Property Market, am I in or out? – By Jack Bass, Director at Sothebys Commercial
I recently attended a talk at a well-known national investment management company, hosted by a friend who runs a financial planning business. The main direction of the advice given, naturally, was to invest in the market. When I raised the question of property as an investment, the response was, “see how poorly the sector is doing”. I guess that was in line with the JSE performance of 2018. States Jack Bass
In the discussion that followed, I mentioned that, personally, I didn’t know of an overall return as good as real estate especially when applied to certain cities like Cape Town. There are opportunities to actually own an asset, receive income on it, or ROI, at an understandable quotient. Then you can watch its almost year on year appreciation, slowly initially, but gathering weight over several years.
So What would constitute as an intelligent commercial property investment?
It is important to realise the risks involved but if you need to accept an element of risk in order to reap lucrative returns. There is also a large capital outlay with banks usually only loaning 60-70% loan to value.
Another variable which needs careful consideration is that there is no exact or predetermined timeframe within which the investor will be able to recoup his initial investment which could give rise to liquidity concerns if it is not properly factored into the risk equation.
When committing to a commercial property investment it must be understood that for optimal returns, it needs to be a long-term investment.
It is necessary for an investor to be cognisant of the prevalent trends, so market research is needed in order to make the best investment and achieve the maximum return. Do your due Diligence on the building, when are the leases expiring, what is the rental escalation year on year, who is liable for what costs.
Market research should help the investor become aware of, as well as understand, the genuine overarching trends in the market. This will ensure that the investor does not operate within a limited field of information.
The question is “can I do it” and the answer is, with some capital, market investigation, knowledge, and assistance from a seasoned professional property broker the answer is “yes you can”.
Not everyone succeeds in these endeavours, but that applies to any business endeavour. However, the risk in property, in my opinion, considering all the factors, is lower than most other asset classes and the returns, if you buy wisely, can be vast.
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