immediately 8. An Employment Identification Number (EIN) is supplied to you as you are generating income from the property 9. You then open your bank account in the name of the LLC. No bank account will be opened without authorisation of an ITIN 10. Deposits for transactions are placed only in an Attorneys escrow account for both payments or deposits for purchasing property, not in a realtors account. 11. Attorneys must produce their law licence as proof of operation or they cannot be sued for malpractice if your money is deposited and disappears.

The second major risk is that the rental market will collapse. For this to happen, homeownership would have to become the more attractive option for US citizens due to, for example, improved credit conditions. However, despite property prices at all time lows and the interest rate at a very low 0.25%, the share of US household renting recently reached a 15-year high, and homeownership reached a corresponding 15-year low. This is because many US citizens simply cannot access credit and, in the wake of foreclosures and job losses, many simply do not want to own a property. As such, the experts consider the risk of a rental market collapse to be very low and, in fact, are predicting strong growth for the rental market over the next few years. In conclusion, my uncle who is a highly successful investor always said: "Determine the worst case scenario and if you can manage this, then everything else is upside". The worst case scenario when it comes to investing in US real estate is that property values do not recover for some time, market and investors enjoy a strong rental and great cash flow positive yields while

they await the turn in the market. Any other developments are all upside! Six steps to start investing through IPS Invest

1. Get started – call now on 011 463 0588 or visit www.ipsinvest.com. 2. Set your goals. 3. Get engaged – match your goals with reasonable expectations. 4. Get real – understand the numbers. 5. Buy right – buy quality renovated properties with rental cash f low from best of breed partners on the ground in the US. Buying right and retiring rich requires action, so take the fi rst step now. Visit www.reimag.co.za and read the full feature about US real estate, including further commentary on the US property market, the US Investment Hot Spots Report, the role of the Fed, the measures implemented by Freddie Mac and Fannie Mae, the latest update on foreclosure rates and the implications thereof, as well as expert views regarding a real recovery in US real estate.

“IPS provides a service to assist you to do all this from the comfort of your home in South Africa," comments Picken. "Th e Patriots Act normally requires foreigners to go to the US to do this, but through our partners, IPS can help you set up your LLC from home, a huge benefit to South African investors.” Too good to be true? What are the major risks?

Two major risks can be identif ied when considering an investment in US property: the US dollar and a slump in the rental market. Interest rate increases are not a risk, since the investments in US real estate are cash only. In respect of the risk that the US dollar may lose its stature as the global traded currency, Picken reports that the Wall Street Bankers he met with to discuss this risk were not concerned at all. These experts believe that, firstly, China’s economy is too controlled for the world to adopt it as the free world currency, and, secondly, China has confirmed on a number of occasions they are not interested, as the Yuan will increase in value by more than 30%, making their own industries uneconomical. www.reimag.co.za

“If practical to do so, I would buy a couple of thousand family homes as the market looks ripe for recovery.” Investment Guru, Warren Buffet June 2012 SA Real Estate INVESTOR

19


CASE STUDIES

BY MONIQUE TERRAZAS

Good, Better & Best While REIM is not positioned as an investigative publication, we do promote fair and ethical property investment practices. Given the number of case studies and personal accounts of unethical dealings by some property players we have received, we introduced this monthly column called "The Good, The Bad and The Ugly". We are delighted that in this edition, we have the opportunity to share with you "The Good, The Better and The Best", because even though unethical practices in the property industry remain a reality, justice is being served on a number of fronts! We encourage you to share your experiences with us and to comment on those we publish by emailing us at editorial@reimag.co.za.

In the May edition of REI Mag, we took an in-depth look at the effects of the imminent e-tolling and rising fuel prices - at the time of writing, a 71c/l increase was being implemented inland - on the property industry. We found that, as a result, property hotspots are shifting as South Africans move closer to work and prefer smaller, safer properties. In addition, access to public transport, once a complete non-issue for tenants and buyers, is becoming a major draw card. Shortly after the May edition was printed, another 28c/l petrol increase hit consumers - the fifth price hike this year - taking petrol prices to a whopping R12.22 a litre for 95 ULP octane in Gauteng.

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June 2012 SA Real Estate Investor

The good news is that the South African Petroleum Retailers Association (Sapra) believes the fuel price could drop by more than 60c/l in June, saying that the latest Central Energy Fund data suggest that a drop of more than 50c/l a litre in June is possible if the rand/dollar exchange rate and oil prices remain at current levels. While it would certainly bring muchneeded relief to South Africans, petrol prices remain far from affordable for motorists and commuters, many of whom cover considerable distances each day to get to work and back. A 60c drop in the petrol price will bring some short-term relief, but will be no means negate the effects of the increased transport costs on the property sector.

www.reimag.co.za


extra digital content

gth of the ion reflects the stren This landmark decis by many, n ed tic tio no ta is en d an em pl is that the im rican democracy Af uth So Pieter As . rld 30 Even better news for d around the wo uteng, scheduled ution: in both Af rica an sol Re 12 ute of the e-tolls in Ga 20 sp ril Di Ap Director in the on Saturday 28 ie, d ad lte nr ha ce at Co s cti wa , pra ril ion ur Ap favo and Mediat terdict granted in ord tigation, Arbitration Li rec of s ey e by a High Court in nc orn lia att Al to Urban Tolling kker Hofmeyr - the n De io e sit iff po Cl Op e th of to OUTA - says: a full court review acting on behalf of (OUTA), pending ed. pp ra sc be ld ou sh g g of determine if tollin t this is the beginnin am of the view tha rica “I Af uth d So oa of e-r le on the Gauteng where the peop ls ase tol ph of w on ne a cti lle The co ney will proceed and no mo will therefore not the legal til un s nt ou acc e-toll be deducted from ncluded. process has been co 's (Sanral) s Agency Limited SA National Road igned his res ly nt ue subseq CEO, Nazir Alli, en the giv not surprising, position. Perhaps , e-tag ple am ex r Fo now faces. challenges Sanral ording acc nt to R25 million, to make about refunds could amou at th est force Government gg l figures su ll stand together to wi benefit the s, to tag d to The Star. Officia e an th r s which are fai registered for d ion ha cis s de ist al tor ion try in rat mo un 0 co 500 00 uld amount uth Af rica and the ag, the refunds wo t it of the people of So tha s lise rea t and at R50 an e-t en the Governm itself. It is time that the other t no d to R25 million. an a ric Af ople of South ged serves the pe umer Union has ur ns Co d." l un na aro tio y Na wa The SA as soon as apply for a refund nd up these motorists to conditions d an Af rican should sta ms ter agency's Indeed, Every South at were th ds hs nt roa possible, since the e mo th o e tw us hts to uld take up to in support of our rig a say in if, stipulate that it co . It will certainly be money and to have ed tax ess r oc ou pr th is wi d ilt un bu roads we eir ing th us before a ref nd for ma en we are taxed many people de w wh d ho an see w to ho ng er, so do sti ov ll t intere million wi e fight is no much of this R25 already paid for. Th ve ha ble ea refunds, and how ese ent! s account for the for not become complac simply lie in Sanral' indeed a major is is th ss, ele support this ssage future. Neverth outa.co.za and ans and a clear me w. ric ww Af uth sit So Vi dent for victor y t stand for g a stunning prece at the people will no ment that is settin ns ve ize mo cit an ric to Government th Af . izens hts of South er our rights as cit in protecting the rig practical im of d n rough-shodding ov an itio ble ed na so ay in the M ational, unrea was against irr As we mentioned not made with of Gauteng roads g at are most certainly lin th tol s ion the cis if , de er oth REI Mag p sto ll ! sts in mind mented, what wi ? our best intere successfully imple ling their roads too tol m fro ies tit en t governmen

s on Collection of toll ad will the Gauteng e-ro ceed and therefore not pro deducted no money will be nts from e-toll accou

www.reimag.co.za

June 2012 SA Real Estate INVESTOR

21


CASE STUDIES

The best news is that global history was made on Friday 20 April 2012, at 11 am in Braamfontein, Johannesburg, when Michael Tellinger delivered a petition regarding the unscrupulous activity of the banks to the Constitutional Court. On the same day, he served Notice of Motion on the Reserve Bank and the Minister of Finance.

1. Banks do not “ loan” money this notion support ed by their multi-m illion rand advertis ing c a mpa ig ns is de ce pt iv e a nd mislead ing. The money loaned is actually money created via an elaborate scheme of paper shifting and number crunching, involving the use of loan application forms and negotiable instruments. 2. It is a common legal principle in Tellinge r, support ed by the New our law that one must possess that Econom ic R ights A l l ia nce, has which one loans. As explain ed prepared this Constitutional Court above, the banks are unable to meet case (case number CCT38 /12) with this fundamental criterion for a valid the aim of obtainin g transpar ency borrower-lender contract. in banking. For the first time, a full 3. The banks are failing to provide bench of 11 judges, 22 registrars, eight simple information to their clerks and four additional researchers custome rs that should be easy to will hear a case that goes to the very access. Examples include a certificate heart of the banking system. of balance , audited proof that a The case may have started as a matter lawful “deposit ” was actually made of principl e for Tellinge r against and the physical location of original Standard Bank, but it has escalated far docume nts, promiss ory notes and beyond simply yet another dissatisfied ot her negot iable inst r uments . custome r. Tellinge r will argue that Instead of providin g the customer the lack of control and intervention by with this informa tion, the banks the Minister of Finance has allowed choose to take legal action and the banks and the Reserve Bank to foreclose on homes and assets with do as they please with impunit y and remarkable alacrity. without recourse by the citizens, and 4. T h e b a n k s a r e a c t i n g a s a n in the process have enslaved millions of interme diar y or agent bet ween honest, hard-working South Africans the custome r and other parties. to a life of misery and debt through the It is a requirement that an agency banks’ malicious activities. relations hip be fully disclose d up In the May 2011 edition of REI Mag, front to the customer. The banks do our feature story entitled "Break Free not disclose this relationship and, from Financia l Checkm ate - What as a result, most people are under the banks don't tell you!" detailed the complete illusion that they are in-dept h the truth that money is borrowi ng from their bank in the “created” through debt – or “promises ordinary sense of the word. to pay”- and that banks do not actually 5. Banks engage in a w idesprea d lend out money they already possess, a nd c om mon p r a c t ic e c a l l e d but rather “create” the money loaned securitisation. Instead of borrowing to borrowers, based on the borrowers’ from the Reser ve Bank on our debt – or “promise to pay”. It provides behalf, banks bundle many loans excellent backgrou nd informat ion to together and then sell these bundles the assertions listed below, on which to investor s whereby the loans Tellinger's action is based.

22

June 2012 SA Real Estate Investor

become securiti es. This process caused the stock market crash of 2008 and continues to threaten the global economy. In fact, the betting game being played by the banks, called the derivativ es market, is currently estimat ed to be 20 times larger than the GDP of the entire planet. Rather than slow ing down, the sheer propensity for profit has led to a rampant growth of the industry in South Africa. The Banks Act makes it crystal clear that securitis ation falls outside the business of a bank. Therefore, it is a blatant breach of the Bank Act for a bank to engage in this practice, and rightly so. 6. B a n k s r e f u s e t o d i s c l o s e t h e s e c u r it i s a t i o n p r o c e s s t o t h e customer, who has a legal right to this informat ion. When a customer asks for disclosure, the banks do not even bother responding, or respond using unintelligible legal jargon. The entire securitisation process is kept tightly secret while it provides huge profits to those behind the scenes. Instead of securitisation providing a benefit to the customer by way of lower interest rates, the reverse occurs: banks swiftly and relentles sly foreclos e on assets in order to satisfy the needs of their investors. It should also be mentioned that banks have been known to securitis e a debt several times, and that should a person default those investors are protected by an insurance policy.

extra digital content

www.reimag.co.za


DEFAULTERS ON THE RISE It is a sign of the times (i.e. the tougher economic conditions under which many now live) that legal fi rms offering debt collection services have seen a greatly increased demand for their services, says Ntombi Mlambo of Gunstons Attorneys. Owners in the sectional title sector have in the last year also been slack about meeting lev y payments, says Mlambo, and they currently comprise a very

big share of the defaulting group with which SA debt collectors are dealing. Asked what Gunstons Attorneys recommend in these situations, Mlambo said that they will always advise trying a tracing ser vice.“ We f ind that over 70% of defaulting debtors are eventually traced, especially if we have a copy of their ID books and a photograph. It is not that easy to “disappear”

inside

RESIDENTIAL

Security And Parking Leaving Your Lease Early? Improve Your Property

28 30 32

6 QUESTIONS AND ANSWERS

Jan Le Roux, CEO Leapfrog Property Group.

FUN FACT

A real estate appraisal helps to establish a property's market value. BALANCE PLANNING, TIMING & SAVVY

In the property market it’s important to strike a good balance between planning, timing and savvy. When buying a home as your primary residence, be smart and rather look at the performance of the suburb over a long period, than at the house only. Also, first choosing the schools and amenities that you will need, will guide you in finding the best and closest suburb. Your primary residence is your best long term property investment, as it will probably pay for the luxury that you will need in your old age. The quality of a property investment clearly lies in the timing. Time the market by keeping your ear to the ground. Savvy : Think and move with the times. ‘Small and compact’ is in; ‘large, old and neglected’ is out! ‘Instant’ is in, as costly renovations have become a thing of the past.

Bill Rawson, Chairman, Rawson Properties "The ver y obv ious major advantage of buying for oneself is that the bond rate will be fi xed at a fairly low level and right now in South Africa the consensus of opinion among economists is that it is unlikely to rise before late 2013." Ntombi Mlambo, Attorney, Gunston Attorneys "There is a tendency, especially among landlords and rental agents, to heave a sigh of relief when a poor tenant leaves and to write off large sums owing because the new address to which the defaulter claims he will be movingturns out to be bogus"

1.Is residential property still a good investment option? For investors with surplus cash the property market is not a good investment on the short and medium term. 2. What kinds of properties are giving good returns? In the medium and long term all properties give a good return on investment as far as capital growth is concerned. 3. What kind of rental returns can one expect? In this case, the value of the property matters. 4. Is buying distressed properties from the banks a good option? Distressed properties are a good option but the swings and roundabouts rule does apply. 5. What advice would you give to residential property purchasers? The best advice to potential property purchasers is not to be put off by short-term swings in the property market. 6. What do you think of the current property market? The property market is going through an adjustment phase

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GETTING STARTED

BY KOOS DU TOIT

Professional Property Investment Emotional intelligence predicts success

P

rofessional property investors understand that emotional intelligence is a key success factor. While the experts debate whether emotional intelligence is innate or learnt, these professionals ensure that emotional intelligence is evident in every decision they make by using a tried-and-tested system with checks and balances built in. Decades of research has shown that Emotional Intelligence (EQ ) predicts success more than any other skill, including IQ and technical expertise. In fact, in leadership positions, EQ accounts for nearly 80% of job performance. What is EQ? Jack Welch, chairman of General Electric, put it most eloquently during an interview with The Wall Street Journal: "A leader's intelligence has to have a strong emotional component. He has to have high levels of self-awareness, maturity and self-control. She must be able to withstand the heat, handle setbacks and, when those lucky moments arise, enjoy success with equal parts of joy and humility. No doubt emotional

Decades of research has shown that Emotional Intelligence (EQ) predicts success more than any other skill intelligence is more rare than book smarts, but my experience says it is actually more important in the making of a leader. You just can't ignore it." So what is emotional intelligence? It is defined as: "the subset of social intelligence that involves the ability to monitor one's own and others' feelings and emotions, to discriminate among them and to use this information to guide one's thinking and actions".

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June 2012 SA Real Estate Investor

EQ in business But why would EQ be important in business? There are hundreds of case studies on the subject, but one illustrates the general findings: In the most complex jobs, a top performer is 127% more productive than an average performer. Competency research in over 200 companies and organisations worldwide suggests that about 33% of this diff erence is due to technical skill and cognitive ability while 66% is due to emotional competence. In top leadership positions, over 80% of the difference is due to emotional competence! EQ in property investment Property investment is exhilarating, the returns are exciting and the rate and speed of success is enthusing. As a result, many property investors get carried away and burn their fingers due to sheer overexcitement, overconf idence and emotional buying decisions. In reality, exercising caution and prudence - even though the system is so simple and streamlined - and patiently building up and paying off a portfolio of quality properties over the years, maintaining these meticulously and renting them out only to well-screened tenants on a water-tight lease, requires a high level of emotional intelligence. In property investment, emotional intelligence is expressed in numerous ways. For example, professional property investors: - Don't act irrationally, even though they are excited by the returns property investment yields. Instead, they gain a thorough understanding of the risks and rewards, implement a tried-andtested system and remain patient as they build up a solid portfolio. - Have a thoroughly considered and well thought through game plan. Their f irst objective is to replace their current monthly income with passive rental income. Only once this goal has been achieved do they consider expanding their portfolios further. - Don't rush out and buy just any property. Th ese

investors do a thorough due diligence on each property and use state-of-the-art software to ensure the numbers add up. - Using custom-designed software, these investors make provision for maintenance costs, interest rate increases and vacancies in their cash f low projections, keep a buff er fund or a "war chest" to cover any unforeseen eventualities and take out rental insurance to cover any rental defaults. - Don't over-extend themselves by gearing beyond what is prudent or over-commit themselves given their cash fl ow positions. Instead they focus on their available cash flow resources, ensuring the properties bought can be comfortably afforded at any given time and only acquire further properties once their cash f low normalises as monthly shortfall payments reduce. - Appoint professionals, such as rental management agents and reputable ser v ice prov iders, to minimise their risk. EQ built-in Th is kind of emotional intelligence is built into the P3 system, with its numerous checks and balances. However, success still depends on following the system to the letter, and this, in itself, requires emotional intelligence. Professional propert y investors understand this and they stick to a triedand-tested system, such as the P3 Investment System, which offers all the steps, procedures, tools and support to ensure their investment decisions display a high level of emotional intelligence, and thus leads to success. Th e result is nothing short of spectacular: financial independence within a few short years, and - once this has been secured - the ability to amass vast wealth, with virtually no limit.

RESOURCES P3 Investment Group www.hope.co.za

www.reimag.co.za


STRATEGIES

BY KOOS DU TOIT

Property Investment: The Ultimate Business Your roadmap to wealth

A

comprehensive business pla n is t he foundation of a successf u l business, because failing to plan is planning to fail! Of course, once you have planned your work, you need to work your plan. Fortunately, creating and implementing a business plan for your property investment business is straightforward and simple - yet another reason why property investment is the ultimate business. A business plan is a crucial success factor in a business, because it allows business owners to think about where the business is today and where they want the business to be in future, and plots the path from where the business is now to where it is going. As such, a business plan is essentially a roadmap to success. Without a roadmap, there is little direction in a business and decision-ma k ing is of ten short-sighted. A good business plan will ensure that all the resources in a business are applied intelligently towards achieving a well-def ined goal. It is often also the difference between simply surviving from month to month, and building a sustainable business that can take advantage of the opportunities, grow into the future and thrive in a changing market. Got a plan? Despite its importance, the words “business plan� seem to strike fear into the hearts of business owners, and this is reflected in estimates that less than 20% of businesses have formal, documented business plans in place. The reason may be that few business owners believe they have time to draw up a 40-page document detailing what business they are in, where they are now, where they want to be in future, and how they will get there. They do not want to design charts or plot breakeven analyses. They do not want to create multi-year

26

June 2012 SA Real Estate Investor

cash flows or factor in the many risks. Or perhaps they simply don't know how or where to start. While there are tools to assist business owners to tackle this crucial task, it doesn't get any easier than drawing up a business plan for the ultimate business: property investment. This is simply because the property investment business system is so simple and streamlined; the step-by-step procedures have already been plotted; the software has been created to produce cash flows, break-even analyses and even risk management strategies; and the system has been tried and tested by thousands of people, eliminating any flaws or pitfalls.

A business plan is a crucial success factor in a business, because it allows business owners to think about where the business is today and where they want the business to be in future Plotting the path In the P3 Investment System, the business plan is called a Roadmap to Wealth. For each property investor, a unique and individual Roadmap to Wealth is created, with the assistance of a qualified portfolio manager, who also becomes a personal mentor. Th is Roadmap to Wealth defines where you are now fi nancially, creates the vision of where you would like to be and then plots the action steps that must be taken, with deadlines, to get there.

At the end of a very productive personal consultation with your Portfolio Manager, you walk away with your own personal "Roadmap to Wealth" business plan - detailing exactly how you will replace your current income with passive income over the next few years, as well as the action steps that need to be taken to get there. For example, if you earn R35 000 per month you will need to acquire 10 properties that generate a rental income of R3 500 each to replace your income. When and how exactly you will acquire each property will depend on your unique circumstances and will be detailed in your Roadmap to Wealth. Work the plan Of course, once you have your business plan in hand, it must be executed. This is much easier if action steps have been plotted, as they are in your Roadmap to Wealth. It is also easier to implement your plan when you know that your personal mentor is just a phone call away should you have a question or need assistance, and if you have at your fingertips a stepby-step business manual, as well as custom-designed software that will create cash flow projections, breakeven analyses and many other useful charts, graphs and stats every step of the way. All that remains to be done is to take the fi rst action step detailed in your Roadmap to Wealth, and then the next one and the next one. If the thought of creating and implementing a business plan has been keeping you from embarking on the road to fi nancial independence and wealth, consider a Roadmap to Wealth instead - it is simpler and quicker, and will put you but a few action steps away from having the ultimate business: creating wealth through property investment.

RESOURCES P3 Investment Group www.hope.co.za

www.reimag.co.za


MANAGING

BY JOHN ROBERTS

Security And Parking!

Tenants are demanding to be in a secure rental property

D

espite the fluctuating economy and current rental trends, two factors remain constant when tenants select rental property: cost and location. But there are a few other factors that also influence the decision-making process and in South Africa some of the most prominent of these are security and parking. Security matters Given the national crime statistics it is obvious that a tenant will always endeavour to secure a rental property with adequate security features, something which becomes even more important if it involves a family and children. Security is one of the main reasons behind the popularity of gated estates in this country. When it comes to freestanding houses security is a potential deal breaker for tenants. Can they keep a dog, does the house have an alarm system and an armed response unit contracted to respond in an emergency? How secure is the neighbourhood? Security is always top of mind for tenants, and landlords would benefit from ensuring that they off er a secure rental.Security however is a broad term and when it comes to rentals crime is not the only thing tenants consider. The safety of structures on the property can be equally important. Tenants will be deterred by what are considered to be hazardous structural situations. These could include such things as loose railings, obvious electrical problems, unsafe swimming pools and unprotected and unfenced drop-offs. It is certainly in the best interest of the landlord to address such hazards before inviting tenants for viewings. Proper parking Parking is another critical consideration for tenants, whether it is a free-standing house or a complex. Studies have shown that one of the top ten features buyers look for when purchasing a property is a garage or secure off-street parking, and tenants are no diff erent. Adding a garage, driveway or other parking area to your rental property is a sensible idea and a worthy investment. As a matter of fact, the value such a space adds to your property can outweigh the cost of building it. Therefore, if you do not have off-street parking at your rental property already, consider adding a garage or secure undercover parking.

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June 2012 SA Real Estate Investor

Tenants are all too aware that cars can easily get damaged when parked on the side of the street. Cars coming down the street misjudge the distance and can take off a side view mirror or swipe the car causing major damage. Parking a car within a secure property or garage can prevent vandals from smashing the car window to steal a radio or prevent the car from getting keyed or the tires from getting stolen. Even by just pulling a car into a driveway or parking bay will make it less noticeable to car thieves. And a car thief has more risk going onto a property to steal a car versus taking it right off the street. These are issues a potential tenant will consider when deciding on the suitability of your property. Many insurance companies have special rates for customers who can park their cars in lock up garages or at least behind a lockable gate as opposed to parking on the street. This makes a property with a lock up garage more appealing to tenants as it allows them to save on their insurance rates or at the very least maintain their current rate. Beyond safety There are other obvious benefits, such as comfort. It is much easier to unload items from your car such as grocery bags, or luggage from a long trip. You can simply pull into your driveway or garage and unload your car.

It goes without saying that in most cases a double garage will be more desirable than a single garage, especially if tenants require additional storage space for items such as bikes or garden equipment. However if a house is small and the area mostly feature houses with single garages, this becomes less of an issue. When it comes to a complex a good parking spot is a prized possession and more than one parking can seriously up the appeal of a rental property. But within a complex the chance of disagreements over parking spaces is also to be expected. When potential tenants come for a viewing let them know exactly which garages or parking bays are attached to the unit. Th en ensure that the body corporate enforces the parking rules to the letter. That means warning letters and notices to tenants who break the rules and calling the tow truck when it becomes necessary. In most cases sec u r it y measu res a nd t he availability of parking is within the control of the landlord, which means that you can enhance the viability of your rental property and secure your investment.

RESOURCES Just Property Group www.justpropertygroup.co.za

www.reimag.co.za


SMART MOVES

BY RUI MARTO

eaving

Your Lease Early?

T

What constitutes a reasonable cancellation fee?

he Consumer Protection Act (CPA) has introduced some far-reaching consequences to suppl iers and consumers. The CPA has created numerous new rights and obligations for parties entering into contracts. This is applicable to lease agreements. The CPA, allows, in certain circumstances, the early cancellation of a lease agreement by a tenant.

has no remedy against a tenant who cancels a lease agreement prematurely.

The landlord’s only remedy is the ability to charge a reasonable cancellation fee. This article explores the circumstances under which a tenant may prematurely cancel a lease agreement and what a reasonable cancellation fee is, in these circumstances.

The question that is being repeatedly asked in these circumstances, is what constitutes a reasonable cancellation fee?

Early Cancellation Where a tenant is a natural person, the CPA confers certain rights, namely 1. The duration of the lease cannot exceed twenty four months unless a longer period is expressly agreed to and the landlord can show a demonstrable financial benefit to a tenant; and 2. The tenant is entitled to cancel a lease agreement at any stage thereof by simply giving the landlord twenty business days’ written notice.

Landlord’s Recourse As a result, a landlord’s rights to enforce the duration of a fixed term lease agreement have certainly been diluted. This does not mean however, that a landlord

30

June 2012 SA Real Estate Investor

The CPA allows a landlord to claim 1. For any amounts owed to the landlord in terms of the lease agreement up to the date of cancellation; and 2. A reasonable cancellation penalty in contemplation of the agreement enduring for its intended fixed term.

Reasonable Cancellation Fee The CPA read together with the Regulations to the

• Losses suffered or benefits accrued by the tenant as a result of the tenant entering into the lease agreement; • The length of notice of cancellation provided by the tenant; • The reasonable potential for the landlord, acting diligently, to find an alternative tenant between the time of receiving the cancellation notice and the time of the cancelled reservation; and • The general practice of the property industry. Not withstanding the aforesaid considerations, the landlord may not charge a charge which would have the effect of negating the tenant’s right to cancel a lease agreement in terms of the CPA. This provision has been interpreted by many in the legal field as implying that the CPA alters the pre-CPA common law position in terms of what a landlord can claim

The landlord may not charge a charge which would have the effect of negating the tenant’s right to cancel Act, prescribe a list of factors which must be taken into consideration to determine a reasonable cancellation fee. These factors include, amongst others:• The amount which the tenant is still liable for to the landlord up to the date of cancellation; • The total value of the lease up to cancellation; • The duration of the lease, as initially agreed;

in damages for a breach of contract should a tenant prematurely cancel a lease agreement.

Pre CPA Position Prior to CPA, alternatively, should the CPA not apply, a landlord, in instances of a premature cancellation by the tenant, may claim for arrears, damage caused to the property and for the monthly

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rental payable until such time as the landlord fi nds a new tenant up to a maximum of the balance of the duration of the lease agreement. While a number of the aforesaid have been incorporated into the CPA, it appears that the CPA has sought to limit the damages or penalty claimable by a landlord. I am of the opinion that while one would still claim for arrears and damages effected by the tenant, the landlord is curtailed in terms of claiming for the balance of duration of the lease agreement with the factors listed above being the new factors

of the opinion that one should not throw out the baby with the bathwater. There is still great value in having a written lease agreement. A written lease agreement still provides clarity to both parties as to the terms agreed upon. It would also facilitate legal claims in respect of other types of potential breaches by either party. It is also important to highlight that while the landlord’s claim may be partly diluted, depending on the circumstances, the tenant does certainly not escape censure and is still liable for the cancellation penalty.

Recommendation for landlords

contributing to the reasonable cancellation penalty. It is important to note however, that the reasonable cancellation penalty would include any discounts which have been offered to the tenant. So, for example, if a lower rental has been negotiated by virtue of a longer period being concluded, it appears that the landlord would be able to claim for the difference between the initial negotiated rental and such discounted rental on that basis.

Calculation of Reasonable Cancellation Penalty

penalty should there by an early cancellation of the lease agreement; • Continued use of written lease agreements; • Obtain necessary legal advice whether the CPA applies to a lease agreement; • Obtain necessary legal advice from a legal specialist as to what a reasonable cancellation penalty should be in a specific circumstance.

Why have a written lease agreement? As a result of the tenant’s right to prematurely cancel a lease agreement, many critics have asked whether it is worth having a written lease agreement. I am

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Various industries, alternatively companies, within such industries have adopted different policies in respect of the calculation of the cancellation penalty. It has been reported, for example, that in the cellular telephone industry, that companies have utilised an “across the board” thirty or forty perc\ ent cancellation penalty. In my opinion, this clearly is not in compliance with what is required in terms of the Regulations to the CPA, as outlined above. It is clear from the method prescribed by the Act and its Regulations that one has to adopt a case-by-case consideration of the cancellation penalty.

• A re-analysis of one’s leasing strategy, considering the dilution of security of a long term fi xed lease. Th is would include considerations of an amount towards tenant allowance, commission paid to estate agents and leasing brokers, discounts afforded to a tenant, etc.; • A specific inclusion in a lease agreement should the tenant receive such discounts, tenant’s allowances, etc. and an acknowledgment by the tenant that such amounts would be part of a reasonable cancellation

RESOURCES Marto Lafitte & Associates www.martolafitte.co.za

June 2012 SA Real Estate INVESTOR

31


IMPROVING

I

W

e

our Valu

ease Y

ncr

BY ANGIE REDMOND

hen a home is looking a little drab, something as simple as replacing cracked and worn tiles can add a sparkle to, instantly improving the value. Hiring a handy man for tiling can be expensive, so if you are feeling adventurous, why not do it yourself? Follow the easy steps to tiling laid out below.

Preparation Get all the tools and materials you will need ready before you begin your tiling project. Tools Needed For Tiling • Tiles • Chalk • Electric wet saw (if you have any uneven distanced places to be tiled) • Scrap wood

H v

Simple steps for tiling success

is to measure where you will start and finish and draw some guidelines in chalk on the surface. This will help avoid any partial tiles in doorways and let you see if you need to cut any to size for smaller spaces and gaps. To cut the tiles you will need an electric wet saw.

Step 2 - Determine spacer size Before you start laying the tiles down you must determine the width of the grout joint. This is the width of the grout between adjacent tiles. As a general rule larger tiles will require wider joints. Place some wooden spacers in between each tile as a guide for the grout. Step 3 - Tile away After mixing the adhesive mastic, you must spread it on a section of the cement board, using the smooth end of the trowel. Then fl ip the trowel over and use

Work it back and forth to force the mastic layer into the cement board and the rough back surface of the tile. Continue spreading mastic and placing the tiles, working on two or three rows at a time. Use the chalk line and the wooden spacers as a guide so that there is an equal distance between the tiles.

Step 4 - Add the grout After all the tiles have been placed and the mastic has dried, begin spreading the grout across the surface, making certain it goes in between each tile. To apply the grout you need a special rubber trowel called a float. As the grout begins to dry, you can remove excess grout with a damp sponge. Finishing After about 15 minutes you can remove the final layer

P p

• Adhesive mastic • Trowel • Float • Grout • Sponge Step 1 - Measure Before you start to lay the tiles, do a dry run or a ‘dry layout’ to give you a good idea how to place the tiles accurately. When laying out tiling, it is very important

32

June 2012 SA Real Estate Investor

the notched edge to obtain an even layer of adhesive over the entire section. Next, use the end of the trowel and apply adhesive to the back of each tile. By using the extra mastic you ensure there is a strong bond between the tile and the floor, and that the tiles will not become loose. Once the back of the tile has been covered with adhesive, position it in place.

of dust and dirt and your tiles will be done. Now that you have new tiles, how about adding a bit of zing with some patterned decals? All clean, white tiles can look a bit harsh and decals brighten up the tiles. These removable vinyl stickers are moisture, heat and splash resistant and add a personal touch. They are also easily removable, so they can be changed as often as you choose.

www.reimag.co.za

D g d a


Highlighting the top performing suburbs in the major provinces, based on highest rate of annual inflation and indicated for e ach value band. Mid Value : R250k – R700k

High Value : R700k – R1.5mil

Gauteng

Luxury : R1.5mil +

Gauteng

Gauteng

Delmore Park Ext - Ekurhuleni

21.4%

Heatherview - City of Tshwane

19.1%

Sunward Park Ext 10 - Ekurhuleni

17.7%

Hospital View - Ekurhuleni

20.0%

Fishers Hill - Ekurhuleni

17.8%

Silver Stream Estate - Kungwini

17.2%

Western Cape

Western Cape

Western Cape

Coniston Park - CT

24.8%

Milnerton Ext 6 - CT

19.6%

Belvedere - CT

25.0%

Summerville - CT

22.3%

Klein Parys - Drakenstein

16.7%

De Zalze Golf Estate - Stellenbosch

19.5%

Eastern Cape

Eastern Cape

Eastern Cape

Tyutyu North - Buffalo City

24.0%

Millard Grange - Nelson Mandela Bay

12.3%

Stirling - Buffalo City

13.1%

Michausdal - Inxuba Yethemba

19.1%

Kaysers Beach - Buffalo City

11.8%

Nahoon Beach - Buffalo City

12.8%

Kwazulu Natal

Kwazulu Natal

Kwazulu Natal

Nazareth - Ethekwini

26.7%

Southridge - Ethekwini

12.9%

Dunkirk Estate - Kwadukuza

14.1%

Pioneer Park - Abaqulusi

17.9%

Stanger Manor - Kwadukuza

11.0%

Umhlali Beach - Kwadukuza

12.5%

Free State

Free State

Shellyvale - Mangaung

24.6%

Bergsig - Maluti A Phofung

Bloemdustria - Mangaung

20.8%

St Helena - Matjhabeng

Free State 11.9% 9.6%

Woodlands Estate - Mangaung Heuwelsig - Mangaung

13.3% 6.4%

Presenting the Top 5 suburbs per area value band in Kwazulu Natal based on the highest rate of inflation for a 1 and 7 year period. The median represents the current median value for the suburb. #

Suburb

1 year

1

Nazareth - Ethekwini

26.7%

2

Pioneer Park - Abaqulusi

3

Grove End - Ethekwini

4

Median

#

Suburb

R 560 000

1

Nazareth - Ethekwini

426.9%

R 560 000

17.9%

R 495 000

2

Ingagane - Newcastle

259.3%

R 440 000

15.6%

R 420 000

3

Sezela - Umdoni

252.7%

R 610 000

Stonebridge - Ethekwini

15.5%

R 420 000

4

Rose Park - Emnambithi

244.9%

R 650 000

5

Bergville - Okhahlamba

15.3%

R 285 000

5

Bergville - Okhahlamba

241.7%

R 285 000

1

Southridge - Ethekwini

12.9%

R 770 000

1

Newlands West - Ethekwini

203.2%

R 990 000

2

Stanger Manor - Kwadukuza

11.0%

R 730 000

2

Reservoir Hill - Emnambithi

177.2%

R 1 300 000

3

Camperdown - Mkhambathini

10.1%

R 1 225 000

3

Camperdown - Mkhambathini

172.1%

R 1 225 000

4

Oslo Beach - Hibiscus Coast

10.0%

R 895 000

4

Darnall - Kwadukuza

171.2%

R 790 000

5

Monteseel - Ethekwini

9.7%

R 850 000

5

Stanger Manor - Kwadukuza

170.6%

R 730 000

Mid Value : R250k – R700k

7 year

Median

Mid Value : R250k – R700k

High Value : R700k – R1.5mil

High Value : R700k – R1.5mil

Luxury : R1.5mil+

Luxury : R1.5mil+

1

Dunkirk Estate - Kwadukuza

14.1%

R 3 650 000

1

Worlds View - Umngeni

143.5%

R 2 000 000

2

Umhlali Beach - Kwadukuza

12.5%

R 1 650 000

2

Zinkwazi Beach - Kwadukuza

132.8%

R 1 850 000

3

Worlds View - Umngeni

10.2%

R 2 000 000

3

Virginia - Ethekwini

130.8%

R 2 050 000

4

Virginia - Ethekwini

8.8%

R 2 050 000

4

Princes Grant - Kwadukuza

126.9%

R 3 325 000

5

Umhlali Golf Estate - Kwadukuza

8.0%

R 2 600 000

5

Wembley - The Msunduzi

124.3%

R 1 600 000

Disclaimer: Lightstone applies advanced statistical methods to a comprehensive property data base - compiled from the Deeds Office, the Surveyor General and other sources - to generate property market data, insights, trends and forecasts. Despite the statistical and actuarial rigour applied, Lightstone cannot guarantee the accuracy and reliability of the data. Furthermore, any information provided does not amount to advice and may not be applicable in some cases. Lightstone does not take responsibility for any losses incurred as a result of any person acting or omitting to act as a result of the publication of this information.


RESIDENTIAL RENT MONITOR NO UNPLEASANT SURPRISES IN QUARTER 1 While the property business in South Africa isn’t getting easier, and no significant changes appear to be illuminating the global horizon, this is still a time when the majority of landlords and property investors in the residential market can count their blessings. It is comforting to note that residential rental payment trends in the first quarter of 2012 have remained largely unchanged since the latter half of 2011. Of course this isn’t surprising when viewed against the stability of interest rates and improvement in the household debt to income ratio. The National Credit Regulator’s Credit Bureau Monitor remained unchanged overall for the Q4 2011 period, with 53.8% of 19.34 consumers considered to be in good standing. Nonetheless there is still grave cause for concern evidenced by the fact that 46.2% of consumers are considered to have impaired credit records. On the positive side there is another influential factor which is seldom noticed – let alone appreciated on the South African property landscape: The overall number of well-managed, well-maintained and well-tenanted properties. The size of our residential rental market includes 2,261 million households (20,58% of the formal housing population: source Stats SA, General Household Survey 2010) where 75% of landlords are microlandlords (owning 1-10 properties). Although it is commonly accepted that there are pockets of excellence and pockets of ill-qualified or ill-advised performance in any industry, a market of this size, serviced by 9829 registered estate agencies, has demonstrated surprisingly few extreme cases of tenant / landlord / agent disputes. National payment profile virtually unchanged Tenants in good standing remained unchanged at 81%; comprising 68% in the Paid on Time category and 13% in the Paid Late category. Effectively these tenants are fully paid up each month; leaving 8% of tenants making a Partial Payment and 11% in the Did Not Pay category. The Did Not Pay category can be further categorised between those tenants whose circumstances have changed and are unable to meet their rental payments but willingly vacate the property, VS. those who TPN has had to classify as “squatters”. I.e. Tenants who have a minimum of 4 months rent in arrears, whilst continuing to reside on the property. These “squatters” make up 1.67% of South African tenants.Eastern Cape and Western Cape continue to fare better, with tenants yielding 86% and 85% good standing trends, respectively. Gauteng is well off the mark at 77% but a notable deterioration occurred for KwaZulu Natal, with tenants in good standing down 4% to 76%.

brought to you by

NATIONAL PERFORMANCE


inside

COMMERCIAL LISTED PROPERTY ENJOYS GOOD GROWTH

The SA Property Owners Association's propert y index, International Propert y Databank (IPD), last week revealed that listed property funds achieved a return of 12.2% compared with 2.6% for the equity market and 10.1% for bonds. Gary Palmer, CEO of Paragon said that while listed property funds were enjoying good growth at the moment, the average investor wanting to invest in commercial property was still facing significant challenges - especially in terms of the pressure on rentals, increased vacancies and reduced escalations. According to Palmer, capital growth on listed property was strong because listed properties generally had strong tenants and good governance.

FUN FACT

Larger buildings are cheaper in the long run–you pay less for each unit if the building has more units. INCREASE IN OFFICE VACANCIES The fi rst quarter of 2012 has seen a continuation of fl at market conditions in Cape Town for the office sector with vacancies in certain nodes showing increases on the previous quarter’s figures. Dave Russell, a director of Baker Street Properties, says,” We have seen a steady increase in off ice vacancies since 2009 as confi rmed in the quarterly

SAPOA Office Vacancy Survey, however, with few new buildings coming on stream in the short term there is every possibility that vacancies may be reaching their peak.” Russell adds that significant change has been recorded in the CBD, where combined vacancies are now reaching 12% and are at levels last seen in 2003

Gary Palmer, CEO, Paragon Lending Solutions "Promising growth in the commercial property industry reported on last week was largely limited to listed property funds and will not be felt by investors investing in non-listed property, listed funds are doing well as they have access to funding and tenants are often stronger. This is a key indicator of a good commercial property investment." Dr Rob Davies, MP, Trade and Industry "Developing countr ies have a lot to offer in terms of making a meaningful contribution to the economic development and g row th discourse, There is great value in developing new thinking and forging a new dialogue on appropriate strategies for economic growth."

Johan Engelbrecht, Director, JHI "Despite the fact that retailers also have to contend w it h t he pressures of rising operational and utility co s t s , couple d w it h affordability of space, through pro-active management we have managed to keep vacancy levels low"

Industrial Investments Improve Your Shopping Mall Rural Retail On The Rise

36 42 44

6 QUESTIONS AND ANSWERS

Erwin Rode, CEO Rode and Associates 1. Which commercial vehicle is best industrials, office, retail or hospitality? There is no simple answer to that question: it depends on your time horizon, risk and where we are in the cycle. 2. Which sector is performing the best? Over the past 40 years, shopping centres were the best performers, but the Great Recession has hit this sector hard. There is currently a significant oversupply of shop space, and I believe the consumer will remain under tremendous strain for many years, thereby taking the shine off shop space. 3. Why do you think that is? In real terms, office and industrial rentals are low, unlike houses and shopping centres. When the economy recovers, offices and industirals will, therefore, have more upside potential. 4. What are the challenges in the commercial sector? Oversupply in office and industrial space needs to be mopped up. 5. What advice would you give to someone looking at investing in commercial property? Invest via a listed property fund. It reduces your risk. 6. What kind of returns can one expect commercial investments? In the long run, you can expect a real total return of 4 percentage points when you invest in property. Shares’ expectation is about 5 percentage points. In the short run, property’s total nominal return is probably going to be 9% (3% real return) Brought to you by


INDUSTRIAL

BY STEFANO CONTARDO

not only at the present time, but going forward,” he continues. Is industrial the best option? Investment in South Africa’s property sector is largely dependent on the economic cycle, as this directs where people invest their money. While the majority of investment into JSE listed properties is in the retail and commercial property space, the economic climate makes industrial property the most attractive option. “The current economy has caused a decline in investment into retail and commercial property. Industrial property is good choice in such a climate because it promises steady growth over time – without factories and warehouses the country’s economy wou ld cer tain ly col lapse,” repor ts Lewington.

Solid Returns In Tough Times Is industrial property a solid return?

T

hose seeking a solid return on investment should, according to Improvon’s, Business Development Executive, Grant Lewington, look to the commercial and industrial property sector. Commercial and industrial property in South Africa is largely held in JSE listed funds, with a small component of the sector held in private hands. “Improvon is one of the private owners,” says Lewington. The company owns a blue chip portfolio of industrial properties in some of the country’s most desirable industrial nodes.

36

June 2012 SA Real Estate Investor

Location Location Location! Location is very important when it comes to return on investment over time. A node must have good access and visibility. “Moreover, one needs to think of where the node is headed in the future,” Lewington advises. “Is it likely to undergo any major change due to legislative or demographic shifts? Is there any reason that the node may degrade over time? Research into such questions is vital to ensure that the investment will be realized over time, and that the node is desirable

Benefits of industrial property. In addition, investment into industrial property offers a number of other benefits. Industrial property is less complicated and more cost effective to develop. Moreover, whereas retail and commercial property owners are faced with multiple tenants to deal with, industrial property owners generally work with only one tenant per building – reducing the risk associated with the investment. “Of course, with the lower risk is a slightly lower reward, as is the case with any investment,” Lewington admits, adding that in the current climate, the reduction in risk is well worth it. Yet how does an organization such as Improvon attract tenants to the market? “Most importantly, tenants will be attracted by the offering,” states Lewington. “Most tenants are seeking a turnkey solution that will minimize the capital they have to outlay. To this end, they are looking to the developer or landlord to provide solutions around infrastructure, storage, data cabling and green issues. Tenants want to move in and start working immediately, putting capital into their actual business rather than in the building they’re renting” It also goes back to location. “Of course, the right location with easy access makes a building attractive to potential clients,” Lewington concludes.

RESOURCES Improvon www.improvon.co.za Livewired www.livewired.co.za

www.reimag.co.za


LIFESTYLE CENTRES

BY ANGIE REDMOND

Live Where You Work y a l P d An Demand for lifestyle centers on the increase

T

he role of a lifestyle centre is to offer a unique retail shopping and entertainment experience in a relaxed and attractive environment. The emphasis is mostly on restaurants, entertainment and a more focused retail offering, including products that are rarely seen in South Africa. Lifestyle centres mainly have open-air designs where the emphasis is on creating an appealing atmosphere. These centers are also based on a combined approach where the tenant mix and architectural style attract more affluent shoppers. With these centres on the increase in South Africa, REIMAG takes a closer look at a succesful lifestyle centre and what makes a lifestyle centre. Melrose Arch, the lifestyle centre Comments Peet Strauss, manager of the Melrose Arch office of Pam Golding Properties: “Melrose Arch typifies a lifestyle sought after across a range of buyers of varying age groups - from dinks purchasers i.e. ‘dual income no kids’, to singles with busy careers who want a convenient location and healthy lifestyle or the older generation.

38

June 2012 SA Real Estate Investor

Picture This “Picture this scenario – a young/middle-aged or older person awakens early, walks to gym for a work-out, has the fi rst meeting of the day over break fast at one of many nearby restaurants, walks to the offi ce and arrives in time for a 9am staff meeting feeling invigorated and ready for a productive day. All this - without the stress and frustration of rush hour traff ic congestion and delays, and in effect, adding about two further, usable hours in the day,” he says. Melrose Arch draws a mix of buyers including security conscious locals, those traveling more frequently and scaling down from large properties to still spacious, lock-up-and-go apartments, commuters from out of town working in Johannesburg, or international buyers. Some of these are purchasing now with a view to moving in later, while our investors continue to buy as the rental income market has performed well over the past five years. Blend of Lifestyle “Melrose Arch makes it possible to be close to

everything, but still away from it all, as you can enjoy the buzz and soak up the local vibe sitting on a piazza, or return to your apartment and enjoy peace and relaxation. The blend of lifestyle, aspirational appeal and ease of use of the precinct type living makes this development highly attractive to people ranging in age from their twenties to seventies – it is what makes this development unique.” Strauss says if you consider that with long term planning and spatial development indicating the natural densification of cities, together with worsening traffic congestion, rising fuel costs and the costs of upgrading transport systems, more and more of this kind of mixed-use development will appear over time. “Coupled with Gauteng’s new proposed toll system, it is inevitable that more than ever, people will want to move closer to their place of work. While this does not mean that precinct style living such as Melrose Arch will solve the city’s traffic problems, demand for property in such areas will remain high and these properties will come at a premium.

www.reimag.co.za


What makes a lifestyle centre?

Lifestyle centres offer a unique atmosphere and a “feel good” feeling. And with the proposed e-tolls and the rise in the cost of living, more and more people are choosing to living close to work, lifestyle centers offer the mixture of work, entertainment and personal residence in one exclusive centre . Lifestyle centres are in many cases also linked to a specific development, offering retail facilities, accommodation, suff icient work facilities (office blocks) and residential communities within the same complex/area. In most cases, lifestyle centres become part of a bigger mixed use development. These developments also correspond with the concept of new urbanism where live, work, play and shop takes place in one mixed-use precinct. The following unique characteristics regarding lifestyle centers should be noted: • Open-air centers • Variety of dining options • Relax in inviting public spaces • Upscale tenant mix • Multipurpose leisure time destination • Design, ambiance, fountains, street furniture • One or more conventional or fashion specialty department store. Location criteria Lifestyle centers are mainly developed in affluent suburban areas in order to be successful. These centers must be located on major arterial routes offering good visibility and accessibility. Tenant mix The typical tenants that will be found in a lifestyle centre are: • Coffee shops • White cloth restaurants • High fashion clothing shops • Quality Woolworths and other national fl agship stores like the new Edgars store at Melrose Arch • Book shops • Good quality homeware stores • Music stores • Furniture stores and Trends and changes Worldwide the emphasis is on developing lifestyle centres as part of a mixed-use development. In these developments the emphasis is on providing residential accommodation, hotel facilities, office

www.reimag.co.za

space, retail development, theatres, gymnasium facilities and other community related facilities. The emphasis with a mixed-use development is to provide all the different urban markets within the same precinct. Th is creates an opportunity to work, play, live and shop, all within the same precinct. The critical aspect for the retail component is to make sure that enough potential exists to be viable, based on the local residents and workers, and in most cases to provide facilities to the surrounding households in the neighbourhood. The lifestyle centres are located in the more affluent suburbs and although pedestrian volumes may be lower, the spending per head is much higher. Actions to guide retail development The main emphasis with a lifest yle centre is to increase the number of visits and ensure a pleasurable and exciting experience within an architecturally attractive environment. C These types of centres will mainly develop as: M • Part of a revitalisation project • Infi ll project or Y • In new growth areas where other retail facilities CM have already been established. MY

Melrose Arch is the best example of a lifestyle CY centre in South Africa. The enthusiasm with which CMY consumers responded to the launch of the fi rst three K residential phases in the iconic Melrose Arch mixeduse development in Johannesburg underlines the rapidly growing trend in South Africa towards a ‘new urban’ lifestyle within vibrant new growth nodes, comments John Herbst, national sales executive for Pam Golding Properties. Live, Work and Play Environments “The common denominator is that such nodes offer a convenient and highly appealing ‘live, work, play’ environment. However this is within the context of a prime location, which offers not only easy access to a comprehensive range of facilities and leisure activities, but also within a modern, dynamic and exciting environment which also provides a sense of community, all amid attractive surrounds with attention to open ‘green’ spaces,” he says.

RESOURCES

Designed for Managers of Commercial, Retail, Residential and Body Corporate Properties HOSTED NS SOLUTIO ,550 FROM R2

Pam Golding Properties www.pamgolding.co.za

www.mdapropsys.com 0861 00 2231


RETAIL

BY PRESTON GADDY

European Retailers Will Add Value With the right knowledge

S

outh African property practitioners should educate Europe about retail opportunities in this country, say Preston Gaddy, executive head of retail property management at Broll Property Group.

and local companies understand the South African market, as well as logistical, labour and tax issues. Here we can help by finding suitable partners.There are a number of conferences that provide excellent platforms for education. One, being held in November in Cannes, France, is MAPIC, the international retail

pricing and service. There is also no doubt that UK retailers are streets ahead in the service arena, and local companies could certainly learn a thing or two from them. Stimulating better service and introducing enhanced product ranges would better serve

European retailing is gaining ground globally, but few of these retailers are looking to South Africa, largely because of a lack of knowledge of what the country has to offer. South Africa is home to 50 million people, and we have a significant retail marketing servicing this population. There are currently eight major shopping centres in South Africa which measure more than 100 000m2, and a further 30 that are more than 50 000 m2. European retail groups are often unaware of the size of our shopping centre industry and the level of retail spend, and choose instead to move into former Eastern Bloc countries which have small populations of less than two million. Success in SA Some large clothing retailers like Spain’s Zara and Australia’s Cotton On have entered the market and are more than satisfied with their performance. Others, like Mango and Guess, have chosen to partner with local companies to ease their entry into a previously unknown market. Then, of course, there is Wal-Mart, which made the decision to buy Massmart rather than try to compete in a saturated market. Partner up The challenge for us as property practitioners is to provide European retailers with information on the market and help them with their entry into the country. Partnerships are often preferred by some groups, as the risk is shared, 40

June 2012 SA Real Estate Investor

real estate market. It brings retail real estate industry professionals together to discover retail property and trends, forge partnerships and close cross-border deals. Significant benefits There are many benef its to be had from

The challenge for us as property practitioners is to provide European retailers with information on the market and help them with their entry into the country European interest in the country, aside from the obvious financial ones. South African shopping centres, which are characterised by the ‘cookie cutter’ approach, could do with the introduction of greater selection and diversity when it comes to retail choices. Consumers would also benefit from the added competition, particularly when it comes to product quality,

the interest of South African consumers, whose hard-earned money keeps our shopping centres running.

RESOURCES Broll www.broll.co.za

www.reimag.co.za


BLOEMFONTEIN, THE STRATEGIC HUB OF SA

MAY 2012 www.broll.co.za Key facts Office

Demand Sales Supply Space in demand

<150m2

Cap rates Lease escalation

10%

Op cost escalation

12%

Bloemfontein, with its position in the centre of South Africa, is fast gaining traction as a natural logistics hub for manufacturers looking to distribute

goods around the country. This renewed focus is having a positive spinoff for all classes of property in the nation’s judicial capital.

Offices The CBD is increasingly focused on government and related service providers, and this is leading to strong demand for smaller office space. Enterprises servicing the large workforce employed in this sector are finding it difficult to source suitable space, and a new development focused on providing this type of space is on the cards for 2012. CBD office rentals range from R60/m2 to R85/m2. Retailers are also looking for space but are struggling due to a lack of suitable opportunities. A number of colleges and training facilities have opened since the beginning of the year, especially in the CBD. Westdene is one of the most vibrant commercial

Industrial

nodes in close proximity to the CBD offering businesses a wide range of office options. Rezoning has taken place and many old, larger residences are being demolished and redeveloped into office parks. Rentals range from R70/m2 to R125/m2. There are a number of vacant plots that are ideally situated for development in Westdene. There are also several significant redevelopments under way in Second Avenue that will completely change Westdene into a node with a look and feel similar to Melrose Arch in Gauteng, albeit on a smaller scale.

Bloemfontein A-Grade Office and Industrial Rentals

Demand Sales Supply

R140.00

R40.00 R20.00

SOUTH AFRICA

RESEARCH

Bloemfontein CBD

Westdene

Industrial rentals

2012:1

2011:3

2011:1

2010:3

2010:1

2009:3

2009:1

2008:3

2008:1

2007:3

2007:1

2006:3

2006:1

2005:3

R0.00 2005:1

10%

R60.00

2003:1

Op cost escalation

8%

R80.00

2004:3

Lease escalation

R100.00

2004:1

Cap rates

R120.00

2003:3

1651 – 500m2

Rentals R/m2

Space in demand

Source: Broll

Industrial It’s on the warehousing and distribution front that Bloemfontein is set to make a large impact, thanks to its strategic position in the middle of South Africa. The increasing cost of transportation is demanding that large multi-link trailers be used to transport goods to a central point but this makes it difficult for efficient offloading except in custom-designed premises. Once in storage, retailers will then use smaller vehicles to deliver to outlying areas.

space under development to accommodate this increased focus. Rentals range from R30/m2 to R40/m2.The new Makro is under construction in Qwaggafontein on the Haldon Road development and the Man Truck outlet is up and running. It’s expected that there will be more development in this area.

The Haldon Road precinct near the N1 highway is seeing almost 500 000m2 of warehouse

Bloemfontein has played a less significant role in the commercial and industrial property sectors but its renewed focus as a logistics hub will likely see it become increasingly important, with vacancy and rental levels more closely reflecting those of other larger centres.

Sources: Oxford Economics, CBRE, Broll

Sanett Uys - GM Group Research and Marketing

For more information on market characteristics

14th Floor, The Terraces, 34 Bree Street

and trends, read our reports at

Cape Town 8000, South Africa

www.broll.co.za

t: +27 21 419 7373 | e: suys@broll.co.za PART OF THE CBRE AFFILIATE NETWORK


MANAGEMENT

BY MARK SOURIS

and skating rinks will do much to draw crowds, especially families looking for ways to keep their children occupied. For this reason, it’s also wise to implement a holiday activity programme. But, says Souris, the centre should take care to ensure this is well publicised – there’s no point in creating a childfriendly spectacle if no one knows about it. What's my age again? Also, centres should consider the demographics in the catchment areas they serve. If the surrounding community is made up of older people whose children have long since moved on to establish their own households, the centre is not required to cater to the ‘mall rat’ generation which loves spending time at the shops. “The family lifecycle is a key factor when it comes to deciding your tenant mix and entertainment offerings,” Souris says.

Stay Ahead Of The Competition Ensure there is never a shortage of foot traffic in your mall

I

n difficult trading conditions, shopping centres must do all they can to ensure they remain ahead of competitors. Mark Souris, Managing Director of Periscopic Property Management has some tips for surviving tough times. It's all in the mix According to Souris, the correct mix of tenants is all important. Th is is borne out by evidence that, while many retailers continue to battle in the wake of the recession, apparel retailers have reported positive results. Thus, shopping centres that count fashion

42

June 2012 SA Real Estate Investor

retailers amongst their tenants can expect to enjoy the knock-on benefits. The same holds for centres that play host to grocery retailers. Such centres can expect to do especially well over the festive season, when these retailers should enjoy brisk business. Let me entertain you While the presence of these retailers is a great aid in terms of attracting customers, factors such as the newness of the centre and the excitement factor must also be considered. “Centres that have an entertainment component already have a competitive advantage,” Souris maintains. Cinemas

Back to basics Something else to bear in mind is how the centre fits into the lifestyle of customers. Many shoppers today prefer to stock up on necessities as they need them, rather than do one large monthly shop. Th is is particularly true of neighbourhood centres. “Th is means that people shop more, but spend less,” he says, adding that such shopping patterns should inform both the type of goods available and how they are displayed. As Souris points out, it is critical that such centres are always stocked with basic essentials and items that are in high demand. Often, people go shopping solely to purchase such products, so maintaining a good store will ensure repeat visits. On the other hand, if shoppers are disappointed one time too many, they will take their customer elsewhere. Souris observes that a number of new centres are opening in areas that appear to be already saturated with mall options. There’s no question that such centres will take market share from each other – so, again, the answer lies in securing a tenant mix that speaks directly to the community’s shopping needs. “Shopping centres need to keep up with the times, both in terms of aesthetics and the tenants they present to consumers,” Souris concludes.

RESOURCES Periscopic Property Management www.oneholdings.co.za Livewired www.livewired.co.za

www.reimag.co.za

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FACILITIES MANAGEMENT

Protecting Your Assets Access control, security and parking: the critical aspects of management

O

ne of the seven functions of property management is maintenance and facilities management and co-ordination. Within this function lays the responsibility for access control, parking and security management. Whereas it is true that these responsibilities are best outsourced to experienced service-providers with a sound track-record in providing such services, it is still necessary for property investors and their respective managers to be aware of the factors which require implementation and control vis-à-vis these concerns. These three responsibilities are inter-related and need to be coordinated. However, independent splitfunction checks are critical to ensure that no theft or malicious damage occurs within your buildings. Access control Carefully monitoring who enters your property development is a sure means of limiting the chances of malicious damage to your property and theft of movables. Pedestrian access should best be controlled by means of video surveillance equipment and taking of a photograph of each visitor. This may seem impractical in the case of very small buildings, but it is surprising just how inexpensive this equipment has become in recent years and how effective this is in containing crime. A preliminary step is to reduce the number of entrances and egresses to the barest minimum so

44

June 2012 SA Real Estate Investor

BY JONATHAN SMITH

HOT INVESTOR TIP Pedestrian access to your development should best be controlled by means of video surveillance equipment and taking of a photograph of each visitor

that one can easily monitor visitors. Some exits can be converted to fi re exits with doors that can only be opened by means of a fire exit (shatter-proof ) glass mechanism. It is sound practice to apply this principle to external vehicle/pedestrian (gate and wall) entrances as well. The following two signs should be prominently displayed in three common languages to protect a property owner’s rights in the event of a delictual claim arising when someone is hurt or a loss is incurred within your property. Liability The owner of this property does not accept any liability of what-so-ever nature and extent for harm and inconvenience of any type, however occasioned, caused to tenants and visitors to this property. The right to search Tenants and visitors to this property agree to have any person, vehicle or possessions searched by an authorised employee while on the premises or upon leaving the premises. Parking Of critical importance is that the parking garage and parking revenue collection system in your property development is well managed. Clear and well-located signage is necessary and all parking lines, wall-markings and warning signs should be repainted on a regular basis. Here are some tips to promote the exemplary management of your parking facilities and cash management of the potential revenue from this part of your building. • Monitor the incoming and outgoing traffic and the length of stay of a vehicle within your parking

garage by obtaining a daily or monthly intelligence report from your parking system. This report should indicate the number of vehicles entering the parking facilities and the length of time during which they remain in temporary occupation. Th is report should be linked to revenue and reconciled with bank deposits. • Implement a licence plate recognition system. O w ner-investors w il l be sur prised at how proportionately inexpensive such systems are. •Implement an intelligent parking system which monitors used (occupied) bays. While these systems are expensive and a luxury in most developments, it should be considered for buildings which have a very high traffic volume and where parking bays are shared between monthly and casual parkers. • Ensure that video surveillance of the entire parking garage is maintained. Again, every building should have this, including smaller developments. Security There is a need for two types of security within a shopping centre. 1. Passive security: this refers to the control of entrance and egress by means of electronic equipment as well as the design, structure and content of a building. 2. Active securit y: this refers to the physical involvement of security personnel in controlling entrances, gates, perimeter walling, passages and malls and shop interiors. Aspects requiring careful security protection • Each person working in or visiting your building; • The stock sold or despatched from a shopping centre or a building; • The cash held within a property development; and • Motor vehicles brought onto the property.

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A pre-emptive eva luation of the securit y requirements of your property development is required so that a security policy and plan can be drafted. Considerations in a pre-emptive analysis • How many entrances and exits to the property are there? • Which tenants pose a higher security risk as a result of their saleable merchandise or customer profi le? Examples of higher-risk tenants include banks, micro-lenders, jewellers and restaurants. • Are there any hidden areas of the building or prop er t y wh ic h shou ld b e mon itore d electronically?

or carrying dangerous weapons or those causing damage to the property) shall be apprehended and reported to the South African Police Services. • Section 42 of the Criminal Procedures Act (Number 51 of 1977) provides that a private person (such as a security employee) may arrest (or assist in the arrest of) the perpetrator of a fi rst schedule offence or somebody who is under reasonable suspicion of having committed a first schedule offence. • A person so arrested, that is, without a warrant, must be taken to the police station as soon as possible and handed over to the South African Police Services.

• Where necessary, a juvenile’s parents or guardians should be advised as soon as possible. • Persons who are not peace off icers (that is, magistrates, justices, policemen and other persons who have been declared peace officers) may NOT search an alleged wrongdoer, except under certain circumstances. These exceptional circumstances include if the suspected wrongdoer is suspected of carrying arms and/or explosives. • The arresting citizen may seize any article which may be used as evidence in the anticipated trial such as stolen goods, weapons, skeleton keys and documents which are related to a crime or proposed crime.

• Only selected, mature and responsible personnel should be tasked with arresting wrongdoers. • Such selected staff members should be given written authority by their employer to perform arrests. • The arrest must be reported immediately to both the controlling office of the employee performing the arrest as well as the South African Police Services. • W here possible, the perpetrator should be encouraged to come willingly to a quiet, secluded office where the matter can be handed over to the South African Police Services as soon as possible. • Once arrested, the alleged wrongdoer should be given access to toilet facilities, food, water and medication.

• It is not permissible to search a person’s motor vehicle or suitcase unless he or she has granted consent thereto. Hence it is advisable to place a sign regarding the right to search, as detailed earlier, in a prominent place at all entrances to a subject property.

The resultant security plan should then address aspects such as: • Positioning of guards • Relief of guards • Patrols • Guard, staff and tenant protection • Incoming and outgoing parcels, bags and cases • Identification tags of relevant security and centre personnel • Vehicle (including delivery truck) off-loading facilities • Alarms and other warning devices • Intra-communication devices • Intercommunication devices • Connectivity with central control rooms, on- and off-site, as well as with the nearest police station • Central and electronic security control Citizen’s arrest It occurs, with increasing frequency, that security personnel are required to arrest wrongdoers. It is possible for property management and building personnel to arrest wrongdoers in the event of their unlawful conduct. Arrest, in this instance, means imprisonment, detention or seizure so as temporarily restrict a person’s rights to individual freedom with the sole purpose of charging such person before a court in order to determine such person’s innocence or guilt in relation to an offence.

Guidelines for and during the arrest and detention of wrongdoers • It is necessary to display prominent signage that shoplifters and other wrongdoers (trespassers, illegal substance dealers and users, those using

www.reimag.co.za

In order to ensure your development does not become a target for criminal activity, security and access control are of the utmost importance.

RESOURCES Courtwell Consulting www.courtwell.com

June 2012 SA Real Estate INVESTOR

45


SMART MOVES

BY ANGIE REDMOND

Rural Retail On The Rise An emerging economic opportunity

W

hen discussing the retail industry in South Africa, sentiments often centre around doom and gloom as people focus on decreases in sales percentages, declining foot traffic and an ongoing struggle to stay afloat. Rural retail strong However, retail in South Africa’s rural areas or “emerging economic areas” is growing and offers great retail opportunities for landlords and tenants. This success is evident in the retail sales and trading densities in these centres. In the last decade, there has seen a significant increase in the number of retail centres being developed in townships and rural areas. Nationally, 160 retail centres were developed in township and rural areas of South Africa between 1962 and 2009. The new market "Townships and rural areas in SA have emerged as a new market for national retailers as we see an upward movement amongst township communities in terms of expendable income. This has resulted in a considerable increase in shopping mall development in previously untapped areas. Despite perceptions that SA is oversupplied with shopping centres, 20 million rural inhabitants are still in need of better retail facilities," comments Marc Edwards, Managing Director of Spire Property Management, which manages retail centres in metropolitan townships and removed rural areas across SA. Fresh opportunities Shopping centres catering to small and mid-sized towns in rural areas are becoming more formalised, prov iding fresh oppor t unities for reta i lers, franchisees and independent store owners. Some towns have up to 600 000 people, and consumer demand for convenience as well as steady population growth offers major prospects for retailers. In South Africa, people living in rural areas and townships (or second economy locations) spend more than R308 billion annually, representing 41% of total consumer spending. “A re-focus in these locations could represent

46

June 2012 SA Real Estate Investor

a paradigm shift in the way retailers view their expansion plans,” says Marc Zlotnick, Managing Director of Forsite, a company providing professional property services to retailers who want to expand, relocate or penetrate new markets. “South African shopping centre development trends are moving towards an oversupply situation in urban areas, yet retailers are still cautious when it comes to considering the opportunities within township and rural areas. “However, some of South Africa’s most successful retailing operations have had their eye on this ball for a while already, they are well ahead of the curve. Shoprite, for example, had this foresight well ahead of their competitors and we believe this vision was key to their current success. They are well-established in these areas with a well-developed network and strategy." Shoprite has more than 1500 stores, making it Africa’s largest grocery chain, in a prime strategic position, not only in South Africa, but also on the African continent. “

transport is accessible – making the centre the convenience hub for the area. Sponsoring events and running promotions are ways to bond with the community and bring feet through the door.”

Partnerships are vital “The first step is to partner with experts in the field. Landlords and tenants alike need to work with a property manager who understands the wants and needs of a national tenant and the consumers. Strong community-based centre managers ensure that centres are effectively managed."

“There are growth opportunities for retailers in rural areas as opposed to saturated and overpopulated urban ones. Rural areas offer a real cash economy and well-marketed tenants who have done their homework will be successful,” concludes Edwards.

Close community Edwards notes that it is essential for retail centres in rural areas to stay close to the community. “Landlords must guarantee effective security and ensure public

“Tenants must be prepared to tailor their stores to the consumers’ preferences. For example, in rural areas bulk buying is standard practise and retailers must accommodate this need. At the same time, the emerging middle-income market segment in these areas is often looking for a ‘shopping experience’ rather than visiting stores to buy only basic essentials.” Best practise One cannot generalise about what works best in malls in ‘emerging economy’ areas. Tenants need to research and meet the needs of the community. What works in one area does not necessarily work in another – tenant mix, product offering and size have to be very site-specific.

RESOURCES Spire Property Management www.spireprop.co.za

www.reimag.co.za


inside

OFFSHORE

BRITS BUY IN GREECE AND IRELAND Greece and Ireland, two of the European countries worst hit by the current eurozone financial crisis are proving popular with British people considering buying property overseas. Real estate investors are eyeing up bargain properties in both countries, according to

the latest report from Rightmove Overseas. The fact that the Pound is rising against the Euro means that buyers can get more for their money at present. Spain, which is also experiencing a tough economic time, is also proving popular.

2012 UK Rich List Hospitality Fertile Ground Investing In Australia

48 50 52

6 QUESTIONS AND ANSWERS

CANADA PRICES COOL OFF Residential property prices are still increasing in Canada, but at a more moderate rate, according to the latest MLS Home Price Index. It increased by 5.1% in March 2012 compared to the same month last year. The increase was on par with February’s gain, which was the smallest since last June. The monthly gain was 1.3%. Toronto posted the largest year on year increase at 7.3%, followed by Vancouver at 5.3%, the Fraser Valley at 3.3%, Calgary at 2.6%, and Montreal at 2.2%. Year on year gains were largest for one and two storey single family homes.

FUN FACT

Exchange rates can also affect the value of overseas properties

Philip Pierides, Senior Manager Lloyds TSB International 1. Has there been an increase in South Africans investing offshore? Absolutely… our mortgage applications for offshore property investments have increased by 100% during the past 18 months. 2. What do you believe is driving this? Our lending appetite, competitive rates, quick, turnaround times as well as our presence in both JHB & CPT 3. Which countries are proving to be the most popular? United Kingdom by far

Ayman Sami, Country Head Jones Lang LaSalle Egypt "we are optimistic about the long term fundamentals of the Cairo real estate market. If the country is able to address its political issues then we are conf ident that act iv it y w i l l return to the market relatively quickly "

www.reimag.co.za

Scott Picken, CEO, International Property Solutions “If you want to become a global citizen you have to invest in fi rst world assets and a f irst world income to ensure that you can grow and maintain your wealth, It's a misnomer that investing in offshore property will bring investors citizenship"

Mike Smuts, MD Smuts and Taylor "With the relaxation of exchange controls, increased foreign travel and greater availability of lowcost offshore mortgage finance, more South Africans are looking at foreign property ownership, particularly in London."

4. What types of properties generate the most interest? United Kingdom, United States and Australia 5. What should they look for when deciding what type of property to invest in? Location ( good suburb, close to tube station and amenities) , resale , potential rental income 6. What has been the best piece of advice given to you and by whom? Most properties in the UK are ‘Leasehold’ - it is vital to ensure upfront the term of the unexpired lease as this will have an effect on the valuatio

June 2012 SA Real Estate INVESTOR

47


RICH LIST

BY MIKE SMUTS

Movers And Shakers In The 2012 Rich List Wealth landscapes are changing

T

he wealthiest people in Britain are richer than they have ever been with a combined fortune of £414 billion, equivalent to more than a third of the country's national debt. The Sunday Times Rich List 2012, published at the end of April, reveals that the 1 000 richest men and women in the UK have increased their wealth by 4.7% on last year’s total of £395.8 billion, surpassing the previous high of £412.8 billion recorded before the 2008 financial crash. At a time when the economy has slipped back into a double-dip recession, the figures will raise concerns

48

June 2012 SA Real Estate Investor

about the growing gap between the most affluent in society and the “squeezed middle”. Compiled every year by Philip Beresford, the leading authority on British wealth, The Sunday Times Rich List is the def initive guide to the wealthiest individuals in Britain and tracks the fortunes of the country's super-rich. The list is based on identifiable wealth, land, property; other assets such as art and racehorses, or significant shares in publicly quoted companies, and do not include the cash in their bank accounts, meaning the true level of their wealth could be even higher.

Getting richer, faster There are 77 British-based billionaires in this year’s list, exceeding the previous peak of 75 in 2008. Last year there were 73 people on the list with a fortune of £1 billion or more, and in 2010 there were just 53. For the third successive year, British-based millionaires are getting richer at a faster pace than those based overseas. The 50 wealthiest people in the world are worth a combined £853 billion. A hefty sum, but only 1.13% more than the £843.7 billion of last year. The Walton family, which owns Walmart, tops the global list with a fortune of £51 billion.

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The rapid rise in the fortunes of the world’s wealthy over the last year meant the threshold for breaking into the Top 1 000 has risen slightly to £72 million from £70 million last year, but still some way off the £80 million level set in 2008. Location, location, location? London and the Southeast continue to dominate the Rich List, with nearly 53% of the entries in the top 1 000 in residence. Yet the Mayfair and Belgravia clan hold a disproportionate amount of the wealth on the list with the £255.3 billion between them accounting for 62% of the total. The three top places in the list were dominated by foreign-born magnates now based in London, again proving that the city remains a magnet for the wealthy of the world. Nearly all the 44 overseasborn billionaires who feature in the 2012 Rich List live in London, drawn by the enduring attractions of London’s excellent schools, the relatively light regulatory burden on companies wishing to gain a public listing in London compared to New York, and London’s geographic position which enables access to Asian markets in the morning UK-time and American markets in the afternoon and evening. The richest of the rich Indian steel magnate, Lakshmi Mittal remains the richest person in Britain despite seeing 27% (£4.8 billion) wiped off of his wealth. The Indian-born billionaire topped the list for the seventh successive year with an estimated fortune of £12.7billion, despite also suffering the biggest fall in wealth of any of the 1 000 men and women named. Uzbek-born billionaire Alisher Usmanov, who owns around 30% of London soccer club Arsenal, was again in second place and close behind Mittal with a fortune of £12.3 billion pounds. Russian investor Roman Abramovich, who owns rival London club Chelsea, held onto third place with a personal value of £9.5 billion, down from £10.3 billion last year. The richest British-born billionaire was the Duke of Westminster, in seventh place with an estimated £7.35 billion, thanks to his central London property empire. Property dominates Interestingly enough, while many of the top ten places are held by those who earned their fortunes from resource-based industries such as minerals, steel and oil, the list is still dominated by those who have made their fortunes in property, land and fi nance. The number of property, construction and land millionaires on the list stands at 232, while fi nance is second with 185 entries, followed

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by industry with 129 entries. Those who dream of a shortcut to wealth or winning the Lottery would do well to take note of the fact that there are only three lottery winners on the list and that of the 75% or so on the list who are not rich by inheritance, almost all are people who have created their own businesses. More women than ever before are included with a record 108 women featured on the list, seven of which are billionaires. Ex-model Kirsty Bertarelli is the richest woman in the UK, thanks to the £7.4 billion fortune she shares with her Swiss-born husband Ernesto – whose family made its money in pharmaceuticals. While the likes of Adele and Cheryl Cole have made it onto the Young Rich List, the main list is still dominated by the older generation. Fact or fiction? The Sunday Times Rich List compiler, Mr Beresford, admits it is a "broad brush estimate", based on public accounts, market intelligence and, in some cases, the individuals themselves. "We look at their accounts, we have spies all over the place and a lot of them co-operate now. There's one guy, I don't want to embarrass him, but he gives me a full breakdown of everything he owns, signed off by his reputable accountant," Mr Beresford explained. "More and more are helping me like that, so we're getting there, and getting more accurate." And those behind the list, report more than a slight air of one-upmanship amongst Britain’s wealthiest citizens. Mr Beresford related the story of one gentleman who phoned his friend, also on the list to say: “Hello, number 21 here, am I talking to number 36?”

RESOURCES Smuts And Taylor www.smutsandtaylor.co.uk

RICHEST PEOPLE IN BRITAIN 2012 1. Lakshmi Mittal and family Steel, £12.7bn 2. Alisher Usmanov Mining and investment, £12.32bn 3. Roman Abramovich Oil and industry, £9.5bn 4. Sri And Gopi Hinduja Industry and finance, £8.6bn 5. Leonard Blavatnik Industry (Russian oil), £7.58bn 6. Ernesto and Kirsty Bertarelli Pharmaceuticals, £7.48bn 7. The Duke of Westminster ,Property £7.3bn 8. David and Simon Reuben Property and investment, £7.08bn 9. John Fredriksen and Family Shipping and oil services, £6.6bn 10. Galen and George Weston and Family Retailing, £5.9bn

RICHEST PEOPLE IN THE WORLD 2012 1. The Walton Family (US) Retail (Walmart), £51bn 2. Carlos Slim (Mexico) Telecoms, £44bn 3. Bill Gates (US) Microsoft, £39bn 4. Charles and David Kock (US) Oil, £32bn 5. Warren Buffet (US) Investment, £28bn 5. K Berthold and Theo Albrecht (Germany Supermarkets (Aldi), £28bn 7. Forrest and John Mars (US) Confectionary (Mars), £26bn 7. Bernard Arnault (France) Luxury Goods, £26bn 9. Ingvar Kamprad (Sweden) Ikea (retail), £25bn 10. Amancio Ortega (Spain) Zara (fashion), £24bn

June 2012 SA Real Estate INVESTOR

49


CROATIA

BY SANJA HANEKOM

Investors' Capital

Hospitality expected to net 7 billion Euros

M

uch has happened in the Croatian real estate market in the last few months. Big ticket buyers are back, joining in the rush for Croatian real estate before EU ascendency mid 2013. While much of the world is ailing, trying to solve their economic woes, investors have found fertile ground to plant their capital and they won't be sorry. Certainly not everyone can buy the national railways or the main Croatian harbour, but there is always something for everybody. Hospitality-based economy The Croatian economy is currently based on the hospitality sector with other sectors quickly catching up. Young Croatians are entrepreneurial, welleducated and great innovaters. The recent invention of an electric supercar by 23-year-old Mate Rimac is an example. Some people are musing that Croatian dependency on hospitality is a sure way to a second Greece. Our opinion is: the more the merrier! The Croatian hospitality sector should be and already is indirectly used as a vehicle to develop other sectors. It is important to allow the profit from the hospitality to remain in the country and let it trickle into other layers of the economy. Why hospitality? So why invest in hospitality? Croatia is a tourist mecca, welcoming 10 million visitors in 2011 and expecting another bumper season this year. The Croatian hospitality minister is expecting around â&#x201A;Ź 7 bilion to originate from the hospitality sector this year. Further good news for hospitality providers is that current VAT (25%) will be reduced to 10% for hospitality services in 2013, rendering the Croatian hospitality sector even more competitive. There is still a lot of space to move by diversifying into still undeveloped hospitality sectors such as conference tourism, country and cultural tourism, food and wine, and boutique tourism. Historical hotels Our advice for investors is to look at unique historical hotels. This type of property will always remain attractive and is impossible to recreate. There are

50

June 2012 SA Real Estate Investor

a lso many sma l l family-run hotels on fantastic positions that can be updated into five-star boutique hotels and branded as such. However, we feel that the ultimate investment oppor t unit y lies in purchasing non-functioning hotels in fantastic positions a nd t r a nsfor m i n g t he s e ugly duck l ings into swans! Count r y tou r ism is a lso a hospitality sector offering great opportunities for smaller and corporate investors. Villas and estates Another wonderful opportunitiy for both smaller and corporate investors are the unique stone villas and estates. They may be 100 to 500 years old and are found in various locations, from the islands to the beautiful wine country of the Istrian peninsula. They can be purchased for as little as â&#x201A;Ź30 000. The latest trend is to transform them into luxurious villas and then rent them out to visitors looking to escape the noise of the big city, at â&#x201A;Ź300/400 per day. Th is can create a very good income stream. Themed estates Visitors often fall in love with the country and they would like to purchase real estate to have at their disposal when they visit. Some plan to retire here. Th is fact leads to a very good opportunity to develop themed estates: retirement, island, coastal, eco, wildlife, wine and country estates. Croatians are getting older and many have not planned for their retirement accommodation . Today retirement accommodation is in a chaotic state and Croatians need to be offered different options and solutions, creating plent y of opportunities for propert y developers. Beyond hospitality Hospitality brings a lot of traffic to the country and

directly affects other sectors of the economy. Visitors get to know the country, see the drive behind the hospitality industry and cash in on it. Agriculture and food refrigeration, as well as food production and packaging, are sectors that are lagging behind and require investment. Croatia imports large amounts of food (for example, 80% frozen vegetables) while homegrown organic vegetables go rotten because of lack of warehousing and refrigeration. A large proportion of tourism profits currently is offset by the bill for imported food. Why not take advantage of this situation and create local boutique brands and sell them in Croatian hotels directly? Visitors who like these products will look for them in their home country shop shelves, directly leading to exporting the goods to the visitors' countries.

RESOURCES Invest In Property Croatia www.investinpropertycroatia.co.za

www.reimag.co.za

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AUSTRALIA

BY KRISTEN MILLER

Time To Head To Australia?

With uncertainty in South Africa is now the time to invest offshore?

I

nternationa l Proper t y Solut ion recent ly held their annual golf day in Braynston, Johannesburg, where Scott Picken CEO of IPS discussed the five biggest threats affecting all South Africans today and how wealth preservation and, a back-up plan can bring you peace of mind for you and your family. In his presentation Scott explained the advantages of off shore property which included the creation of wealth preservation by taking into account the following aspects unique to South Africa. Major concerns may include land redistributionas recently pointed of by President Jacob Zuma, government needs to have redistributed 30% of its’ land resources by 2014. Adding on to this concern is the controversy around South Africa’s credit rating and the on-going battle between Rand hedge and

ESTABLISHED HOUSE PRICES Dec Qtr 11 to Mar Qtr 12% change CITY

Weighted average of eight capital cities -1.1

Sydney

-1.8

Melbourne

-2.2

Brisbane

0.4

Adelaide

-0.9

Perth

1.1

Hobart

-2.7

Darwin

4.4

Canberra

1.2

taxation and the comparable returns fi rst world countries offer your investment thus creating possibilities for back up plans and the option of immigrating. Peter Jacobson from Australia a consultant for IPS explained how you could only be perceived as good as your partners are on the ground. According to Jacobson, 96% of people can’t afford to retire and in today’s unstable economy smart investment choices need to be made. Currency devaluation of the rand has devalued greatly. From 1978 to 2010, you would be 350% richer if you invested in Australia, over the last 20 years the rand has devalued at 6.6% year on year. Australia has both Political and economic stability. Jacobson also explained why Australia constitutes as a good investment: “Australia has three major reasons – the country holds a strong government with a good economy, a growing population and they provide fundamentals in mainly creating a demand and supply.” Picken added by saying that 80% of investors lose money overseas, this happens because they make rushed decisions, underestimate after sales. The big question possible investors should ask is why should they invest now? Jacobson provided the following reasons: There are low asset values, the rand is currently as strong as its going to get, controllable variables and great opportunities. With new developments in Brisbane like Eden, the latest new apartment development project at the town of Albion in the city of Brisbane. Located close to the Brisbane Central Business District (CBD), the inner city new apartment is definitely a good choice for those working within the CBD area. The new development is beautifully designed with inspired architecture and lush landscaping which focuses on high quality to create a perfect urban and contemporary living lifestyle.

General Information

52

June 2012 SA Real Estate Investor

Land area: 2,941,283 sq mi (7,617,931 sq km); total area: 2,967,893 sq mi (7,686,850 sq km)

Population (2011 est.): 21,766,711 (growth rate: 1.148%); birth rate: 12.33/1000;

Largest cities: Sydney 4.429 million; Melbourne 3.853 million; Brisbane 1.97 million; Perth 1.599 million (2009)

Economic summar y: GDP/ PPP $917.7 billion (2011 est.); per capita $40,800. Real growth rate: 1.8%. Inflation: 3.4%. Unemployment: 5%. Arable land: 6.15%. Agriculture: wheat, barley, sugarcane, fruits; cattle, sheep, poultry. Labour force: 12.02 million; agriculture 3.6%, industry 21.1%, services 70.4% (2009 est.).

RESOURCES International Property Solutions www.ipsinvest.com Livewired www.livewired.co.za

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INSPIRATION

BY JOHN LLOYD

Don't Hold Back H

How do you handle the sting of rejection?

ave you heard of Fred Smith? While attending Yale University, Smith wrote a paper on the need for reliable overnight delivery in a computerised information age. His professor found the idea highly improbable and he only received a grade of C minus for his effort, but the idea remained with him. Fred started his express transport business in 1971. The young entrepreneur raised $80 million to launch Federal Express, informally known as FedEx. The delivery service began modestly with small packages and documents. On the first night of operations, a fleet of fourteen jets took off with one hundred and eighty-six packages. One plane carried only two parcels. In the fi rst two years, the venture lost $27 million. In a short time, the company was on the verge of bankruptcy. It appeared that Fred

“I think all great innovations are built on rejections.”

- Louis Ferdinand Celine

had lost all of his investors’ money, but he succeeded in renegotiating his bank loans and was able to keep the company afloat. Smith’s professor at Yale may not have seen the need for overnight delivery, but today’s business world depends on businesses like FedEx shipping all manner of goods around the globe quickly and reliably. His story is a great example of identifying and anticipating a trend, persevering against the odds and, probably most importantly, having the ability to handle rejection. Today, FedEx Express is the world's leading express transportation provider. As of 2007, more than 290 000 FedEx staff worldwide were fielding

54

June 2012 SA Real Estate Investor

a f leet of 672 aircraft and 75 000 other vehicles, delivering nearly 8 million packages every business day, to over 220 countries. Fred Smith has amassed a vast personal fortune by enabling the world of business to deliver its goods quickly, anywhere in the world. Businesses seeking to reduce the costs of maintaining large inventory are increasingly adopting ‘ just in time’ delivery practices, increasing the demand for express services like FedEx. The rise of online commerce and the growth of the global economy are also contributing to the company’s growth. FedEx has fully capitalised on both of these trends. A round the globe,

communications and transport continue to develop along the lines that the young student Fred Smith predicted in his term paper over forty years ago. Smith’s story of success is a reminder to each and every one of us that there will always be people and obstacles standing in the way of our dreams. History is littered with success stories where people have overcome adversity, negativity and rejection to achieve amazing success. Don’t ever let the moaners and groaners of this world hold you back. Go for it!

RESOURCES Brandstorm www.brandstorm.co.za

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LESSONS

BY ANGIE REDMOND

Just Like Jobs

Who was Steve Jobs? He was was an American busine ssma n, de sig ner a nd i nventor. He is best known as the co-founder, chairman, and chief executive off icer of Apple Inc. He created technology which has forever changed the face of computing today, with his death, the world has lost a true visionary. While he may not be a property proffesional he is certainly one of the most succesful people of this century. Below are some of the best quotes from Steve Jobs taken over the years. His success is a inspiration to millions.

Words from the genius behind Apple

“My job is not to be easy on people. My jobs is to take these great people we have and to push them and make them even better.” – All About Steve Jobs. “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.” – Inc. Magazine. “That’s not what we think design is. It’s not just what it looks like and feels like. Design is how it works” – New York Times, The Guts of a New Machine, 2003.

“Why join the navy if you can be a pirate?” - As quoted or paraphrased in Young Guns: The Fearless Entrepreneur’s Guide to Chasing Your Dreams and Breaking Out on Your Own (2009) by Robert Tuchman. “It’s not about pop culture, and it’s not about fooling people, and it ’s not about convincing people that they want something they don’t. We f igure out what we want. And I think we’re pretty good at having the right discipline to think through whether a lot of other people are going to want it, too. That’s what we get paid to do.” – CNNMoney. “So when a good idea comes, you know, part of my job is to move it around, just see what different people think, get people talking about it, argue with people about it, get ideas moving among that group of 100 people, get different people together to explore different aspects of it quietly, and, you know – just explore things.” – CNNMoney.

56

June 2012 SA Real Estate Investor

“We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, you know? And we’ve all chosen to do this with our lives. So it better be damn good. It better be worth it.” – Fortune. “Almost everything–all external expectations, all pride, all fear of embarrassment or failure–these things just fall away in the

face of death, leaving only what is truly

important. Remembering that you are going

to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no

reason not to follow your heart.” – Steve Jobs’ Stanford Commencement Address.

“Here’s to t he crazy ones, t he misfi t s, t he rebels, the troublemakers, the round pegs in the square holes… the ones who see things dif ferently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough t o t hink t ha t t hey can change t he world, are the ones who do.” – Think Different, narrated by Steve Jobs. “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”

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REIM June 2012  

Real Estate Investor Magazine June 2012.

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