Investing in property

Introduction | How should you invest in property? | Why should you invest in property? | Are there any risks involved in property investment? | Managing risks associated with property investment

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Umthombowami – creating wealth through investing in property

Real estate remains the one reliable investment in which profits can be made consistently, no matter where you live. Whether employment figures and stock prices are high or low, thereal estate market never dries up – it is one of the most dynamic income-producing vehicles ever created.

Umthombowami is a special vehicle created by MMP targeting people who are interested in creating wealth through property investment. The purpose of Umthombowami is to offer an opportunity to emerging real estate investors to purchase property with a ‘buy-to- let’ strategy in mind.

It has been said that Real Estate Has created more millionaires than any other investment vehicle.

 Believe it or not, more millionaires are created in this type of market than any other.

Traditionally, ordinary people make debt to finance a life style: cars, cell phones, furniture, clothes, jewelry, holidays, etc. Through Umthombowami ordinary people are encouraged and offered the opportunity to create a future of financial freedom for themselves and for their posterity.

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Why should you invest in property?

Consider the following:

  • Currently there is a housing backlog of over 2million housing units in South Africa.
  • Umthombowami targets the market where the demand is the greatest – the affordable/low cost housing market.
  • In South Africa a problem is emerging known as the ‘housing gap market’ – we saw its worst real visible manifestation during the 2010 government’s employee strike.
  • This problem comprises of households who cannot afford bonded houses, and at the same time do not qualify for free RDP houses. Among the professionals like teachers and nurses
  • In a capitalist country such as ours, every problem creates an opportunity for those who can provide solutions to that problem.
  • Investing in affordable housing affords us with the leverage to assist the country in its housing backlog and profiting from the problem.

How should you invest in property?

  • Ideally investors are encouraged to do what all smart business people do – use other people money (OPM) to make money.
  • In South Africa, to access the banks money OPM, you have to prove with your current income that you can service their loan
  • Your credit record as a commodity is key in determining your ability to succeed in accessing OPM to create wealth
  • Ideally it is recommended that you should leverage fully on OPM by taking a 100% bond to fund your property investment.
  • The housing shortage in the affordable housing market has necessitated the banks to make 100% loans available.

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Why should you invest in property?

  • Your own cash contribution is relatively limited
  • It is easily achievable by almost everyone who has a regular income
  • Your investment is tangible and visible, you can always go to it
  • You are always in control and not fund managers like in other forms of investments
  • It is almost impossible to lose your investment, even in an environment of an economic meltdown
  • You can increase the value of your investment by improving or simply remodeling it
  • You can use your property investment to raise cash
  • You don’t need to have money in the bank to access this type of investment, because ideally you’d you can use OPM to own it
  • Your own personal involvement is minimal

“When an investor learns how to buy real estate with little or no money down (nothing down real estate) it is simple to see how a small nest egg could grow into millions rather quickly. Any serious real estate investor knows that a well-selected property can earn well in excess of 100% per year ROI with the proper leverage. That is why investing in real estate has produced more wealth than all other investments combined. In my opinion, real estate is the perfect investment.” – Bob Allen

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Are there any risks involved in property investment?

Like in any business, there are inherent unavoidable risks that an investor has to manage. Some of these risks are:

  • By taking a bond from a bank you are taking responsibility of repaying the loan with interest to the bank.
  • You need to get a dependable tenant to service your bond for you.
  • You have to manage that payments from the tenant to you, and to the bank are handled efficiently
  • You are responsible for the maintenance cost of the property. These costs include painting, plumbing, electrical faults, etc.
  • You are responsible for the rates and taxes costs on the property.

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Managing risks associated with property investment

  • Buy a property with your mind and not your heart. Remember it is not your home, it’s your cash cow.
  • Invest in an area where there is a great chance for a good return on investment.
  • Remember that your investment is a business and not a means to be charitable to the community.
  • Appoint a good property manager who will take care of the headache of the day to day running of your business – use other people’s time (OPT).
  • Watch your property manager and be very effective in managing the manager.
  • Take insurance for tenant failure to pay rent, and sufficient personal life insurance
  • In severely stressful situations be willing to flip the property asap.

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