Z
PROPERTY LESSONS
LOCAL INFRASTRUCTURE
Learn From A Self-Made Millionaire
The
How To Exploit The Transport Corridor
OFFSHORE BOOM
Knowledge
London Not Slowing Down - Invest!
Issue
Prosper With Your Property Education
December 2012 R39.95 (Incl. VAT) R35.04 Other Countries
www.reimag.co.za
MASTER INVESTOR MICHELLE DICKENS
SOUTH AFRICAN REAL ESTATE INVESTOR
Contents EDITORIAL EDITOR-IN-CHIEF Neale Petersen
DECEMBER Cover Guide
ASSISTANT EDITOR Angelique Redmond DESIGN STUDIO Michelle Alexander, James Clark & Brent Fisher
Page 46
Offhshore Boom
PHOTOGRAPHY Stock Exchange, Dreamstime
Page 66
Learn From A Self-Made Millionaire
TRAFFIC Juanita Heilbron
Page 14
The Knowledge Issue
Page 16
Master Investor Michelle Dickens
Page 12
Master Investor Competition
Page 67
Exclusive 6 Page Education Plan
write to us:
editorial@reimag.co.za
LoCAL INfrAStrUCtUre How To Exploit The Transport Corridor
The
London Not Slowing Down - Invest!
offShore boom
Knowledge Issue
Prosper With Your Property Education
December 2012 R39.95 (Incl. VAT)
DECEMBER 2012
Property Infrastructure
www.reimag.co.za
Page 36
CONTRIBUTORS Monique Terrazas, Jonathan Courtwell, Koos du Toit, Angie Redmond, John Roberts, Meyer de Waal, Rui Marto, Olga Koma.
ProPerty LeSSoNS
Learn From A Self-Made Millionaire
Have an entirely new experienc Estate Investor on your PC, M Android. The magazine conten integrated with content from issue.
Experience video, links through additional content, and image ga the printed version. Visit www.re and click on Digimag.
R35.04 Other Countries
Z
Real Estate Investor Digit
www.reimag.co.za
MASTER INVESTOR MICHELLE DICKENS
FINANCIAL MANAGER Marisa George WEBSITE Diamatrix WEB ADMINISTRATOR Russell Bennett
ADVERTISING National Paul Stubbs paul@reimag.co.za Roy Lategan roy@reimag.co.za Faheem Abrahams faheem@reimag.co.za Andre Evans andre@reimag.co.za Material & Traffic Juanita Heilbron juanita@reimag.co.za
to advertise: 021 674 5026
CIRCULATION DISTRIBUTION RNA Distribution
FEATURES 5
INVESTOR TALK Know When To Take Advice Seven golden rules for success
to subscribe:
12
subs@reimag.co.za
14
COVER STORY Get The Knowledge A brilliant game plan
20
CASE STUDIES The Good, Bad & Ugly
PUBLISHED BY REAL|E MEDIA
We have created an Online Business Directory to help readers and visitors find and access the products and services they need.
issue.
Experience video, links through to websites, DICKENS MASTER INVESTOR additionalMICHELLE content, and image galleries not in the printed version.Management Visit www.reimag.co.za Property Revolutionizing and click on Digimag.
SUBSCRIPTION RATES: R 360 - 1 year ; R 720 - 2 years
Real Estate Investor readers and reimag website visitors are always for property related businesses and people to help them with their i such as estate agents, brokers, buyer's agents, property managers, a conveyancers, valuation specialists, accountants, seminars & workshop property developers.
Have an entirely new experience with Real 8 INBOX Estate Investor on your PC, Mac, iPad or Experts Ask The Property Android. The magazine content has been integrated with content from the latest my name? Should i invest in
PRINTING SED Printing Solutions
0861 228 669
Online Business Directory
Real Estate Investor Digital
6 ONLINE What’s New On The REIMWebsite New on REIM TV, Events & Resources
You can list your business for FREE in our Online Business Directory. Got reimag.co.za and Click on the BUSINESS DIRECTORY banner, which w you how to list your business or even source the company or service, y Your company can be exposed to over 30 000 investors, landlords, professionals and institutions.
Search For Property To Buy And Rent
Real Estate Investor readers and reimag website visitors are always looking for property to buy or rent. Click on the www.reimag.co.za SEARCH FOR PROPERTY banner which will take you to over 10 000 property listings nationwide.
Neale Petersen (CEO), B.Taylor
RESIDENTIAL ALSO PUBLISHED BY REIM SOUTH AFRICAN REAL ESTATE INVESTOR MAGAZINE
26 ACQUIRING
Online Business Directory To Hire Or To Let?
Feel The Pulse Of The Property Industry Where is South Africa heading?
www.reimag.co.za
Your Tenant Could Sue You!
LISTED PROPERTY Are You Missing The Fireworks?
Real Estate Investor readers and reimag website visitors are always looking Q & A SERIES 27 for property related businesses and people to help them with their investing Property More Than agents,Buying such as estate brokers, buyer's agents,One property managers, attorneys, conveyancers, valuation specialists, accountants, seminars & workshops or even property developers. 28 MANAGING
7 Deadly Sins Of Property Investment JULY 2012
July 2012 R39.95 (Incl. VAT)
R35.04 (Exclu. VAT) Other countries
The New Land Rover Evoque Reviewed Z
www.reimag.co.za
MASTER INVESTOR DOLF DE ROOS
JUST PROPERTY MAGAZINE
Autumn 2012
PROPERTY
OFFSHORE
MAGAZINE
2012
your absolute look into the world of real estate
PROPERTY HANDBOOK
Rental Income Security Challenges can be overcome www.justpropertygroup.co.za
The Commercial Property Market Where to this year?
Holiday Homes
A wise financial decision?
R 99.95 (EXL VAT)
ISSUE
EDITION 3• 2012
2
Autumn 2012
BROUGHT TO YOU BY:
24 MANAGING Extreme Outsourcing
www.justpropertygroup.co.za
www.reimag.co.za
Down Break Discussions WhenBusiness We have created an Online Directory to help readers and website visitors find and access the products and services they need.
SMART MOVES 30 You can list your business for FREE in our Online Business Directory. Got to www. Mediation Mandatory reimag.co.za and Click on the BUSINESS DIRECTORY banner, which will direct the streamline it Will you how to list your business or even source theprocess? company or service, you need.
All rights reserved. No portion of this publication Your company can be exposed to over 30 000 investors, landlords, property may be reproduced or used in any form without prior professionals and institutions. 32 ACQUIRING written consent and permission from Real Estate The Housing Value Chain Media. The publisher gives no written guarantees or assurances and makes no representation regarding Who is the weakest link? 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 www.reimag.co.za
www.reimag.co.za
books
CDs/DVDs
Software
Games
The Biz Mall
Knowledge is money The new BIZ MALL now offers an even wider range of property, business, inspiration and financial publications with an improved shopping experience.
May 2012 SA Real Estate INVESTOR
1
December 2012 SA Real Estate INVESTOR
1
COMMERCIAL 35
INDEX
COMMERCIAL INVESTOR News And Industry Update Updates and property hear say
ABC BILLION GROUP.................................................................35 CENTRE FOR AFFORDABLE HOUSING......................33 COURTWELL CONSULTING...........................................37 CYPRUS.................................................................................44
36 INFRASTRUCTURE The Transport Corridor In South Africa 38 LEGISLATION Meet The Challeneges Of Transformation
DEF ELAN...................................................................................... 9 ENTREPRENEUR.................................................................42 EDAN ISLAND.....................................................................51
40
GHI HEARTLAND............................................................................4 INTERSECTIONAL TITLE SERVICES................................ 23
SMART MOVES Get The Best Returns What will 2013 bring?
42 RETAIL Put Location At Top
JKL JUST PROPERTY GROUP................................................28 JUST PROPERTY GROUP................................................29 JHI PROPERTIES.................................................................40 KOOPLIEDE.........................................................................41 LIGHTSTONE.......................................................................22
OFFSHORE 45
OFFSHORE INVESTOR News And Industry Update Updates and property hear say
MNO MASTER INVESTOR..........................................................10 MASTER INVESTOR..........................................................11 MARTO LAFITTE & ASSOCIATES.................................38 MARTO LAFITTE & ASSOCIATES.................................39 MDA PROPERTY SYSYTEMS.........................................42 NICOR.................................................................................... 7 NATIONWIDE......................................................................43
46 LONDON Investigating The Property Boom 50
HOLIDAY INVESTMENT The Seychelles
52
NEW TRENDS Ski Holiday Homes
PQR RAWSON PROPERTIES....................................................23 P3 Investment Group......................................................24 P3 Investment Group......................................................25 P3 INVESTMENT GROUP................................................26 P3 INVESTMENT GROUP................................................27 PROPWEALTH....................................................................49 PAM GOLDING PROPERTIES.........................................50 PAM GOLDING PROPERTIES.........................................52 REMAX..................................................................................23 ROYAL INSTITUTION OF CHARTERED SURVEYORS .................................................................................................31
LIFESTYLE
54
LUXURY PROPERTIES Homes Of The Rich And Fabulous
56
YOUR BUSINESS It's Office Party Time
STUVWYZ SOUTH AFRICAN COUNCIL OF SHOPPING CENTRES .................................................................................................35 SMUTS & TAYLOR..............................................................46 SMUTS & TAYLOR..............................................................47 SMUTS & TAYLOR..............................................................48 TPN.........................................................................................12 TPN.........................................................................................13 TRAFALGAR.........................................................................21 TPN.........................................................................................34 THE BLUE TRAIN................................................................65 THE FARRAH GREY WEBSITE........................................66 W.A. ELLIS............................................................................45 ZANDSPRUIT...................................................................... 3
60 LESSONS New Year, New You 66 INSPIRATION The Self-Made Millionaire
Contributors Mike Smuts is an author, and property investor, he is the owner and managing director of Smuts and Taylor, a London based investment firm
Jonathan Smith is the Director of Courtwell Consulting and has ex- tensive experience in property and consulting, including educational programs
John Roberts is the CEO of The Just Property Group, a dynamic property company born from the motivation to create a property industry leader
2
December 2012 SA Real Estate Investor
Koos du Toit is the CEO of P3 Investment Group that offers hope and guidance to anyone looking to build a successful investment portfolio.
Angelique Redmond is our talented in-house copy editor. With a passion for words and music, her pink earphones are a permanent fixture.
Olga Koma is a researcher with FinMark Trust’ Centre for Affordable Housing Finance in Africa. Her interests are urban studies, urban design & African cities discourse.
Rui Marto is the Director of Marto Lafitte & Assoc, a firm specializing in Property Law Commercial Law, Foreclosures, Civil Litigation and Consumer Law.
Monique Terrazas is REIMS 2012 SAPOA award winning property investment writer, she is a treasured REIM contributor for almost five years.
www.reimag.co.za
HOEDSPRUIT - LIMPOPO - SOUTH AFRICA
You’ve dreamt of it, now own it! True African bush living at the only bush and aero estate in the world Life at Zandspruit is one of peace and tranquility - a home cocooned in wild life and bush, offering a tranquil getaway from a demanding world. The exceptional weather all year around gives you ample opportunity to explore your environment with wildlife walks, horse rides or game drives. View this tranquil setting from the comfort of your living room or pool deck. Sunset views are magnificent treats! This is an investment sure to keep your health and living experience a notch above any other.
KEY FEATURES Estate size: 1000 ha Stand size from 4000 m², full title House designs are in 3 different styles being Farmhouse Pavilion Thatch 650 ha of untouched wildlife reserved exclusively for owners game viewing pleasure
Contact: +27 15 793 1192
Breathtaking sunsets and mountain views with ample free roaming plains game
Email: info@zandspruit.co.za
Safe environment and close to retailers, doctors and recreational facilities
Web: www.zandspruit.co.za
M O V E
T O A B E T T E R P L A C E www.zandspruit.co.za
INVESTOR TALK
Know When To Take Advice and When To Apply It Seven golden rules for success
D
ecember is a time for reflection on the year that has passed. Also take time to ref lect on this: real estate is your answer to acquire the wealth you’ve always dreamed of. Just ask Warren Buffett. Earlier this year, Buffett said on CNBC that real estate is the best investment of all at the moment. This statement holds true, particularly now in the US, and also right here in South Africa. Buffett said: “Single family houses bought on a distressed basis now, and financed over a long term at current interest rates, may be the best investment of all. I mean if I knew anything about real estate and I was just working with a relatively small amount of money and I was seeing distressed houses around me that I could rent out, I would buy them and put on a 4 percent mortgage for 30 years and in three or four or five years, I’d probably sell it at a very substantial profit relative to my equity.” So, the question is this: Why have most of us not gone out and followed Buffet's advice? After all, he has the reputation of being one of the most successful investors to walk this planet. When the world’s current No.1 investor says "invest in real estate", why do people start finding excuses why they cannot invest, instead of jumping at the opportunity? Too good to be true Most people who read about real estate investment don’t believe it is possible. Even some of our readers still believe it is too good to be true. This is despite the fact that many of our readers also read success books, attend events and seminars and educate themselves about improving their lives, whether from a financial or personal perspective. So why have not all our readers achieved the success and wealth they want? The great Napoleon Hill, author of Think and Grow Rich, once said that only 2% of those who learned his now-legendary success principles actually used them to become
successful. Here's why: even when you know what to do, and even if you really want success, there are many ways you may unconsciously sabotage yourself. You may procrastinate. You may quit if you experience a setback. You may unconsciously make bad decisions, or attract people who take you off-track; instead of attracting those who can help you achieve what you want. You may believe things about success, about yourself, about other people or about money that causes you to get in your own way. As long as your behaviour is generated by an unconscious part of your mind, you may have trouble taking the successful actions you need to take, even if you know what they are, and want to take them. Sadly, 98% of people still do this. What can you do? What is the most potent, most effective way to get rid of these unconscious, self-sabotaging demons? Meditation can help you become aware of how you sabotage yourself mentally. Don't be afraid to learn. Knowledge is weightless, a treasure that you can carry easily. Read our cover story on page 12 and discover what you can do as an investor to use your knowledge for the best results. Should we be looking elsewhere? The negative publicity generated by the regular strikes protests in South Africa, as well as the issue of land redistribution, continues to have a negative impact on our economy. Many investors feel uneasy about the unrest and are seriously starting to look abroad for investment opportunities. Investing in certain areas offshore seems to offer more stability. Some South African investors are also considering a Plan B and are investigating residency options in other countries. Whichever way you believe is the way forward, these 7 Golden Rules for Success will help you gain more knowledge and become more successful.
extra digital video content
7 Golden Rules for Success 1. Mentor with the wealthy. 2. Develop empowering beliefs. 3. Find your passion so that you can add more value. 4. Set goals – think big but underestimate your result in 10 years. 5. Work smart not hard – do things that make an immediate impact. 6. Tithe - giving back is better than taking. 7. Have fun along the way. Prosperous investing
Neale Petersen EDITOR-IN-CHIEF
FREE @www.reimag.co.za
"We lift ourselves by our thought. We climb upon our vision of ourselves. If you want to enlarge your life, you must first enlarge your thought of it and of yourself." Orison Swett Marden www.reimag.co.za
December 2012 SA Real Estate INVESTOR
5
ONLINE Follow us
www.reimag.co.za Digimag
October Events 13th - 19th US Property Tour Dolf De Roos
www.reidigimag.co.za
Online Business Directory Real Estate Investor readers and reimag website visitors are always looking for proper t y related businesses and people to help them with their investing such as estate agents, brokers, buyer's agents, proper t y managers, at torneys, conveyancers, valuation specialists, accountants, seminars & workshops or even property developers. We have created an Online Business Directory to help readers and website visitors find and access the products and services they need.
19th Search For Property SAPOA/IPD research breakfast, Johannesburg To Buy And Rent
Real Estate Investor Digital Read the print magazine for free in a new, more visually appealing format than ever before, or install the Real Estate Investor Magazine app for iOS and Android devices for real-time updates on our content. Join us in the social media realm as well, where we're committed to building a vibrant and responsive community using both Facebook and Twitter giving you direct access to our real estate knowledge base as well as our network of serious South African property investors.
Real Estate Investor readers and reimag website visitors are always looking for property to buy or rent. Click on the SAPOA/IPD research SEARCH FOR PROPERTY banner which will take you to over 10 000 property breakfast listings nationwide.
26th
books
CDs/DVDs
Software
Games
The Biz Mall Knowledge is money
Investor The new BIZ Mall MALL now offers an even wider range of property, business, inspiration and financial publications with an improved shopping experience.
www.reimag.co.za
May 2012 SA Real Estate INVESTOR
1
Books CD/DVD Software Games www.reimag.co.za 6 December 2012 SA Real Estate Investor
May 2012 SA Real Estatewww.reimag.co.za INVESTOR 1
Book reviews Inspired Destiny
The VAT Handbook
By Dr John F Martini
By Geoff Hull; Clive Gibson
Based on a program originally developed for young people
Taxpayers often pay over more to the Receiver than required, and nowhere is this more evident than In the payment of Value Added Tax. in practice it is rather more complex, as certain rules apply to what you can and cannot claim as a legitimate amount, and on imports and exports related to your business. Help is now at hand with The VAT Handbook, everyone’s essential guide on all matters concerning this tax.
seeking purpose and direction i n t h e i r l i v e s , D r. J oh n Demartini’s Inspired Destiny has deep meaning for readers of all ages. You’ll come away from this book with an immense vision of yourself and set in motion a far-reaching ‘ripple effect’, beginning the journey of mastering and l iv ing a meaningful and inspiring life.
Like a Virgin: Secrets they won't teach you at Business School
By Geoff Hull; Clive Gibson
By Richard Branson Business advice, from the best in the business. Are you interested in setting up your own business, improving your leadership skills or simply looking for inspiration f r o m on e of t h e g r e a t e s t entrepreneurs of our time? In Like A Virgin, Richard Branson brings together some of his best advice, collected from his internationally syndicated New York Times colu m n, wh ic h app ea r s i n publications all over the world, from India to Australia and the Bahamas. From his 'Top 5 secrets
Business in Africa: Corporate Insights
of Business Success', to hard hitting discussions about the global financial crisis.
High-growth, high-return Africa, with much improved trading conditions, is the most sought after frontier destination for global investment today. However, there are 54 countries on the continent and even rigorous business plans can run aground on the unique and complex set of circumstances found in each of them. Business in Africa: Corporate Insights takes the reader to the coal face of doing business on the continent. Featuring articles by and interviews with people at the forefront of developments and opportunities.
www.thebizmall.co.za
BOOKS AVAILABLE AT Knowledge Is Money
Appearances can be very deceiving... One tends to take things at face value, we on the other hand look a little deeper and understand your needs, now and for the future. With 35 years experience in Property Management Software, we have seen it all, and provide indepth training, consultancy and needless to say support.
For more information, call 0861 4 NICOR or email: pro@nicor.co.za
For all the support you’ll ever need
www.nicor.co.za
INBOX
ASK THE PROPERTY EXPERTS
Unsecured Lending
Consumer Protection Act
Meyer de Waal, Director Oosthuizen & Co www.oostco.co.za
Michael Hands, Consultant Garlicke & Bousfield Inc www.gb.co.za
Emma Bishop asks: If my unsecured credit is more than my monthly mortgage, what steps can I take to rectify this? My budget at the moment is showing that i am paying more on my bills than i am to my mortgage.
Meyer de Waal replies: If you are in a situation were you cannot pay your debt, you can obtain protection and relief under the National Credit Act (NCA). The most obvious way would to apply for debt counselling and the debt counsellor will analyse your situation and determine how much money you have to distribute between your creditors each month. Depending on the level of your debt and excess cash available, each debtor may then receive a pro rata payment of the outstanding debt. This may however be an expensive exercise as your contribution for the first month may go to pay the fee of the debt counsellor and interest will continue to be added to the accounts while it is being settled over the debt counselling term. A solution may be to realise early that you are heading for a financial disaster and obtain the services of a professional person who can assist you to restructure and manage your debt. A proper budget is to be prepared and you must try to stay as close as possible to your budget, and ensure that your expenses does not exceed your income.
Loyiso Mzane asks: I want to invest in commercial property but I am a little hesitant, if a property is sold 'voetstoots', will the Consumer Protection Act give me adequate protection? Also, is it better to buy the commercial building in my name or in a company name?
Michael Hands answers: The CPA protects individual buyers against the unforeseen consequences which would possibly otherwise be covered by the voetstoots clause. A voetstoots clause means that any hidden defects do not impose any liability on the seller at the buyer's instance, unless the buyer can prove that the seller actually knew about the defect at the time of the sale. Natural persons are generally protected as buyers by reason of the CPA's prohibition on selling goods or property "voetstoots". There is also limited protection for artificial persons (companies, close corporations, trusts) buying goods or property. Such persons are also given protection against the voetstoots clause if they have an annual turnover of less than R2 million or have assets valued at less than R2 million at the date of sale. Very importantly, especially if the property is a commercial one, there may be other tax and financial advantages to buying through a company, and these advantages might outweigh the downside of not having CPA protection against defective property.
Investing In America
Scott Picken, CEO International Property Solutions www.ipsinvest.com
James Lund asks: Where is the best place to invest in America? With the devastation left behind by the storm, is America still a good place to invest in? I am an interested investor but I am very hesitant due to the natural disasters that are seen frequently in America.
Scott Picken responds: The USA is a huge place. In South Africa there are 15 MSA (metropolitan statistical areas) and in America there are 300, with a population of over 300 million. Therefore there is no way to say where is the best place to invest. It depends on what you are trying to achieve. Once I understand what you are trying to achieve I can point you in the right direction – whether it is capital growth (some places are growing 6% to 10% a month) or yield (with yields of over 20%) or both? As I matter of interest I was in New York when hurricane Sandy was coming (got out the day before) and I was in Atlanta when the hurricane hit. Although it was windy and cold, you would not have known anything as the weather was like a winter's day in JHB – sunny and cold. Whereever you invest you will also have insurance to protect yourself. None of our properties (including the ones in New York) were affected by the hurricane which affected 20% of the American population or 60 million people.
Do you have a property question you would like answered by our experts?
If so, post it on ASK THE EXPERTS on www.reimag.co.za or email editorial@reimag.co.za 8
November 2012 SA Real Estate Investor
www.reimag.co.za
MASTER INVESTOR OF THE YEAR COMPETITION
?
?
Are you South Africa’s no.1 Property Investor? Real Estate Investor Magazine together with WEALTH MIGRATE INVESTMENTS is searching for South Africa’s leading property investor for 2013.
WIN R50 000 in cash plus other prizes including iPads,
SmartPhones, Smart TV’s, an all-inclusive Weekend away for two & many other prizes valued at over R100 000
The first annual Master Investor of the Year award aims to find South Africa’s leading property investor and to recognize and celebrate the achievements of property investors in South Africa. All potential candidates will be invited to enter and 12 investors will be short-listed but only one person will be given the title of Master Investor of the year 2013 and the fantastic prizes that go with that title. pure on the rand value of the property or the size of the The competition will not be judged purely portfolio. We want to know the key factors that have contributed to your investment success such as discipline, entrepreneurial flair, creativity, dedication, initiative, commitment and plain hard work that have got you to where you are today.
Our all-star judging panel includes: Dolf de Roos
Gordon Mackay
Jason Lee
Neale Petersen
Professor Francois Viruly Pro
Hennie Bezuidenhout
SA author and investor
International investor, author and educator
Best-selling South African property author and investor
Expert lecturer and head of property faculty of UCT
What are you waiting for?
Publisher of REIM
Property developer and entrepreneur
Please submit your entry with your investment story to editorial@reimag.co.za or enter at www.reimag.co.za to view the details of the competition, prize packs, judge’s profiles, and contestants. Entries close 28 February 2013. Sponsored by
MASTER INVESTOR
BY NEALE PETERSEN
Revolutionising Property Management Adding value for landlords and rental agents
M
ichel le Dickens is a mover and shaker in the proper t y management space. She launched her successful property credit bureau Tenant Profile Network (TPN) in January 2000 and since then the company has grown tremendously to serve more than 9 000clients.
extra digital video content
Michelle Dickens PERSONAL STATISTICS AGE: 38 EXPERIENCE/QUALIFICATIONS: BCompt, Accounting and Auditing from UNISA. MARITAL STATUS: Married to Chris with two boys, Max and James. HOBBIES: Cycling, running and swimming.
CLOSE-UP MENTORS: My Dad is my mentor; he was in the banking industry for many years and I learnt a lot from him. I also credit my most amazing partners, Alan Williams and Chris, my husband, who is the IT Director of TPN. BOOKS: I like reading biographies to discover what drives people to success. HOW IMPORTANT IS FINANCIAL EDUCATION TO YOU? Financial education is critical before investing. I come from a formal financially literate background with financial management as one of my majors.
12
December 2012 SA Real Estate Investor
As managing director of the company, Michelle gave REIM an inspiring look into her journey in property investment and property management and shared some fascinating insights into the property business she built from scratch. Where it all started By the time Michelle had started her articles, she had realized that the financial world was not for her. She cut her teeth with a large Sandton-based propert y management company called Gary Bruyns Properties, where she worked for almost five years. Here she witnessed first-hand how often landlords did not receive their rental income on time, and how often not at all. Many would end up out of pocket, without any legal recourse against the defaulting tenants. There was no Rental Housing Act at the time - just a general state of lawlessness in the property rental game. Her background as a property manager allowed her to spot a huge gap in the proper t y ma na gement space: ma ny frustrated rental agents did not have proper tenant checking systems and were not able to share critical tenant information. In 1999, she initiated the establishment of TPN and partnered with a company called Pro Solutions. The team then integrated TPN into TransUnion, a web-based system. At the time, many agents were not technically savvy, did not access any credit bureau information and were still sending faxes. But, from 2001 when TPN integrated
with Experian and Cipro, agent and landlord behavioral changes gradually started to take place. By 2006, when the National Credit Act (NCA) came into play, more than 80% of real estate agents still did not have proper accounting systems and were still using Excel. TPN developed a payment tracking system and the agents using this system immediately started reaping results, including a big drop in defaults. The system provided tenant rental payment profiles for up to five years as well as tenant information and behavior data. TPN's Rent Book, a custom-designed and complete rental management system, which went onto the web at R600 per annum, certainly revolutionized the entire rental industry. Rent Book creates invoices, tracks expenses, monitors levy payments and much, much more. The system currently has 900 users. Battling eBay In 2008, TPN also launched RentBay, which has since produced a 200% increase in property listings activity and currently has more than 11 000 property rental listings. The site certainly seems a force to be reckoned with, given that international online auction and shopping website, eBay.com, has brought a trademark infringement lawsuit against TPN, claiming that the property company’s RentBay website, which it uses to list rental properties without charge, because it was likely to cause "deception or confusion" and took "unfair advantage" of eBay’s trademarks. Michelle comments that it is really unlikely that visitors come to Rentbay.co.za and think they’ve found eBay. She says that since 2008, the website has not attracted a single visitor who searched for eBay and ended up at RentBay. Going forward Despite challenges such as these, Michelle and the TPN team have grown TPN into one of www.reimag.co.za
the lessons learnt as best practice within her business. M ic hel le bel ie ves in bu i ld ing sol id relationships and treating her tenants as clients - excellent advice for all landlords who prefer to handle their tenants themselves.
MICHELLE'S TIPS FOR PROPERTY INVESTORS n
the most crucial service providers for investors, landlords, estate agents and property managers alike, playing a critical role in the placement of tenants into residential and commercial properties within South Africa. The majority of rental agents, property managers, investors and landlords do their tenant credit checks and balances with TPN first. TPN is currently focusing on their existing product set and improving their management systems. In addition, they will continue to educate and grow the agent and landlord markets. DIY or property manager? There are 1.6 million formally rented properties in South Africa. The fact that up to 70% of all rental properties are managed directly by the landlords themselves is a telling figure. There are two major reasons why landlords prefer to manage their own properties: one is the perceived expense of using a property management or rental agent and the other is the lack of trust in the abilities of rental agents. Michelle believes that a lack of trust in property management and rental agents are the key reason why landlords manage their own tenants. Unfortunately some agents have not remained abreast with all the changes in the market, don't act in the landlord's best interests and are slow to act upon rental arrears and other tenant issues. Of course, the negative media coverage and a poor perception of the professionalism among estate agents have also not promoted the case for using agents. www.reimag.co.za
Match quality tenants with the relevant property - the goal is to place a quality tenant in a quality property. n Keep the property well-maintained the better the condition of the property, the more likely you will keep the tenant. n Don’t place a tenant with bad credit or bad payment record - many landlords and agents do a credit check and still place a tenant with negative credit information. Rental agents may place poor tenants to the landlord’s detriment in the face of losing commission on a deal. n Before you place a tenant, do a comprehensive affordability assessment which detail a tenant’s income and expenses. These are not "private matters" as most tenants protest. They are part and parcel of the rental application. n Be diligent in sending your tenant a monthly rental invoice of rental and additional charges due. Communication is key to any relationship. n Understand all the costs that can affect the tenant – an interest rate increase could push living costs upwards. Some tenants are already using microloans to pay rental deposits and even monthly utilities, so understand the unforeseen expenses which can get your tenant into financial trouble. n Act on late payers immediately – the longer you leave the situation, the worse it will become. You have a 10% chance of a late payer becoming a non-payer and a 1.6% chance of becoming stuck with a squatter or delinquent tenant. n Always budget for one-month vacancy in every year
For t h is rea son, T PN cont inues to educate and enable estate agents, property management agents and rental management agents with the information, tools and systems that will ensure a professional approach to tenant management. Investing in property While establishing TPN, Michelle and Chris also started building their own property portfolio, acquiring rental properties in the R3000 to R6000 per month rental range. Most of them are sectional title f lats and townhouses in the Midrand and Randburg areas. Her criteria for investing include the 20-minute maximum distance criteria to enable her to keep a f irm hand on the management of each property. Nevertheless, Michelle has also had a few bad experiences, especially with poorly managed sectional title complexes. She also once had a tenant who spray-painted the carpets bright blue! Another one of her tenants had been running an illegal ‘chop shop’ from the garage! Michelle says that one of the biggest challenges landlords and tenants are facing is the escalating costs of utilities and municipal fees. Another major challenge is poor Body Corporate management. Learning from her lessons Michel le has a portfolio of around 10 residential properties. She manages her properties herself so she can stay in touch with the market dynamics, understand the frustrations of investors and landlords and use
RESOURCES TPN www.tpn.co.za
December 2012 SA Real Estate INVESTOR
13
COVER STORY
BY MONIQUE TERRAZAS
Get The Knowledge A Brilliant Game Plan With Infinite Possibilities
"An investment in knowledge pays the best interest." Benjamin Franklin
K
nowledge is power, indeed, because knowledge opens up new horizons, new possibilities and new opportunities. Without knowledge, there are no options and no alternatives, and as we all know, doing the same thing again and again will produce the same results - and zero progress. This could not be truer than in today's investment world, in which new possibilities and new opportunities are so desperately needed. Without knowledge about alternative investment options, investors are faced with no alternative to the usual, traditional investment options, which have certainly left many investors deeply disappointed, if not financially ruined. In the wake of the global financial crisis which ensued in 2007, investors globally faced 14
December 2012 SA Real Estate Investor
losses amounting to trillions of dollars. And five years later - things are not exactly looking up. In fact, the consensus among investment managers is that the general outlook is certainly negative and analysts have warned that many asset classes will struggle to beat inflation over the next few years by much more than a percent or two. So what k nowledge cou ld open new horizons, possibilities and opportunities for investors? Perhaps the knowledge that there are alternatives to the traditional ways of investing? Perhaps the knowledge about how those who have achieved investment success did so, despite trying conditions? Many people assume that this knowledge is a closely guarded secret. In reality, in the Information Age, the extensive knowledge
human beings have amassed is widely available for anyone cares to acquire it. For example, it is not a secret that property is the basis of all wealth. Nor is it a secret that the world's wealthiest invest in property. So what knowledge do direct property investors have that has allowed them to achieve investment success despite the turmoil and losses that have characterised the traditional investment world for so many years, and have allowed them to build wealth regardless of the difficult economic circumstances? This is not a secret either: these investors understand the property playing field and they have a game plan that is not only brilliant, it is superbly sustainable. And this knowledge is available to anyone who wants to create investment success and build wealth despite the circumstances. www.reimag.co.za
Understand the playing field The rationale behind a direct investment in property is quite simple, but even so, it is incredibly exciting. Regardless of the time in history or the future and regardless of the place, all people have a basic and pressing need for shelter - a home that will keep them - and their belongings safe from the elements. Similarly, businesses need premises to operate from: whether that is an office building, a manufacturing facility or a warehouse, or a retail outlet. People and business owners essentially have two options: buy their own property, or rent a property from a landlord. There are many reasons why people do not simply buy their own properties and prefer to rent. Property prices may be unaffordable, or it may be difficult to obtain finance. Tenants may only want to stay in a particular area for a short period, or they may simply not want the responsibility and costs involved in owning and managing a property. For all of these reasons - and more - there are always people and businesses looking for property to rent. And the numbers of tenants are growing in many areas all over the globe, because the population and the number of businesses are growing, and urbanisation is gaining momentum. As such, property owners and landlords provide an essential service in the economy: providing housing or premises to individuals and businesses.
Understand the property investment game plan The game plan is actually a simple fourstep process, which can be summarised as follows: 1. An investor acquires a property using leverage or gearing - in plain English: using finance, such as a mortgage bond, to acquire the property - so the investor does not use any of his or her money. 2. The investor then rents out the property to a tenant, using the rental to pay the bond and other property expenses and pocketing the difference. 3. As the rental income increases year after year, the difference between the rental income and the property expenses increases, producing an ever-increasing inflation-linked passive income for as long as the property is held. Once the bond - the biggest expense - is paid off, the passive income the investor receives increases significantly. 4. In addition to the inflation-linked passive monthly income the property generates, it is also producing capital growth, which can be accessed by selling the property, or - the better option - refinancing. This game plan is not only simple, it is brilliant and superbly sustainable.
Brilliant game plan This game plan is brilliant, as it allows a propert y investor to obtain an incomegenerating asset - the property - without investing his or her own money. This is because the finance institution that provides the bond puts up the money for the purchase price. Of course, this loan needs to be repaid, but that is not a problem either, since the property is generating an income from day one: the monthly rental. If the investor is smart, he or she would have bought the right property in the right area, and the rental income should cover the bond repayments and the other property expenses. Thus, the property investor has acquired a property asset without using his or her own money. This property asset will increase in value year after year and this capital growth can be accessed in future by selling the property, or, the better option, refinancing the property through, for example, a second bond, which provides the investors with a tax-free lump sum. But it gets even better. Every year the rental increases in line with inflation, but the biggest expense - the bond repayments - remain static,
"Without knowledge about alternative investment options, investors are faced with no alternative to the usual, traditional investment options, which have certainly left many investors deeply disappointed, if not financially ruined"
So, the basic concept of property investment is quite simple: there is a growing demand for residential and commercial property for rent from those who cannot or do not want to own a property. Property investors acquire the properties to supply this demand, and in the process deliver a crucial service to the community and to the economy, while earning a passive income - as well as capital growth from their investment. But it certainly gets more exciting than this! That is because property investment is based on a brilliant game plan, one that has been implemented by the world's wealthiest for hundreds of years. And it is an infallible game plan, indeed, if it is executed properly.
www.reimag.co.za
December 2012 SA Real Estate INVESTOR
15
COVER STORY barring, of course, interest rate increases and decreases. This means that year after year, the difference between the rental income and the property expenses become larger, and the amount that the investor puts in his or her pocket becomes bigger. At some point, the bond is paid off, and all the rental income - less a few remaining expenses - goes into the investor's pocket. And this income grows year after year - keeping pace with inflation - for as long as the investor keeps the property. And if the property investor acquires the investment property in a trust, that could be literally forever. Superb sustainability So, this game plan is also superbly sustainable. Just ask the landowners in the UK, Europe and the US who were already doing this 300 or 400 years ago! This is because their properties, acquired for amounts like ÂŁ50 - which now simply seem silly - have been generating an inflation-linked income for 300 years, and has been producing capital growth for 300 years.
And, of course, these properties will continue to generate inflation-linked income and capital growth in the future, which means the return on investment of the original ÂŁ50 is truly incalculable and infinite. Excited? You should be! What other asset on the face of the planet can be acquired without investing a cent of your own money, producing not only an inf lation-linked passive income but also capital growth year after year? And since you don't have to sell the property to access the equity, what other asset can produce infinite returns? Property is indeed the basis of wealth. While this basic game plan is the foundation of property investment, there are as many different systems and approaches as there are successful property investors. Evaluate different approaches and systems Another extraordinary feature of property investment is the sheer scope and scale of opportunities it offers property investors. The brilliant property investment game plan works across time and space, across different property sectors and different property markets. The game plan worked as well for landowners 300 years ago as it does today and as it will in
"Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family."
100 years from now. The game plan works as well in Cape Town or Soweto, as it does in Phoenix, Arizona in the US or in London in the UK. It works as well in Auckland, New Zealand or in Perth, Australia, as it does in Lagos, Nigeria or in Harare, Zimbabwe. The game plan works whether you prefer investing in residentia l or commercia l property. Whether you are purchasing a residential unit in Lephalale or a commercial unit in Midrand, the game plan remains the same. It works whether you are buying a house to accommodate students near a university, a small townhouse for a couple, a holiday home at the coast or a mansion in Hyde Park fit for dignitaries. The game plan remains the same whether you are buying a warehouse or a factory, an office building or a shopping centre. It works whether you are buying a regional shopping mall or a small apartment building with a single shop on the ground f loor. It works whether you are buying a nursery school or an industrial manufacturing complex. In addition, there are many different systems to choose from to match your risk profile. For example, some property investment experts believe that entry-level properties are the safest bet, while others believe commercial property is the answer. Some property gurus suggest buying one property at a time and paying
"What other asset on the face of the planet can be acquired without investing a cent of your own money, producing not only an inflation-linked passive income but also capital growth year after year?"
Kofi Annan
16
December 2012 SA Real Estate Investor
www.reimag.co.za
it off before acquiring the next one. Some suggest buying more than one property at a time to take advantage of the property cycles. Some believe that the South African market offers great opportunities, while others are promoting offshore property investment and yet others still believe Africa is the place to be right now. Depending on your risk profile, you need to choose the approach and the system that suits you best. The way of the lion Because the opportunities are so vast, it is important to become focussed like a lion: zoom into a single objective with absolute focus. A lion doesn't barge into a herd of antelope and run around madly trying to catch as many of these "opportunities" as possible. The lion identifies one antelope and focuses exclusively on that "opportunity". Just like a lion cannot make more than one kill at a time, you cannot exploit all the property opportunities that exist at once. Pick one approach or one system and focus on that. Otherwise the sheer scale and diversity of the opportunities in the property investment world will seem overwhelming and bewildering. Identify the pitfalls and shortcuts Here is another aspect that makes property investment an absolute gem. You don't have to reinvent the wheel, or learn by trial and error, which is expensive and time-consuming. Property investment is nothing new. It is a system of wealth creation that has been implemented by the world's wealthiest - from individual property moguls and listed property companies to the major pension funds and the insurance companies - for hundreds of years. Whichever approach or system you prefer, there is an existing property investment system that you can implement. It's like buying a franchise, without the franchise fees or royalties or restrictions! All you have to do is follow the system to the letter to replicate the results. The beauty of this is that you can avoid the pitfalls and manage the risks correctly, right from the start. In any endeavour in life - including property investment - there are pitfalls and risks. As you increase your knowledge of property investment, you will have an invaluable www.reimag.co.za
opportunit y to identif y the pitfalls and shortcuts by learning from others' mistakes. And you will discover the same pitfalls again and again: for example, paying too much for a property, buying a property that is in poor condition, buying in the wrong area, not screening tenants thoroughly, not having a water-tight lease, not insuring the rental income, not taking swift action against a defaulting tenant, not doing the cash f low projections before making a purchase, overgearing and not factoring in interest rate increases, not doing regular and ongoing maintenance, and many more. If you have identified the pitfalls, you can avoid these entirely. You can learn how to manage all the risks involved in property investment, effectively and from the very beginning. Even better news is that learning from others' mistakes also reveals the shortcuts that take you to your goal that much faster. For example, you could use a bond originator that specialises in buy-to-let property to acquire finance. Or, you can join a property investment organisation that provides preferential and discounted access to pre-screened properties and bulk discounts.
"Knowledge is power. Information is power. The secreting or hoarding of knowledge or information may be an act of tyranny camouflaged as humility."
Robin Morgan Or you can increase the rental of a commercial property exponentially by investing in a few clever improvements. There are a wealth of shortcuts to be discovered! Keep your knowledge up-to-date Even experienced and successful property investors need to continue learning to keep their skills sharp. This is simply because change is inevitable. The economic conditions change. The markets change. Consumer demands change. Legislation and regulations change. The property cycles turn. New developments open up new opportunities. New technologies change the way we live and work. New infrastructure changes the playing f ield. For example, the Gautrain and Bus Rapid Transit routes have created investment hotspots near the train and bus stations. The December 2012 SA Real Estate INVESTOR
17
COVER STORY new power stations being constructed by Eskom have turned entire previously small towns into new playing f ields for sav v y investors. Similarly, new challenges continually arise. For example, the credit crunch has made it more difficult to obtain traditional finance; the rapid rise in property ownership costs, such as rates and taxes, utilities and other services have necessitated ever-more thorough due diligence and detailed cash f low projections; and the economic conditions demand increasingly thorough tenant screening and management. Professional property investors therefore never stop learning, because while the game plan remains the same, change is inevitable and these investors ensure they are armed with the knowledge and strategies to meet any challenge that arises. Where do you get the knowledge? So where do property investors get their knowledge of direct property investment as an investment alternative, of the playing field and the simple, brilliant and sustainable game
18
December 2012 SA Real Estate Investor
plan, of the different approaches and systems, as well as the pitfalls and shortcuts? We share a few sources of knowledge on the next page. Knowledge is potential power‌ Knowledge is absolutely vital, because you can't apply knowledge you don't have. So the first step is, absolutely, to get the knowledge. You already have knowledge of the playing f ield and the game plan. You probably already have some knowledge of the different approaches and systems available.
K nowledge rema ins potent ia l power until it is applied. But when you have the knowledge of the property playing field and the brilliant property game plan, and you put this knowledge into action, you will unleash the full power of property to create wealth, not just for yourself, but for your children and their children, too.
Now is the time to deepen your knowledge to build the confidence to put your knowledge into action. We are not talking about years of study, because the game plan is simple and the systems already exist. We are talking about dedicating an hour or two a day to really immerse yourself in the property investment world, and through knowledge, building confidence for the next crucial step: taking action.
"Knowledge is absolutely vital, because you can't apply knowledge you don't have. So the first step is, absolutely, to get the knowledge"
"Knowledge is a collective enterprise. Without it understanding is impossible. Ignorance is too often a murderous vulnerability"
Jane Rule
www.reimag.co.za
Whether you are just starting out property investment or whether you are a seasoned property investor, you need to tap into the sources listed below to build and sharpen your property investment knowledge.
"The essence of knowledge is, having it, to apply it; not having it, to confess your ignorance."
Confucius Books
Property investment courses
Literally hundreds of books have been written about property investment in general and about specific approaches and systems. Some books were authored by internationally-acclaimed property experts, and some even became global bestsellers. Others were written by experts right here in South Africa, including the books by Jason Lee, Gordon Mackay and Pieter Louw. Start reading as much as you can to discover how other investors have created success and to learn from their mistakes. At the REI Mag Investor Mall you will find a selection of books by local and international property investment experts, from the comfort of your desk or smartphone.
There are a range of property investment training resources available to investors - from courses and seminars offered by local property experts to CD and DVD training courses produced by the leading international property investment experts. You will also find these at the REI Mag Investor Mall.
Industry publications Industry publications, published by respectable and trusted publishers, will help you to keep abreast of the changes and developments in the industry. REI Mag was awarded the SAPOA Feature Journalism Award this year, placing it among the top property publications in the country. In addition to property magazines and journals, there is also a world of property investment information available online. As with printed resources, exercise good judgement when you select your source of industry news.
www.reimag.co.za
Conferences, seminars and events REI Mag has presented South African investors with a series of power breakfasts, seminars and conferences over the last few years, bringing together some of the greatest property minds to ensure delegates are inspired and empowered by opportunities to interact with the likes of Dr Dolf de Roos and Clem Sunter, among many others. Attending events such as these places you at the cutting edge of what is happening in the property and property investment industries, condensing the expertise and experience of a wide range of experts into powerful knowledge sessions. Join a professional property investment organisation Just like other professionals such as doctors or lawyers, professional property investors join professional organisations which provide them with knowledge and information, access to specialised services and products, including, for example, custom-designed software, as well as an opportunity to network with like-minded people. December 2012 SA Real Estate INVESTOR
19
PROPERTY CASE STUDIES
MORE PEOPLE LIVING IN FORMAL HOUSING According to the official results of the 2011 Census, the number of South Africans living in shacks is slowly decreasing. The number of people living in “ formal dwellings” has risen by just under 10% over the past decade, while the percentage of those forced to live in shacks and other “informal dwellings” has dropped slightly to 13.6%. This is good news, particularly in light of the fact that the population has increased by around 7 million people since the previous census in 2001, bringing the South African population to 51.8 million people, as well as the reality that far more rapid urbanisation and much higher migration had taken place than had been anticipated. Town planners have warned that cities like Johannesburg must brace themselves for a fur ther influx of millions of people. According to Berry Everitt, MD of the Chas Everitt International property group, Human Settlements Minister Tokyo Sexwale made it clear during a recent t wo - day Estate Agency Industry Affairs Summit with leaders in the estate agency industry that he is determined to close the gap between affordable housing and the more established market, and sees the industry playing a vital role in this integration. “We totally agree with the Minister's vision of a de-racialised and transformed housing scenario, and the part that properly trained and professional agents can play in bringing this about to promote widespread wealth creation and e c o n o m i c g r ow t h ," c o m m e n t e d Everitt.
20
December 2012 SA Real Estate Investor
BY MONIQUE TERRAZAS
IRRESPONSIBLE LETTING
HOW DEEP IS THE ROT?
The consequences of irresponsible letting were highlighted again by a recent case in which a deceased estate executor requested Rawson Properties Muizenberg to take over the management of an apartment after the owner/landlord had died. The owner had, wi t h t he help of an agent, rented the flat to an unemployed person. “This placed the client at risk - a violation of the Estate Agency Affairs Board’s code which makes it clear that agents have to act in the best interests of their client,” says Errol King, Rawson Properties Muizenberg franchisee. The tenant had stopped paying rent and the initial agent failed to start eviction proceedings. Furthermore, t h e s h o w e r w a t e r ov e r f l o w e d , resulting in significant water damage to the f lat below, for which the deceased estate was liable. Rawson Proper ties Muizenberg received no response to emails and phone calls to the tenant. However, the lease provided the right to enter the property if it was suspected that the tenant had damaged or neglected it. With the executor's permission, Raw so n Pro p e r t i e s c a ll e d i n a plumber to fix the water leak and a locksmith to replace the locks. A few days later, the tenant laid a charge of breaking and entering against Rawson Properties, alleging that the company had also stolen gold jewellery. “We then received a call from the police to report to the station, where we were told we have to pay the full amount of the missing jewellery or face arrest," says King. "The incident shows that the police are still inclined to act in a highhanded manner, and that there are still landlords and agents who take on tenants without checking their credit and other records.
The property industry's image has certainly been tarnished by what Human Settlements Minister Tokyo Sexwale described as a "series of disturbing events". These included the Wendy Machanik saga, the Auction Alliance debacle and the trouble at the Estate Agency Affairs Board (EAAB). The Minister said that it was unclear how deep the rot was: "There's a stench here. How far does it go back, I don't know."In October, estate agent Wendy Machanik pleaded guilty to 90 counts of theft, totalling R27 million, as well as two counts of contravening the Estate Agency Affairs Act in terms of failure to keep accountable records of her trust account. Rael Levitt resigned his position as CEO of Auction Alliance in February following accusations of rigging proper ty auctions. After months of denying the allegations, Levitt confessed to rigging a proper ty auction in December last year. The Hawks are investigating the company for fraud, money laundering, and a failure to keep accurate records, or wilfully destroying them. In the meantime, following suspensions and resignations from the EA AB board - including the suspension of the CEO followed by a R3 million rand "golden handshake" and the sub sequ ent t er minat ion of her contract - Sexwale announced the dissolution of the board. A Special Investigating Unit (SIU) team was appointed to conduct a separate inquir y. Suspected fraud in the industry's fidelity fund is also being probed. Sexwale commented that the administrator and the SIU would independently help determine "the extent of the rot in the industry".
www.reimag.co.za
RESIDENTIAL HOT SPOTS
PROVINCIAL PERFORMERS
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
Daspoort Estate - City of Tshwane
20.75%
Meyerton Ext 6 - Midvaal
18.89%
Eastgate - City of Johannesburg
10.97%
Windmill Park - Ekurhuleni
16.35%
Vaalmarina Holiday Township - Midvaal
15.99%
Carlswald Estate - City of Johannesburg
10.82%
Western Cape
Western Cape
Western Cape
South End - City of Cape Town
24.99%
Rawsonville - Breede Valley
17.97%
Schoneberg Estate - City of Cape Town
16.39%
Summerville - City of Cape Town
23.29%
Milnerton Ext 6 - City of Cape Town
13.63%
De Zalze Golf Estate - Stellenbosch
11.04%
Tyutyu North - Buffalo City
26.15%
Sunrise On Sea - Buffalo City
10.80%
Bonnie Doon - Buffalo City
7.54%
Alexandria - Ndlambe
25.13%
Abbotsford - Buffalo City
10.23%
Vincent - Buffalo City
7.37%
Eastern Cape
Eastern Cape
Kwazulu Natal
Eastern Cape
Kwazulu Natal
Kwazulu Natal
Stonebridge - Ethekwini
18.78%
Leisure Bay - Hibiscus Coast
Redfern - Ethekwini
15.26%
Ixopo - Ubuhlebezwe
Merriespruit - Matjhabeng
32.14%
Panorama - Moqhaka
Phuthaditjhaba-A - Maluti A Phofung
20.48%
Universitas Ridge - Mangaung
Free State
10.89% 9.78%
Free State
Zinkwazi Beach - Kwadukuza
10.94%
Virginia - Ethekwini
6.55%
Free State 11.97% 9.73%
Woodlands Country Estate - Mangaung
8.90%
Hillsboro - Mangaung
4.12%
GAUTENG
Presenting the Top 5 suburbs per area value band in Gauteng 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
Median
#
Mid Value : R250k – R700k
Suburb
7 year
Median
Mid Value : R250k – R700k
1
Daspoort Estate - City of Tshwane
20.75%
R 660 000
1
Actonville - Ekurhuleni
221.80%
R 360 000
2
Windmill Park - Ekurhuleni
16.35%
R 560 000
2
Vosloorus Ext 25 - Ekurhuleni
214.66%
R 390 000
3
Pageview - City of Johannesburg
15.68%
R 450 000
3
Hospital View - Ekurhuleni
208.17%
R 410 000
4
Alveda - City of Johannesburg
14.47%
R 640 000
4
Villa Liza - Ekurhuleni
203.51%
R 370 000
5
Vanderbijl Park Cw 1 - Emfuleni
14.42%
R 490 000
5
Chief Albert Luthuli Park - Ekurhuleni
193.91%
R 340 000
High Value : R700k – R1.5mil
High Value : R700k – R1.5mil
1
Meyerton Ext 6 - Midvaal
18.89%
R 1 300 000
1
Vaalmarina Holiday Township - Midvaal
135.54%
R 800 000
2
Vaalmarina Holiday Township - Midvaal
15.99%
R 800 000
2
Bronkhorstbaai - City of Tshwane
116.75%
R 1 150 000
3
Kent View - City of Johannesburg
14.48%
R 1 250 000
3
Meyerton Ext 6 - Midvaal
113.41%
R 1 300 000
4
Solheim - Ekurhuleni
14.43%
R 930 000
4
Newmarket Park - Ekurhuleni
107.43%
R 1 150 000
5
Heatherview - City of Tshwane
13.09%
R 810 000
5
Westonaria - Westonaria
105.47%
R 710 000
1
Eastgate - City of Johannesburg
10.97%
R 2 250 000
Carlswald Estate - City of Johannesburg
121.03%
R 3 150 000
2
Carlswald Estate - City of Johannesburg
10.82%
R 3 150 000
Eastgate - City of Johannesburg
97.67%
R 2 250 000
Luxury : R1.5mil+
Luxury : R1.5mil+
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.
inside
RESIDENTIAL
Extreme Outsourcing Mandatory Mediation Housing Value Chain
24 30 32
Unlawful Occupiers' Right To Protection The Constitutional Court has decided to hear an application by 139 former residents of two buildings in Marlboro, northern Johannesburg, who appealed against a High Court order dismissing their application to be returned to two properties they had illegally occupied. The occupiers applied to court immediately after being removed from Marlboro by the Johannesburg Metropolitan Police in August for trespassing. The case highlights the problems faced by cities with rising migration trends and the court has been called on to decide whether unlawful occupiers should be afforded the same protection as people who are evicted from their homes. The Constitution states that no one may be evicted from their home without an order of the court.
Adrian Goslett ,CEO, RE/MAX South Africa “Despite influences of seasonality and other market factors, it is essential for buyers and sellers to maintain a long-term perspective when it comes to the immediate state of a specific property sector."
Martin Bester, Managing Director, Intersect Sectional Title Services "Reducing the energy consumption of a building takes a concerted combined effort from the property owners, managers, tenants and staff - but is a very worthwhile exercise, both from a f inancial and an environmental point of view."
Tony Clarke, MD, Rawson Property “Pessimists are once again advising renting on the grounds that South Africa's economy is struggling and the political changes over the next few years could be radical. It is particularly regrettable that certain estate agents have imbibed this negative attitude."
www.reimag.co.za
Affordable Housing Attractive The South African residential market offers an attractive opportunity in the affordable housing rental segment largely driven by low and middle income earners who do not qualify for bonds and increased demand for housing located closer to areas of economic opportunity. Mr Gerhard Zeelie, Standard Bank Head Real Estate Finance, Residential says, “Investors who select good locations, efficiently manage their assets and look after their tenants can reap good returns from affordable housing rentals. Rentals in the affordable housing rental market can typically offer returns of between 8.5% and 9% after tax, assuming conservative gearing and taking moderate capital growth into account.” The returns offered by the upper rental market are significantly less, usually as a result of the lower rental yield achievable on these properties and the fact that the capital growth outlook is lower. He adds that the most important element to consider is economies of scale. Standard Bank Real Estate Finance typically funds large projects, of 150 units or more, customarily with a gearing ratio of around 60% debt with the balance funded through equity. The best way to mitigate market risk in larger developments is to plan the development based on a phased approach. According to Mr Zeelie, investors holding sectionalised units are at an advantage since these units can be sold either together or individually, which allows for flexible exit strategies. For example, this allows an owner to sell say 100 out of a complex of 500 units, if the price and timing is right.
December 2012 SA Real Estate INVESTOR
23
MANAGING
BY KOOS DU TOIT
Extreme Outsourcing Your strategy for success
G
lobally, outsourcing continues to gain momentum as an international business success strategy. A buy-to-let property investment business allows business owners to take this outsourcing model to the extreme. Originally, the concept of outsourcing certain non-core functions of a business was simply a matter of reducing costs. But in today's complex and highly-regulated business world, the cost factor has become less important than the ability to access expertise and experience in numerous business areas that are becoming ever-more complex and specialised. From IT and marketing, to tax and accounting and even HR management, companies can no longer keep up with the legal and compliance requirements imposed by legislation, regulation and customer demands, and the only viable solution is to outsource these functions to reputable and professional specialists. For these reasons, even traditionally core business functions are now being outsourced. The buy-to-let property investment business model certainly allows business owners to implement this outsourcing model to the extreme. In fact, every function within a buyto-let property business can - and should - be outsourced effectively to specialists in their field, leaving the buy-to-let property business owner free to focus on building and expanding the property portfolio.
STEP ONE The very first step to establish a buy-to-let property investment business is to establish and manage a trust. This can - and should - be outsourced to professionals who are up-todate with the current laws and regulations 24
December 2012 SA Real Estate Investor
governing trusts and who have the expertise and experience to set up and manage the trust to the business owner's benefit and in line with his/her particular circumstances.
STEP TWO Nex t, a proper t y investor wou ld need some training and a system to implement to ensure the success of the buy-to-let property investment business. This can be outsourced easily and cost-effectively by joining a professional property investment organisation which provides all the ongoing training, knowledge, systems and tools to run a streamlined and successful property investment business.
STEP THREE
The next step is to identify the right investment properties. And again, if you have partnered with a reputable and professional organisation, you will have access to carefully selected, pre-screened properties, including prelaunch notif ications of new developments and exceptional discounts negotiated on the strength of the organisations' bulk buying power. Once you have decided to acquire a property, you will need finance and legal services. As part of a professional organisation, you will have access to pre-screened professionals who thoroughly understand the property investment business, such as experienced specialists, who work with hand-picked conveyancers and other legal experts. Once the property has been acquired, it must be tenanted and managed. This important function can - and should be outsourced to a reputable and professional rental and property management company, who will find, thoroughly screen, select, place and manage the tenant - from collecting
the required deposits, doing pre- and postoccupation inspections and dealing with rental collection and other tenant management issues, as well as take care of the property management and maintenance - all for a reasonable fee. Propert y investors can - and should outsource the accounting, insurance and tax aspects of the business to a professional accountant and tax advisor who is up-todate with the latest legislative changes and developments, as well as the compliance requirements. Once these functions are outsourced, you have experts in each f ield managing each function of your buy-to-let property business and all that remains to be done is for you to keep a tight rein on all these outsourced specialists to ensure their services are delivered as per the agreed standards. Fortunately, you don't have to spend years finding the right people and companies to become your outsourcing partners. You can simply join a professional property investment organisation, which provides preferential access to a network of professionals who have been carefully screened, are continuously monitored in terms of service levels, and most importantly, who understand the property investment game and the market. In allowing buy-to-let property investors to harness the globally-recognised outsourcing business success strategies to the maximum, buy-to-let property investment business again confirms itself as the ultimate business model.
RESOURCES P3 Investment Group www.hope.co.za
www.reimag.co.za
ACQUIRING
BY KOOS DE TOIT Professional investors factor in a vacancy rate of 5% into their cash f low calculations, as a risk management measure, even if the current vacancy rate for the area is lower. Speak to the estate agents and letting agents in the area to establish the market demand in the area, the current and future developments in the area and the average vacancy rate for the area, all of which should be factored into your investment decision.
TO HIRE OR Address your risk in advance
A
s with any other investment, buy-tolet property investment entails risk, including vacancy risk. But instead of simply abandoning buy-to-let property investment - one of the most effective and eff icient wealth creation systems - simply because of a risk factor, professional buy-to-let investors implement proven risk management strategies to manage this risk professionally and to ensure they can still reap the massive rewards of a buy-to-let property investment strategy. Indeed, vacancy risk is a substantial risk for a buy-to-let property investor. Without a tenant, the buy-to-let investors is not receiving an income from the property, and must - in addition - fund the expenses associated with the property out of his/her own pocket. This can have a significant impact on the investor’s cash flow and the viability of the investment. However, pure common sense dictates that even the best property in the best area will not be tenanted every day of every year for the next ten or twenty years. For this reason, professional property investors understand the risk thoroughly and address it before they purchase an investment property. Fortunately, with the right system and the right planning, each one of these risks can be addressed in advance to ensure vacancies are minimised and that a vacancy does not derail the investor's investment strategy. Let's look at each of these risks and how to address each one professionally.
26
December 2012 SA Real Estate Investor
Understanding the risk A vacancy could be the result of a number of issues, and there may be a number of contributing risk factors, each of which needs to be addressed. • Inadequate research before the property was acquired • Property not suitable to market demand • Oversupply of rental properties in the complex or area • Vacancy rates not factored into buying decision • Property is not marketed correctly • Rental asked is too high • The property is in poor condition Inadequate research One of the very first aspects of a property that professional property investors investigate is the market demand in the area. Is the demand the strongest for entry-level properties or for secure units in a sectional title development? You also need to investigate the current developments and planned developments in the area to ensure the market will not be flooded by similar units as current and future developments are completed. Vacancy rates However, even if you have found a good property that matches the demand in the area, and have established that the area will not be flooded by an over-supply of properties in the future, you should still factor in a vacancy rate into the cash flow projections on which you will base your investment decision.
The property is not marketed correctly A vacancy may simply be due to the fact that the property is not marketed properly. Professional property investors use a reputable and professional letting company that already has a database of potential suitable tenants and the expertise and resource to advertise the property widely and to match your property with the right tenant. If your property is not marketed correctly, you may end up with a high turnover of tenants. Using a professional rental agency will ensure that you find the right tenants, who are trustworthy, with good payment histories and solid references from previous landlords, and who can be expected to stay longer, pay regularly and on time, and look after your investment better. Rental is too high If you have done your research properly before buying a property, you would know what the market-related rentals are. However, if you cannot find a tenant at the market-related rental, consider reducing the rental on a shortterm lease basis. Receiving a lower rental for three to six months is far better than receiving no rental income at all. Property condition A vacancy may be the result of the condition of the property, if it is damaged or in a poor state of repair. For this reason, it is crucial to get a deposit from every tenant for the purpose of repairing damages caused by the tenant. Professional investors also make further provision in their cash flow for ongoing maintenance, and for the repairs - such as repainting and carpet-cleaning - which must be completed before a new tenant can be placed.
RESOURCES P3 Investment Group www.hope.co.za
www.reimag.co.za
Q & A SERIES
BY PIETER LOUW
Buying More Than One Property
What strategy is best? In this sixth article in our series aimed at enlightening and informing everyone who has not yet shed their fears in the world of real estate investment - Pieter Louw, founder of the P3 Investment Group, answers the questions of wouldbe and novice investors.
“How many properties should I buy? Is there a way that I can be assured not to burn my fingers or that I do not bite off more than I can chew?” Everyone is different. Our dreams, our goals and our circumstances differ. The first thing that is important therefore is for any individual to establish what those dreams and goals are in order to create a meaningful property investment strategy. People who just jump in after seeing the promising picture of property investment are often driven by greed. These are the ones who are inclined to get into trouble because they have not properly planned their newly found business venture. A typical well-planned strategy would start with the question: “How much money do I need on a monthly basis to live comfortably and make most of my dreams come true?” Let us assume that an average couple needs about R30 000 in passive income to be able to stop working and still have a fairly adventurous life. In order to get to such an amount, we need to
break it down to the net income that an average single entry level property would render us. A property of about R400 000 should be able to deliver a rental income of around R4 000 per month, and given the rates, taxes, levies and management fees, could possibly provide a net income of about R3 000 per month.
embarked on a property investment career can therefore look forward to being financially independent within about fifteen to seventeen years from now. The number of properties that any individual would be able to buy at any given time have to be in line with the individual’s cash flow ability.
In other words if I need to earn R30 000 per month, it dictates to me to buy ten such properties. The income of these properties are linked to inflation which means that ten properties’ income will roughly always buy me about R30 000 in the current time value of money.
Since most average people do not have spare cash available, a concerted effort must be made to free some cash f low from other resources. People rarely have enough insight into their own affairs to do this effectively, so it is highly recommended to speak to a financial adviser who understands property and is not incentivised to sell other types of investments. The guidance of such a mentor would also protect the new property investor from making wrong decisions like buying more properties than what can be safely afforded.
In reality this could translate to spending about f ive or seven years acquiring these properties and a further ten years or so to pay them off completely. People who have not yet
“What if I do not earn enough to qualify for a bond?” We have already discussed the ability of an average person to obtain several bonds along the way. But what if an individual’s income is below average? Well, to get into the property market, one could buy the cheapest of cheap properties and still be successful. In other words, if you can find properties for under R300 000, this can work for you. There are enough properties available in this category, but it dictates that the investor has to earn at www.reimag.co.za
least R10 000 per month in order to qualify for the bond. In cases where a salary does not meet this threshold, it would be necessary to join forces with another person or people to provide enough earning power to become eligible for bonds. Remember that all the trustees of a trust (with the exception of an independent trustee) can pool their resources towards qualifying for a bond. If a typical husband and wife trusteeship is inadequate, it might be
necessary to add another creditworthy trustee to the trust in order to start with the building of a property portfolio.
RESOURCES P3 Investment Group www.hope.co.za
December 2012 SA Real Estate INVESTOR
27
MANAGING
BY JOHN ROBERTS
When Discussions Break Down A case study of noise complaints
U
nless you really do own property in the middle of nowhere with miles of open space between your home and the neighbours, the likelihood of dealing with people living within close proximity is a reality in modern society. Hence, the outcome of a case bet ween East London neighbours - the judgment on which was delivered earlier this year - has an interesting message for owners and investors. The case study The area was zoned agricultural, but in 2007 Sammy and Simon Amos Brown began using their property as a conference and wedding venue. They converted a building close to the boundary line with neighbour Alexa Bickell, who was not pleased with the new noisegenerating business. W hen neighbourly discussions broke down, she took the matter to court and won resoundingly. No noisegenerating functions could be held until the present structure had been demolished and a soundproof one built instead - and that building could not begin until issues raised by the neighbours had been incorporated into a design approved by the Economic Development and Environmental Affairs department. That Bickell had to return thrice to court because her neighbours were in contempt might speak volumes to neighbourly relations. However, the outcome of the April decision could have left them with little doubt about their future if they again transgressed - they were slammed with a R20,000 fine payable within 10 days with a six-month jail term waiting should they fail to do so. They were also warned that if found in contempt of court again in the next three years, they would be jailed for six months. This was their reward
28
December 2012 SA Real Estate Investor
for having "paid scant regard to the rights and entitlements of their neighbours". The interesting element of this judgment is the implication it has for neighbourly relationships and the consideration people have to pay in ensuring their activities do not interfere with the well-being of those living within earshot.
suburban acceptance levels or times. This could be vital should you need to take the issue to the authorities or, as Bicknell did, to court. However, there are always unreasonable people and should you realise that would be the case with the neighbours, rather call the police to handle the issue than put yourself in danger.
The consequences of noisy neighbours Noisy neighbours can detrimentally impact on your life and the enjoyment thereof - or in the case of investment property - on the enjoyment tenants have in living in that space and thus their willingness to renew the lease or even terminate before term.
Four-legged neighbours On a related matter, because in fact the noisy neighbour may not be two-legged, the issue of pets in investment properties can also be a contentious one. Investment properties are essentially that - a means by which to generate income and grow an asset base.
On one side, noisy neighbours can merely distract you from fully enjoying the simple daily activities - watching television, listening to music or reading a book. On the other hand they can affect the ability to secure sufficient sleep, spiralling into related health issues. Psychologically, experiencing excessive unwanted noise can be destructive and, in persisting unrelentingly, can become an issue way beyond its confines to something akin to road rage. When the affected party is your tenant, the issue becomes yours too.
While in some complexes, pets are forbidden according to the body corporate rules and thus not an issue with tenants, the decision to allow tenants to have pets on your property is yours to make. Both tenants and landlords must be clear upfront on the permission to prevent arguments down the road.
What is the answer to noisy neighbours? The first step must be to personally approach the problem, because in reality the neighbours may not be aware that their actions are disturbing. A less personal approach would be writing a letter explaining the sleep deprivation, but remaining polite as initial aggressive behaviour is unlikely to desired outcome. Should those outlets fail, the next approach would be collecting evidence - a diary of noisy activities that would be beyond reasonable
From a tenant's perspective, having a pet can be viewed as a major drawback by landlords, particularly if there are other applicants without pets. However, should landlords allow pets, the lease agreement must specifically state the nature and number of the pets included. One small dog does not translate into two great Danes. It would also be advisable for the lease to state that carpets be drycleaned and damage rectified including the lawns and garden. In a nutshell, dealing with neighbours or pets merely means keeping a cool head.
RESOURCES Just Property Group www.justpropertygroup.co.za
www.reimag.co.za
Studen t
SMART MOVES
BY JOHN FLETCHER
Mandatory Mediation Coming To South Africa Will this streamline the dispute process?
T
he South African Department of Justice’s proposed mandatory mediation scheme was initially due to be launched on 1st April this year. The idea was that the Civil Procedure Rules of the High and Magistrates’ Courts would be amended to force parties to go to mediation before being given a date for set down for trail. This would have brought SA roughly in line with developments in many countries around the world where mandatory mediation in one form or another is being introduced. In the last year it has come into force in Italy and Germany and now France is following suit; Argentina has had it for years and Brazil is about to follow. It exists in various guises in the States, Australia and New Zealand, some of the Far East tiger economies and even conservative Britain has led the way in applying judicial pressure on parties to go to mediation or risk an adverse costs order.
as soon as the defendant files his appearance to defend. This is very early in the procedure and in the absence of even seeing the defendant’s plea – there is some doubt as to whether this is wise. The other big problem is capacity: if every single case in the High Courts and the Magistrate’s Courts is going to go to mediation, where are the mediators? An organisation in Cape Town is proposing to run a case management system in which the parties would be sent to a two hour “mediation” session before a mediation officer - who would run four or five cases a day, day in day out.
However, the SA scheme was then moved back to 1st July and then 1st September and now into next year. There has been no official explanation given, but the reason for the delays is not hard to see. The change to the Court Rules involves every case being sent to mandatory mediation
This is where Royal Institution of Chartered Surveyors (RICS) is positioning itself, and whether or not the proposed scheme comes into being in the current form, RICS believes that such is the international precedent and commercial pressure in the South African built
30
December 2012 SA Real Estate Investor
This is not really what most people understand by mediation, and the Department of Justice seems to have recognised that there will need to be a mechanism by which cases of substance can bypass this stage and be sent to a real mediator for real mediation.
environment for expert dispute resolution, that demand will build. RICS is aiming to create the RICS President’s Panel of about 200 built environment expert mediators across SA so that it can promote their services to government, business and the ultimate consumers of dispute resolution in the property and construction industry. As far as anyone can be confident, given the volatile nature of SA politics, RICS believes that some form of court encouraged mediation will develop in the country and it wants its panelists to be ready to provide the SA public with the service they deserve. This is reflected in the current growing interest in private, robust and expert dispute resolution on the ground, both in SA and north of its borders, and RICS is providing training in SA designed to allow individuals and the firms for which they work to position themselves to take advantage of this. The scope for robust, expert mediation in the built environment is significant, as the following three contrasting case studies illustrate.
www.reimag.co.za
Client vs main contractor
Contractor vs sub-contractor
One of the oil rich Middle Eastern countries contracted with a Far Eastern developer to create a series of artificial islands just off its Gulf shoreline. The islands are built by creating an outer shell of rubble and concrete around the perimeter, and then pumping dredged sediment from the bottom of the Gulf over the wall to fill the centre. Once the pile is high enough, it is compacted and houses built on it. If the compaction is not done properly, the soil settles and the houses fall down. This happened in this development and the client sued the developer. The contract provided for a month’s mediation period and RICS provided the mediator from its international panel.
A large hotel/office/residential complex was being erected in the heart of the City of London. The main contractor instructed a specialist subcontractor to clad the entire exterior in a new type of glass cladding material. Plans were drawn up; a price of £3.6 million was agreed and the sub-contract was signed.
The mediator spent weeks on site talking to both sides and the subcontractors involved. He reviewed all the documentation and the experts’ reports and then shuttled between the two sides for the full month period. The case settled, but significantly not on the tight legal questions of causation and liability which would have occupied the minds of a court or arbitrator, but on the commercial basis of the further work already in the pipeline between the client and main contractor and eventually a deal was thrashed out that allowed both parties to get on with the job of tearing down the houses that were cracking, re-compacting the areas that needed it and rebuilding - whilst making the plans they needed for the next development in which the units had already all been sold offplan.
"The change to the Court Rules involves every case being sent to mandatory mediation as soon as the defendant files his appearance to defend. This is very early in the procedure and in the absence of even seeing the defendant’s plea" www.reimag.co.za
T he sub-cont ractor sta r ted work and substantial changes to the project were discussed at various stages. Some of the changes were carried out, however there was disagreement about what changes had been agreed, how they were to be priced and when they were to be paid for. Because the sub-contractor had been asked to make repeated changes to the original design, and had not been paid for what he thought was due, the work stopped leaving the overall construction project in chaos. Court proceedings ensued, the sub-contractor claiming £1.5 million for unpaid work and the main contractor counter-claiming damages for delay and breach of contract. The proceedings continued for 3 years and legal fees ran up to approximately £150,000 for each side. Estimates for future legal costs were very substantial. The sub-contractor’s solicitor talked to the main contractor’s solicitor about possible ways forward that would save both parties further costs and time in legal proceedings. They agreed to recommend mediation and shortly afterwards both parties agreed to mediate. After three years of dispute, a settlement was reached, with the mediator’s help, in less than seven hours - and at a cost of less than £4000 for both parties.
Neighbour vs neighbour At the other end of the scale, disputes between neighbours are often ideal for mediation. In one recent one Mr. and Mrs. A submitted plans for an extension to their house that would replace the garage they had built ten years before their current neighbours (Mr. and Mrs. B) moved in. The garage ran only a metre away from the side of the B’s house, but curiously was not parallel to it. The boundary fence between the two properties was parallel with neither building and where the garage butted up to the boundary fence, there was an odd kink in the fence of about 15 centimeters. The plans for the extension included a small jutting out wall built up to the line of the fence, thus removing the kink. The Bs objected saying that if one drew a straight line from the back of the property to the front, the kink disappeared and the actual boundary ran along the edge of the garage i.e. that it had been built on the boundary and that the current line of the fence was misleading. Lawyers’ letters were exchanged and the parties were gearing themselves up for a court case, all over a 15 cm stub of wall across a gap neither of them had ever thought about before. They were persuaded to try mediation and RICS provided an expert mediator. He did not decide the matter, but using his expert knowledge was able to show both sides exactly where the difficulties lay in proving their cases and how much it would cost them in experts’ fees, surveys, expert reviews of the title deeds and lawyers. The real problem was that the proposed jutting out wall would have set in stone the A’s version of where the boundary lay; whereas the existence of the kink was interpreted by the Bs as showing that it lay where they said. Common sense prevailed and the parties agreed to build the corner without the jutting out stump; left the kink in the fence where it was and once the plants grew up, no one could tell the difference.
RESOURCES Royal Institution of Chartered Surveyors www.rics.org
December2012 SA Real Estate INVESTOR
31
ACQUIRING
BY OLGA KOMA
The Housing Value Chain Who is the weakest link?
T
he housing market is driven by the basic principles of supply and demand. In a perfect market, households would be able to afford what developers would build, and demand would equal supply. However that hardly ever is the case, especially for the South African market where the majority of the population cannot afford to meet their own housing needs and demand far exceeds supply. Since 1994 about 2.5 million units have been built by our government and given for free to low income households. That is astonishing considering that no government in Africa has ever undertaken such an endeavour. Besides the impressive development, the current housing deficit is estimated at 3 million units and we have heard of a new deficit in the so-called “gap” market, comprising households who earn too much for the subsidy but too little to afford the least expensive newly built house.
32
December 2012 SA Real Estate Investor
So why is the deficit still so high, after the applaudable effort by government to provide housing? When the Reconstruction and Development Programme (RDP) was introduced in 1994, about 85% of the population was eligible for a free house. As income levels increased for some South Africans over the years, there still remains 60% of the population that earn less than R3 500 per month and thus could qualify for a free 40m 2 house. To build this 40m 2 house costs government anything between R56 000 and R200 000, inclusive of land and services. Mortgage accesibility Twenty five percent of the population earns within the region of R3 500 and R15 000 per month. They are not eligible for the RDP house
as they earn too much, hence they have to find other means of accessing a house. Assuming a twenty-year mortgage at prime (9 percent), and 30 per cent instalment to income, households within this income bracket could afford a loan of between about R116 000 and R500 000. Now, when we look at the current residential market, the price of the cheapest house built by a developer costs R245 000 in Palm Springs, in Evaton, South of Johannesburg, or R327400 for a two bedroom 40m 2 house, found in Bram Fisherville (a suburb in Soweto, south of Johannesburg). These houses are affordable to households earning between R7500 and R10 000 per month, assuming no other debt. There is no new housing supply for those earning between R3500 – R7500, and to make it worse, not enough houses are built in that bottom range. The other 15% of the population that earn R15000 or more fall into the regular market where there is sufficient www.reimag.co.za
housing supply. Immediately we can see what is wrong with the picture that was painted above. When Government spends up to R200 000 to give away a 40m 2 house, developers have to offer more value (better finishes) for something that buyers must pay for – but affordability constraints limit how much they can charge. Developers have since 2007 decreased their activity within this income sector and have moved into other lucrative sectors. Hence, the neglect of what is known as the gap market. The gap market is an example of what happens when links within the housing value chain do not function well. The housing value chain The housing value chain involves all the processes that are needed in order to deliver a house. These processes can be divided into six links: Property Development Rights, Land Availability, Developer Finance, Infrastructure Services, The Construction Industry and Access to End User Finance. Each of these links within the value chain is equally essential in the process of the housing market, and the value chain is as weak as its weakest link. Property Development Rights are the rights of ownership, the quality of land registration systems, protection rights etc. And these have to be well functional. The high cost of well-located land leads to spatial segregation.
Developers often need upfront payment in order to access land before banks can grant them loans. As such these costs are most often passed onto the buyer which is why in some instances housing units are sold off in sections before construction even begins. Infrastructure Services also need to be on par with municipal plans because the developer cannot bear all these costs. The gap in the market The construction industry has proven to be inherently important in this Gap Market, which was largely influenced by government policy. Developers are profit driven and will go where there are fewer problems and the most profits. According to Stats SA, construction of residential houses greater than 80m 2 has increased by 5.5% whereas construction of houses less than 80m 2 has increased only by 3.4%. Developers cannot compete in the same market as government because it is expensive to build a 40m 2 house and the profit margins are minuscule in comparison to those at the top end of the market. That being said, the gap market value chain has many weak links. Land is still a contested issue in South Africa and securing land tenure is a challenge. Developers are also having difficulty in accessing development finance as banks’ lending criterion is being structured.
"Government has responded to this by promising tax incentives for developers to promote the development of houses that cost R300 000 or less. And then of course the introduction of the FLISP scheme"
Municipalities are constrained in their finances and thus unable to provide the necessary infrastructure for new developments, and also a big challenge is mortgage finance as banks are becoming more stringent in their lending and consumer indebtedness is on the rise. Housing supply need There is a clear need for housing supply within the gap market, besides having listed some of the challenges experienced within this sector it remains a vast sector that at the end of it all still needs housing. Fortunately there are ways of increasing affordability levels and catering to this sector. The government has just proposed a few ways in which they are willing to help stimulate activity within the sector. In February of this year during his State of the Nation Address, President Jacob Zuma introduced a revised housing subsidy scheme called the Finance Linked Individual Subsidy Programme (FLISP) which essentially aims to give households (who earn between R3 500 and R15 000) a subsidy that ranges between R10 000 and R87 000. This scheme is an attempt by government to stimulate the “gap market” and help households access mortgage finance. The lower a household’s income the higher the subsidy they will qualify for. The gap market is an example of what happens when links within the housing value chain do not function well. Government has responded to this by promising tax incentives for developers to promote the development of houses that cost R300 000 or less. And then of course the introduction of the FLISP scheme, which will now serve about 85% of the population who will once again be dependent on government. Housing microfinance (HMF) also provides a solution for affordability limitations among households, in that it restructures the total housing cost into smaller, financeable phases that support the incremental delivery of housing, step-by-step. This offers developers an interesting challenge – how to structure their development process in such a way that it can be affordably financed by the very large and currently unserviced target market – the so-called gap market.
RESOURCES Centre For Affordable Housing www.housingfinanceafrica.org
www.reimag.co.za
December2012 SA Real Estate INVESTOR
33
E -TOLLLING TO GO AHEAD Cosatu president S'dumo Dlamini has announced that the government is implementing the contentious electronic tolling system in Gauteng at a reduced cost. The system is set to come into operation in February 2013. Dlamini said that the ANC presented Cosatu with a ‘detailed response’ to the arguments it put forward opposing the tolls. ‘It would appear that they see e-tolling as the only option, they don't see any alternative,’ Dlamini said. Cosatu was presented with a reduced amount for the tolls, at 30c/km, after Sanral said last year it would be 66c/km. Dlamini could not confirm whether this was the final amount that motorists would pay, as he believed there would be further consultation on the costs. He said Cosatu was not backing down from its opposition. It would take the government's stance to its Central Executive Committee for a decision on what action to take. Peter Conradie, legal representative of the Opposition to Urban Tolling Alliance, also said the battle was far from over.
inside
COMMERCIAL
The Transport Corridor Challenges Of Transformation Get The Best Returns
36 38 40
SA REITS IN 2013 After a six-year journey, one of the most f lexible REIT (Real Estate Investment Trust) regimes internationally has become a reality in South Africa, which could have its first SA REIT from April 2013. In a significant development for South Africa’s publicly traded real estate sector, formal REIT tax legislation was announced and published in the Taxation Laws Amendment Bill of 25 October 2012. Parts of the bill come into effect immediately while others will apply only after REIT conversion. From 1 April 2013, any qualifying company with a tax year starting on 1 April or after can adopt the new SA REIT structure at the start of its tax year.
PROPERTY HEARSAY
INCREASE IN RATES UNLAWFUL
Sisa Ngebulana, CEO, Billion Group
The City of Johannesburg unlawfully increased rates on business, commercial and industrial properties in 2009-10, the SCA ruled. It delivered judgment in an appeal by the SA Property Owners’ Association (Sapoa) against an earlier finding for the municipality. The SCA found the Johannesburg council and mayor had not complied with the relevant provisions of the local government’s Municipal Systems Act, its Municipal Finance Management Act, and its Municipal Property Rates Act. All three Acts make provision for community participation. At the time, the municipality decided to increase the rates on business, commercial and industrial properties by 28%. This came after its budget, providing for an increase of 10%, had been tabled and advertised for public comment. The High Court found for the city, and held that the levying of property rates was not an integral part of the budget process. The SCA, however, held that the decision to impose the additional 18% was irrational and unfairly discriminated against property owners. The judgment declared the council had to comply with the relevant provisions of the Acts when it wanted to adopt a budget with rates materially different from those in the tabled budget.
“Pre-letting commitments from South Africa’s most exciting retail, fashion and leisure brands have been received for both Bay West and Forest Hill malls. The sites have been cleared, and earthworks are underway.”
Marius Muller, President , South African Council Of Shopping Centres “SACSC is committed to nurturing South Africa’s retail network on all levels – networking, education, research and wherever there is a need to connect, communicate and collaborate.”
www.reimag.co.za
December 2012 SA Real Estate INVESTOR
35
INFRASTRUCTURE
BY JONATHAN COURTWELL
Exploiting The Transport Corridor In South Africa New developments bring benefits
A
number of opportunities to derive extensive wealth have arisen across South Africa in recent years with the development of a number of new transport corridors. The surrounding commercial (as well as residential) development opportunities within these corridors are extensive. Although not an exhaustive list, the following new transport corridors have provided property developers and investors with an opportunity to build and buy into wealth creating real estate: n The Gautrain corridor between central Johannesburg and Pretoria and the Johannesburg airport on the eastern side of main Gauteng development corridor n The road link network between Pretoria and Nelspruit n The road link to Richards Bay along the north coast of KwaZulu-Natal n The new KwaZulu-Natal (“King Shaka”) airport on the north coast of KwaZulu-Natal n The Rustenburg Rapid Transport system (scheduled to be completed in 2014) Future planned transport and infrastructural developments bet ween D u rban and Johannesburg include: n The development of Cato Ridge on the eastern coast as a dry port n The sale of the old Durban airport site to Transnet so that a dug out port can be constructed n The extension of commuter rail network to reach Pietermaritzburg n The development of Harrismith as a logistics hub 36
December 2012 SA Real Estate Investor
n The setting up of several logistics hubs throughout Gauteng These new corridor developments act as a catalyst for other new real estate development, which development typically follows this (nodal development) pattern: u catalyst u industrial development u residential development u social development u retail development u off ice development u more residential development u more retail development. Some of the new property developments which have already occurred along these routes detailed below. The Gautrain network The Gautrain project commenced in 2006 and over 11 000 people were employed to work on the fifty sites which the project impacted along its route. Now in full operation, the Gautrain links Pretoria, Johannesburg and OR Tambo airport by quick, efficient rides. Property development along the route has been, as can be expected, dynamic and has resulted in many wealth creation opportunities for developers and investors. These include: n The transformation of the mi xed-use precinct in Rosebank (directly opposite the new Rosebank station) to include a R600 million upgrading of the retail developments such as the Zone, the Firs and the Galleria, all of which are within walking distance of Gautrain’s Rosebank Station. n Rosebank has also seen the development or refurbishment of new hotels (including,
for example, 45 on Bath, a boutique hotel offering exceptional comfort to both business travellers and tourists. Standard Bank ’s new office development – which shall boast env i ron menta l ly-f r iend ly const r uc t ion components (please see table 1, ) and energysaving processes – shall be complete and ready for occupation in early 2013. n The development or refurbishment of several world-class hotels, entertainment centres and shopping centres within Sandton such as the Balalaika, Michelangelo, Hilton and Garden Court Hotels, Sandton Towers, Nelson Mandela Square and Sandton City. Pedestrian access to these destinations will be improved as most are within walking distance from the Sandton station. n The construction of a 40-storey skyscraper and the development of an additional two hundred thousand square metres of office space since 2009. n Although development within this node is slower than everyone would have liked, A lexandra is receiving both private and public investment, the latter being under the government’s A lexandra Urban Renewal project. n Linking Johannesburg and Pretoria is the Blue IQ Innovation Hub – a strategic development initiative of many years by the Gauteng provincial government in association with the CSIR and the University of Pretoria. A number of developments around scientific and technical research and development have been commenced within this development band. n A ten-hectare land portion close to the Centurion station is to be redeveloped to www.reimag.co.za
include an ultra-modern convention centre, hotel precinct, residential developments and new office developments. This proposed mixeduse development represents one of the best investment opportunities within South Africa at present. 132 embassies and four prominent universities are located within the greater Pretoria precinct and the opportunity to tap into the service provision to these markets abounds. n Centurion lakeside – a short GautrainBus ride from the Centurion station – is to be revamped and improved with the lake, itself, being rehabilitated to improve its attractiveness. n As administrative headquarters to our national government, Pretoria’s central business district remains a f irm target for property investment, an aspect of our development terrain that has been somewhat under-rated in recent years: a new series-development and inner-city R10-billion development termed Re Kgabisa Tshwane will revitalise this inner city and re-establish Pretoria as a leading city comparable to both Cape Town and London. n Residential development in both Hatfield and Centurion has risen exponentially as a result of the train and bus transport connectivity which the Gautrain concept has provided while east of Beckett Street, Hatfield’s residential area is changing into an exclusive business district as property owners avail of the consent-use zoning rights within this node. The value-extraction opportunity herein lies in converting- or redeveloping- residential units into commercial office accommodation to correlate with business growth. n Rhodesf ield – another Gautrain station site – will also be revised within the local authority’s Spatial Development Framework (a document which property developers should
obtain from all local authorities in order to see where development opportunities can best be exploited) at a level exceeding R800 billion. Both residential and commercial development is planned for this area and private participation is an excellent opportunity for value creation via property development. Kwazulu Natal’s king shaka airport The most significant catalyst for future property development near KZN’s new airport – and, in line with international development trends - is the proposed iDube trade port and associated the multi-billion rand Wewe Driefontein mixed-use development which shall boost the province’s manufacturing and services potential by R50 billion.
"A number of opportunities to derive extensive wealth have arisen across South Africa in recent years with the development of a number of new transport corridors" Having been identified in the 2011 census as South Africa’s second-most populous province, this boost to the KZN economy will create sustainable employment for at least two hundred and fifty thousand people by the time of its completion and the associated real economic growth for this region abounds with possibility. The Wewe Driefontein project lies seven kilometres north west of King Shaka airport. It will see about 3 500 houses being built there with at least 600 of these falling into the low-income or affordable-housing category and the remaining mixed-use development will set aside 150 hectares for light and general
GRAPH 1 VALUATION METHODOLOGY
EXAMPLE
Land costs
(available bulk) X (bulk rate per square metre)
(1 000) X (R600) = R600 000
Construction costs
(size of development) X (construction cost rate per square metre)
(4 000) X (R6 900) = R27 600 000
Professional fees
construction cost) X (professional fee rate, expressed as a percentage of construction cost)
(R27 600 000 ) X (12%) = R3 312 000
Holding costs
(monthly holding costs) X (number of months during which the development shall be held prior to completion
(R14 000) X (23 months) = R322 000
Finance costs
(amount to be borrowed) X (annual interest rate/12) X (number of months from drawdown to completion)
(R31 834 000) X (10%/12) X (20 months) = R5 305 667
COST ITEM
TOTAL DEVELOPMENT COSTS
R37 139 667
industries and services as well as 30 hectares for the development of an office and business park, storage, warehousing and distribution service accommodation. This development shall form a measurable part of the Priority One KZN Provincial Growth and Development Corridor which runs from eThekwini (specifically, Durban’s business district) to KwaDukuza along the north coast of KwaZulu-Natal. Worthy of final mention is that a further 16 two-hectare plots have been allocated towards high-intensity agricultural production and about seven hectares is earmarked for commercial and retail shopping centres, recreation facilities and conservation areas. This development shall complement the Tongaat-Hulett Cornubia housing project between Umhlanga and Phonix on KZN’s north-coast, which residential project shall include sustainable housing components for Natal’s residents. Naturally, this estate will need to contain social development (such as schools and hospitals) as well as retail centres and a proposed 90 000m2 shopping centre is currently being tenanted for development by Investec Properties. Modern, innovative shopping centres comprise open-air structures which allow shoppers to enjoy a life-enhancing environment away from home with a series of piazzas and landscaped open spaces being interspersed among the shopping areas: this proposed new development will include many attractions such as dedicated fashion wings, sporting features, entertainment clusters, child-friendly areas and food-emporium sections. Opportunities for property investors A l l this prov ides many va lue creation opportunities for investors in the property sector but, where (long-term) profit and value remains the motive, it is imperative for us to ensure that our financial models are accurate. Thus, costing the development and the real income potential is critical. The adjacent table depicts the costing model that should be employed.
b
RESOURCES Courtwell Consulting www.courtwell.com
Table 1: development component costs www.reimag.co.za
December 2012 SA Real Estate INVESTOR
37
LEGISLATION
BY RUI MARTO
Meet the Challenges of Transformation How will the new property sector charter affect your organisation?
T
he Property Sector Charter, gazetted in June 2012 is set to transform the property sector. The objectives of the Sector Code include the promoting of economic transformation in the property sector in order to enable meaningful participation of black people including women, youth and people with disabilities. It is aimed at promoting property development and investment in underresourced areas, which enhance infrastructure and encourages investment and support in small enterprises. How does the Property Sector Code affect you? Broadly speaking the Code will apply to all parties who are members of the Charter’s member organisations, which covers most parties involved in commercial and residential property. In most aspects the Property Sector Code is similar to the Generic Codes and shares the same status as the B-BBEE codes of Good Practice and is fully binding between and among businesses operating in the property sector. In terms of the Generic Codes organisations are required to comply with BEE targets in terms of seven key aspects, namely:l Ownership; l Management Control; l Employment Equity; l Skills Development; l Procurement; l Enterprise Development; and l Socio-Economic Development.
The Propert y Sector Code specif ically introduces an eighth element of the scorecard called “Economic Development”. How does this affect your organisation? Entities undertaking new developments are required to invest at least ten percent of their 38
December 2012 SA Real Estate Investor
annual property development investments in under-resourced areas. This is a transformational infrastructure commitment for the purpose to stimulate investment in those areas; and entities disposing of property assets are committed to disposing thirty five percent of assets to blackowned enterprises that are B-BBEE status of Level 1 to Level 3. This will allow black-owned enterprises to be given the opportunity to own and trade in assets. Another deviation to the Code of Good Practice is that the threshold for exemption from compliance for estate agents and brokers has been reduced to R2,5 million of annual turnover and not R5 million. This is to allow as many estate agencies and brokerages as possible to be given the opportunity to contribute towards transformation of the sector. Qualifying small enterprises (QSE), which are deemed to be those with a value of between R2,5 million and R35 million, are required to select and adhere to four of the eight codes listed above. Challenges of transformation The Property Sector is estimated at R4 trillion in value and therefore remains one of the key economic sectors in the South African economy. Transformation of this critical sector strives to promote a vibrant growing property sector. However, the Charter and the Property Sector Codes are only guiding documents of how transformation empowerment could be achieved in the Property Sector. The true effects and results will be seen in the implementation of the Charter by its member organisations and their members. In this regard, it must be recognised that Government is the biggest property owner, said to be valued in the region of R400 billion and the largest tenant in the South African property sector. The Government will certainly be a large player in ensuring transformation in property ownership and in the property sector. It remains to be seen the extent of the co-operation and commitment of Government departments, private sector and
small to medium enterprises. The challenges include l a pre-dominance in the residential property industry of private family-owned businesses. It may be a challenge to these organisations to take on shareholders or executive board members; l the availability of capital allowing blackowned businesses to invest in the property sector, either through equity in the private sector or in development projects; l the ability of estate agencies and brokerages to attract new recr uits from prev iously disadvantaged back g rounds if they a re expected to survive on commissions they earn as per the Industry’s standard practice. It is generally expected, that an agent commencing his training will need to support himself for a period of between three to twelve months. This is not possible for the majority of candidates wishing to enter the industry. In this regard it has been suggested that subsidies be required from Government or an alternative source to assist such candidates. What the future holds W hilst the Propert y Sector Codes were gazetted in June, on the 5th of October 2012 the Revised Codes of Good Practice where published in the Government Gazette for public comment. Interested parties have until the 4th of December 2012 to submit comments to DTI. The content of the Revised Codes is beyond the scope of this article save to mention that the Revised Codes are seeking to reduce the seven elements to just five, merging Management Control and Employment Equity as well as Procurement and Enterprise Development into single elements. It remains to be seen how the Property Sector Charter Council will react once the Revised Codes have been concluded.
RESOURCES Marto Lafitte & Associates www.martolafitte.co.za
www.reimag.co.za
SMART MOVES
BY GAYE DE VILLIERS
Get The Best Returns What will 2013 bring?
A
s the year (2012) draws to a close, while the commercial property market in South Africa remains resilient despite being under constant pressure, it is apparent that the containment of operating costs is an increasingly key priority. "Facilities management is rapid ly emerging as an important factor which is a key contributor to containing costs and achieving savings – while enhancing the value of commercial property,” says Marna van der Walt, CEO of Excellerate Property Services, which includes, among others, Excellerate Facilities Management, JHI Properties and JHI Project Management. “Now more than ever, the integration of effective facilities management in the commercial property sector has an increasingly relevant role to play, not only in addressing energy saving, waste recycling and minimising the use and pollution of water, but also in regard to green issues during both the construction and use phase of a building. By reducing operating costs landlords have the potential to achieve a higher rental rate while keeping the tenant’s occupation costs unchanged and also helping retain tenants,” says van der Walt. Industrial Property Market Commenting on the industrial property market Johann Boshoff, MD of JHI Properties says: “This has fared better than most, with transport issues having a significant impact on the choice of location, and easy access to major transport routes even more imperative bearing in mind high fuel costs and Gauteng’s e-tolls. There is an ongoing demand among larger users, mainly from 3 000 up to 20 000sqm, as well as a demand from warehousing and distribution operations seeking more modern space. Certain nodes remain sought after in various regions, for example in Epping in the Western Cape, 40
December 2012 SA Real Estate Investor
traditionally a popular industrial area with good infrastructure and access to transport routes where older buildings are being upgraded and given a facelift. As the growth node north of Durban continues to increase in popularity among the business sector and residential buyers, the area of Mount Edgecombe is experiencing an increasing demand for industrial space, which is in relatively short supply. “The demand for logistical uses such as warehousing, packing and distribution is
"Facilities management is rapidly emerging as a key factor” especially evident on the East Rand, with the significant opening up of new development nodes to the north of OR Tambo and in the vicinity of the popular Jet Park, Meadowdale, Longmeadow and Linbro Park stretch – where there is good proximity to major routes such as the R21, R24, N12 and N3.” Boshoff says in addition to convenient location, users are seeking good power capacity and access for loading within a secure complex or area, as well as general aesthetics. Office Market “In the office market we are seeing a trend towards large businesses seeking cost efficiencies and economies of scale by relocating from a number of different buildings to occupying just one property, thereby capitalising on opportunities to relocate while rentals remain competitive. Increasingly, the emphasis in the office market, particularly among companies with a large staff complement, is towards buildings that offer secure, quality space coupled with convenience of location for easy access for
staff and clients. An ongoing trend is interest from national and international businesses seeking large space for call centres in major centres such as Cape Town and Johannesburg.” Retail Market Positive In the retail market, although consumers remain under pressure, the outlook is positive, anticipating a middle to late run on festive season shopping at the year-end and into January (2013). Says Boshoff, “In general the retail sector has experienced growth of 6.5 percent from July to August 2012, and the fast food category has been very well supported with approximately 20 percent growth during this period. The market is stable and certainly looking more positive than was the case two years ago.” And next year? Commenting on the year ahead (2013), Boshoff says that astute investors are taking advantage of the current economic trading conditions to increase their portfolios at attractive yields. Adds van der Walt: “The emergence of a number of new funds has increased investor appetite for commercial property, where returns are currently on average around 10 percent. And it’s not always the most attractive buildings in the best locations that afford the best returns. Looking ahead we anticipate limited rental growth, stabilising vacancies and an ongoing trend towards landlords looking to implement cost saving measures and concessions in order to attract and retain tenants. We are hoping for an upturn in 2013,” she says.
RESOURCES JHI Properties www.jhi.co.za
www.reimag.co.za
Sheriff Auctions vs Private Auctions
A
s opposed to a Private Auction where the rightful owner (either being a private person or the bank) sells his property, a Sheriff Auction is a forced sale resulting from a judgement taken against the owner of the property. There are many differences between the two types of auctions, but let’s focus on differences with financial implications. At the Sheriff Auction the purchaser may immediately take occupation or collect rent from the current occupants as the profit and risk of the property passes to the buyer at the fall of the hammer. At a Private Auction your purchase is not necessarily a done deal as the auctioneer can take in higher bids for another five to ten days and the sale is also subject to acceptance by the seller. At a Sheriff Auction, sheriff commission (R9 975 VAT included) plus a deposit of 10% of the purchase price, is immediately payable by the purchaser. At a Private Auction the auctioneer’s commission is 5%-10% of the purchase price plus VAT and the deposit is also 5%-10%. The commission is payable on top of the purchase price . When selling a PIP (Property in Possession) on a Private Auction, the bank will want more for it than what it has paid for it at the Sheriff Auction when all the other buyers opted out because it surpassed their assessment of good value. This is the case since the bank has to make provision in its reserve price for the Sheriff Auction acquisition price, the added expenses of municipal and levy arrears, incurred sheriff commission, transfer costs, advertising costs of the private auctioneer and holding costs. A purchase at auctions is not subject to a suspensive condition of getting a loan and the balance of the purchase price is due in 14 to 30 days. With a Sheriff Auction the purchaser is responsible for arrear rates and taxes and an electrical compliance certificate, and if necessary the purchaser is responsible for the eviction of any occupiers.
cy!
Lega uild a
Koopliede
B
Our forte is researching and buying on
Sheriff Auctions on Your behalf! IF YOU: have funds available and know it is now the time to get the extraordinary deals. are careful of the risks of buying property at auctions. do not have enough time or know-how to do the research and property valuations. don’t have time to attend auctions.
WE ARE: the best suited partner to serve you with the BEST OPPORTUNITIES without charging you an arm and a leg. here for you to provide COMPREHESIVE MANAGEMENT of your newly acquired investment in your best interest. geared to provide the following VALUE ADDED SERVICES and more: Transfer negotiations and management, repairs and maintenance, credible rental management.
We invite you to subscribe to our Sheriff Auction Catalogue Service.
“Most of the best property investments are made on Sheriff Auctions. On the downside Sheriff Auctions take a lot of effort and resources to do the necessary research and to manage potential risks. Through Koopliede, with it’s five years of Sheriff Auction experience, you can acquire property with less effort, more confidence and probably at a total cost that is less than if you would attend the auction yourself.”
koopliedebargains
082 466 2341 012-736 2457
co.za
info@koopliede.co.za
www
Lots of Equity Rental Returns Beyond 1% !
RETAIL
BY JAMES COLBY
Put Location At The Top Of Your To-Do List And ensure your retail business is a success
C
hances are, you've heard the term "location, location, location" more than a few times. It's time to put location at the top of your to-do list. If you're preparing to open a food or retail business with a storefront, putting your business in the proper location might be the single most important thing you do at startup. Of course you need a winning product, too, but how will anyone know about that product unless you get them through the door? In the brick-and-mortar retail world, it's said that the three most important decisions [you'll make] are location, location and location. Careful determination of new sites is critical for retail businesses. Check Your Demographics Making these determinations can be as simple or as complex as you make it. There are, for instance, sophisticated location analysis tools available that include traff ic pattern information, demographic and lifestyle data, and competitive analyses. For a price, a retailer can ask such questions as, 'If I'm looking to add a store to a particular market, what's the optimum level of traffic as it relates to the specific targeted trade area? What is the overall type of traffic? Once consumers are in the store, is there any way to measure the traffic patterns in the store? But you need to get a demographic overview of the area you are looking for. In addition, you should look at neighborhood traffic generators, such as other retailers that draw people to the area, industrial or office parks, schools, colleges and hospital complexes. You'll also want to look at both highway and foot traffic. You want an area where there is a lot of foot traffic, the more people walking around the more people who are liable to walk into your retail shop/ centre. Look Your Competitors in the Eye Many ex per ts ag ree, though, that the answer to where you should locate is more 42
December 2012 SA Real Estate Investor
straightforward than many entrepreneurs make it. "Quite simply, the best place to be is as close to your biggest competitor as you can be," says Greg Kahn, founder and CEO of Kahn Research Group in Huntersville, North Carolina, and a behavioral research veteran who's done location research for Arby's, Buffets Inc., Home Depot, Subway and other major and minor players. "Foot traffic is obviously important, but landing the 'perfect' customer is far more crucial. By being in close proximity to your competitors, you can benefit from their C marketing efforts." M In other words, your competitors chose their Y locations based on the ideal demographics of a particular area, says Kahn. In many cases, CM they've also devoted large portions of their MY advertising budget toward driving traffic to CY their locations. "Why spend the money when they've already [spent it] for you?" asks Kahn. CMY "It's that easy." K W hat's more, being located near your competition can be a boon to business, provided you're confident enough in your product to outsell your competitors. "Competition is good," concurs Blake Tartt III, president and CEO of commercial real estate f irm New Regional Planning in Houston, known for his work on major malls and other commercial developments. "It makes the retailer or the restaurant better-competition breeds more business, more traffic, and that's a positive. If my clients are good, I tell them to go right up against the competition." Of course, it's still a good idea to make your own evaluations of a particular property, even if your competitors seem to be thriving in the area. Staying ahead of the game in this regard will help your business grow should you decide, for instance, that you later want to open another location.
RESOURCES Entrepreneur www.entrepreneur.com
Designed for Managers of Commercial, Retail, Residential and Body Corporate Properties HOSTED NS SOLUTIO ,550 FROM R2
www.mdapropsys.com 0861 00 2231
Damages Following Deadly Superstorm Sandy has killed at least 39 people across eight states, has left more than 8 million without power, and has absolutely crippled the mass transit system that the nation’s biggest city relies upon to function, with many subway tunnels flooded. “The New York City subway system is 108 years old, but it has never faced a disaster as devastating as last night,” said Joe Lhota, chairman of the Metropolitan Transit Authority, the morning after Sandy put parts of the sunway system under water. This super storm will certainly go down as one of the greatest ever to hit the United S t a t e s , w it h d a m a g e amounts well in excess of Irene’s $10 billion hit in 2 011. Equecat has estimated that the damage will be in the order of $20 billion, which would put it in the neighborhood of Hurricane Ike, which str uck Texas in 20 08. Insured losses will likely be more than $7 billion.
Botswana Property Performance Report Investment Property Databank (IPD) released its first-ever Botswana property performance report in Gaborone. The IPD Botswana Property Performance Report for the year to December 2011 produced a total return of 20.9%. This figure represents the ungeared total return to directly held standing property investments from one open market valuation to the next. This return on Botswana property is comprised of a 10.8% income return, coupled with 9.2% capital growth throughout the year. Headline inflation in Botswana over the same period, however, was also 9.2% - meaning that growth in nominal terms was in fact stable, and highlights the importance of income yields in the property market. Retail and residential proper t y investments outperformed off ices, ref lecting the impact of recent development activ it y in the off ice sector and the resulting pressure on rental levels in the short to medium term as new supply comes online.
www.reimag.co.za
inside
OFFSHORE
London The Seychelles Ski Holiday Homes
46 50 52
London Is South Africa's 'Swiss Bank Account' A new report into foreign buyers of London property reveals that wealthy South Africans are the 11th most active nationality in the £1m+ property segment. The report released by global property consultancy Knight Frank LLP, shows that South African buyers outperformed buyers from far wealthier countries such as Germany, Singapore, Saudi Arabia, Switzerland and Canada over the past 3 years. “This news comes as little surprise” says Mike Smuts, managing director of Smuts & Taylor Ltd. His firm, with offices in London and Cape Town, specializes in assisting wealthy South African investors enter the London property market. “Wealthy South Africans are highly sensible with their investments and are looking at London property as a “Safe-haven” amidst the weak domestic economic outlook and continuing uncertainty about the timing of the global economic recovery. London bricks and mortar is fast becoming the new Swiss Bank account.”
Tim des Forges, Residential sales, W.A. Ellis "When there is uncertainty, we must find a balance between the vendors’ and buyers’ expectations and a motivated vendor will recognise a price reduction as a way of effecting a sale. When we reduce a price, activity noticeably increases."
Dr Andrew Golding, CEO, Pam Golding "With its beautiful beaches, strong and stable economy and good infrastructure - and conveniently situated just four-and-a-half hours from South Africa by air, Mauritius offers South Africans permanent residence in an idyllic environment."
December 2012 SA Real Estate INVESTOR
45
LONDON
BY MIKE SMUTS
Investigating The London Property Boom
Central London property not slowing down
I
t would seem London PLC is continuing to cash in on the fabulous PR it received during the 2012 Olympic and Paralympic Games with luxury property prices in central London rising at its fastest rate in four months in October. According to an index published by Knight Frank LLP, the average value of property in the World’s Capital's most expensive neighbourhoods climbed 0.8 percent from September - with demand for apartments outstripping that of houses. According to the report the annual increase to date is 10.1 percent, as the global economic slowdown continued to boost demand for Prime Central London propert y among international buyers, many of whom are driven by the search for a safe haven for their assets. Reports like these are of course nothing new. For some time now, the Prime Central London residential market has seemingly defied the laws of gravity. Whilst the rest of the UK, Europe and the United States are generally showing, at best, weak economic growth, the Central London market is booming. While this incredible rise of London property prices has been much reported in the media 46
December 2012 SA Real Estate Investor
and discussed my commentators there has been a notable lack of quantitative research and economic facts to investigate the main reasons behind the growth. Over the next few months my aim will be to present you with a series of articles investigating the f undamenta l ma rket dynamics and principal drivers behind the London property boom. London loves business and business loves London Despite the volatility of the last few years, the UK firmly remains a place to generate and hold wealth, and London has retained its crown and credibility as the world’s financial centre. London’s economy is set to grow by £64 billion by 2015 according to Oxford Economics; Pricewaterhouse Coopers estimates that some £6.8 billion of this will be as a result of the 2012 Olympic and Paralympic Games. In its October 2012 report on the UK economy, Oxford Economics point out that London’s output is now estimated to have grown by 2.6% in 2011. This means that London’s recovery from the financial crisis has
been more than three times stronger than that of the UK as a whole. Looking at sectors, the rebound has largely been driven by professional and technical activities, construction and information and communications. Thanks to its proximity to western markets, a highly skilled workforce and great international and domestic transport links, the European Cities Monitor has ranked London as the number one European city in which to locate a business, a position it has comfortably held for 21 consecutive years. The latest edition of the Global Financial Centres Index, a barometer which tracks movements in the competitiveness of 77 global financial centres, ranks London as number one - outperforming both New York and Hong Kong. London is also where New York banks still hold most of their non-US assets. Some 85 per cent of them, according to Paul Volcker, the former US Federal Reserve chief who drafted a key part of America's reforms to financial regulation. Maybe not surprising when you consider that 70% of Fortune 500 companies have their European HQ's in London. Compared to www.reimag.co.za
the London property specialists
Ballymore’s finest tower on the River Thames next to Canary Wharf • Suites, 1, 2 & 3 bedroom apartments available • 43rd floor panoramic Sky Lounge & Terrace • Spectacular views of River Thames, Canary Wharf & London skyline • Premium facilities inc business centre, athletic gym, 25m pool, spa, 24hr concierge, valet parking & hotel • Great transport links with City Airport, Jubilee Line, DLR, Overground & new Canary Wharf • 9 min walk to Canary Wharf PRiCeS FROM
SuiTeS 1 BeDS 2 BeDS 3 BeDS
-
£250,000 £330,000 £460,000 £905,000
FOR MORe inFORMATiOn COnTACT Mike SMuTS: +27 (0) 11 083 6366 • +27 (0) 72 802 1982 • mike@smutsandtaylor.com
Whilst every care has been taken in preparing these particulars, Smuts and Taylor Ltd and the respective landlords/vendors give no warranty, express or implied, as to the completeness or accuracy of the information contained herein. These particulars are subject to errors, omissions, change of price/rental or other conditions, withdrawal without notice, and any special listing conditions imposed by our principals. Smuts and Taylor Ltd will not be liable for negligence, or for any direct or indirect consequential losses or damages arising from the use of this information. You should satisfy yourself about the completeness or accuracy of any information or materials. The information contained herein does not form part of an offer or contract.
LONDON New York, there is a relatively light regulatory burden on companies wishing to gain a public listing. This makes London the stock market of choice for many international companies seeking capital. Another important factor for many companies is London’s geographic position, which enables access to Asian markets in the morning UK-time and to American markets in the afternoon and evening. London's other advantages are also often undersold. Not just the time zone, but the "network" or "cluster" effect of having large groups of high flying business execs all working in the same field in close proximity to each other. This means that businesses in London have the ability to access a huge range of senior, experienced people that aren't available elsewhere. This cluster effect is also cited by City UK, which promotes the City's financial competitiveness, as a key selling point which isn't going away anytime soon. The UK legal system has also found favour with international business powerhouses due to the fact that London operate in a far less litigious environment than in the US. English law makes unsuccessful litigants pay their opponent's costs, there are limited circumstances in which shareholders can bring an action and keep the proceeds and, in the case of class actions, English law essentially
requires that claimants opt-in (rather than opt out) of a class of claimants bringing proceedings and keeps an extremely tight rein on what is permitted by way of class action and how this is managed. English litigation procedure is also designed to require parties to seek to resolve disputes without recourse to litigation wherever feasible. Many international retailers have also targeted the prime shopping streets in the city’s West End for their flagship stores because of the number of visitors that the city attracts. In August 2010, London’s New Bond Street overtook the Avenue des Champs- Elysées in Paris to become the most expensive retail address in Europe. Luxury retailers like Chanel and watch retailer Piaget have paid huge premiums to secure a store on Bond Street. The rising rents in the area have made many retailers look to acquire their own stores. Rents have also ballooned in nearby Oxford Street and Regent Street. More recently shopping centre giant, The Westfield Group, reported retail sales of £896 million in its first year of trade at its Westfield Stratford City. During the course of the Olympic and Paralympic Games, the East London development welcomed eight million shoppers and reported a total of 47 million customer visits in its first year. London has proven time and again its ability to adapt to changing global circumstances thanks to its healthy combination of financial, business,
legal, cultural, political, infrastructure, human and landscape qualities. On the back of all this evidence of London’s importance on a global scale, it’s hardly surprising that London’s property market has benefited greatly, and will continue to do so. London in numbers: l £4.1 TRILLION - The value of funds
that are currently under financial management in the United Kingdom. l 124,000 - The number of people employed in the wholesale operations of foreign banks in the UK - 40,000 of whom have a foreign passport. l 21% - The share that City institutions have of the global market in marine insurance, making Great Britain a world leader. l 2.4% - The estimated contribution the City of London makes to the UK's national income. l $1.74 TRILLION - The daily value of the foreign exchange traded through London, accounting for 33% of all global foreign exchange trading. l 22 - The number of banks in the City supplying Islamic financial services, five of which are Sharia compliant, making the Square Mile the leading Western centre for Islamic finance. l 604 - The total foreign companies listed on the London Stock Exchange. There are also 241 foreign banks in London; which is more than in any other country. l £35.7 BILLION - The trade surplus that is currently generated by the UK financial services sector. l 1.293 BILLION - The number of contracts traded in a year on London's International Financial Futures Exchange. l 315,000 - The number of people who are employed by London's financial services industry.
RESOURCES Smuts And Taylor www.smutsandtaylor.com
48
December 2012 SA Real Estate Investor
www.reimag.co.za
CASH POSITIVE INVESTING IN THE UNITED KINGDOM PROPWEALTH is a UK based property investment company, run by South African investors living in the UK. We offer bespoke property investments that are ideal for distance investing *London off plan and new builds from £ 190 000 to £ 270 000 with 5.5% + yields *Affordable Liverpool property £ 36 000 with 10% + yields
from
*All investment properties are fully managed and tenanted *Non UK resident mortgages available with 70% loan to values at 4% *Landlord insurance cover *Limited company structures and tax advice *Solicitor services *Advice on Property Investment portfolio development
The PROPWEALTH team will be in Johannesburg, Cape Town and Durban in early February 2013 for one-on -one appointments to discuss your investment needs. To book please e mail us on info@propwealth.co.uk or call the office on +441273732069 or mobile +447500166982.
SIGN UP FOR YOUR FREE ONLINE COURSE “INVESTING IN THE UK” - www.propwealth.co.uk
HOLIDAY INVESTMENT
BY COLLEEN MAY
Seychelles A Vibrant Melting Pot
B
lessed by nature, the Seychelles is an archipelago of 115 islands with superb beaches, an unspoiled landscape, virgin forest, amazing marine life, lots of orchids, bougainvilleas, hibiscuses, gardenias and frangipani, and a profusion of bird species found nowhere else. It is 1,600 km off the coast of East Africa, with a population of only 81,000. The Seychelles is outside the cyclone belt so the weather is stable all year round, a humid equatorial climate with an average maximum daily temperature of 29 degrees. Foreign property buyers in Seychelles mainly come from South Africa, Italy, France, Russia and the UK. Seychelles culture is largely French-inf luenced, and the population is highly racially mixed. Tourism employs 30% of the labor force, and powers the economy. Independent from Britain in 1976, Seychelles became a one-party state (1979-1991) under president France Albert René, who continued to dominate politics after 5-yearly elections were introduced till 2004, when he stepped down in favour of president James Michel. In recent yea rs h igh-end resident ia l development have seen many foreigners buying residential property for a second homes or primary residence. One of these developments is Eden Islands, a marina development on a reclaimed land linked to Mahè by a bridge. It comprises about 578 luxury two- and threebedroom apartments, mansions and villas. Property prices start at about US$465,000. For the first time on Eden Island, buyers can acquire a villa with access to their own mooring directly in front of their garden. The 50
December 2012 SA Real Estate Investor
current villa owners have their moorings in other basins or in the main marina. This means you can simply step out of your front door and into your boat, and head off for the day, without requiring use of a golf cart. Ranging in size from 250 to over 609 square meters on plots up to 820 square meters, these new Basin 5 Villas are priced from $2.6 million to $4.5 million, depending on the layout selected. Located right on the water’s edge, they have scenic views over the basin to the beautiful mainland of Mahè and its mountain backdrop. Built with a sound infrastructure, Seychelles presents an opportunity for relaxed holidays, intermingled with water and island adventures. As a result, island hopping is a favourite pastime among Seychelles residents, and it can be done via airplane, helicopter, ferry, chartered boat, yacht, motorboat, or even fishing boat. Transport The Seychelles International Airport is located on Mahè and it receives many direct Seychelles f lights of major airlines from large cities including London, Paris, Rome, Singapore and Johannesburg. In addition to international f lights, Air Seychelles provides inter-island connection flights in smaller aircraft. Private carriers also private charter f lights and helicopter services. Healthy economic growth Seychelles’ economy expanded by around 5% in 2011, from annual GDP growth rates of 6.2% in 2010, 0.7% in 2009 and -1.25% in 2008. In 2012, the economy is projected to grow by 4%.
The country’s unemployment rate was 4.1% in 2011, down from 4.6% in 2010 and 5.1% in 2009. In 2012, overall unemployment is expected to fall to 3.7%, according to the IMF. Consumer prices rose by 5.1% in November 2011, according to the National Bureau of Statistics (NBS). In 2010, the overall inflation rate was -2.3%, up from the dramatic inflation during the post-depreciation years of 31.8% in 2009, and 37% in 2008. Culture Seychelles culture is a vibrant melting pot of those who have come before, from the first Arab and Phoenician seafarers and Portuguese explorers to the French settlers, Malabar Indians, Chinese traders and British colonists. The national languages are English, French and Creole. From a great fusion of religious beliefs, customs and traditions, the Seychellois nation was born, bringing colourful and unique influences to bear on local architecture, arts, music, recreation and cuisine. A blend of French gastronomy with the spices of the East, Seychelles food makes use of a great range of textures, tastes, ingredients and colours. The breathtaking views and island lifestyle make this one property destination you will not want to miss out on, and with rental yields averaging at approximately five percent per annum, why not invest and enjoy the benefits offered by vibrant and beautiful islands.
RESOURCES Pam Golding Properties www.pamgolding.co.za
www.reimag.co.za
NEW TRENDS
BY ANGIE REDMOND
Ski Holiday Homes Ski For Free And Make A Profit
A
re you an excellent skier or do you have teenage children who are very good at the sport? If you do, you are probably already spending money on a skiing holiday on a regular basis (10 days per year or every second year). To purchase a property on a ski resort is in a sense a way to go skiing for free as you will have some income from the rental of the property when you are not occupying it yourself. The French Alps are overwhelmingly the most popular location, Switzerland is also popular, and can be better value, though you can only buy in certain cantons; and Austria and Italy are both being seen as value for money alternatives. It's possible to buy in the Pyrenees, though few do, and the biggest growth in recent years has been in Bulgaria at the resorts of Bankso, Pamporovo and Borovets where big investment to improve infrastructure is taking place. Further afield Canada guarantees good snow and you get more property for your money. Do your homework first Always buy in a popular or established resort or one that shows or has potential to become one as it is the tourism traffic that will provide the rental income. It is preferable to be near the ski lifts (walking distance) or in the best-case scenario to be ski-in, ski-out. Resorts that have dual seasons and are vibrant in summer as well as winter are also important as this provides additional holiday or rental opportunities. For the long term buy at a good altitude so the snow is more assured and if buying at a lower altitude make sure the connectivity to the ski lifts higher up is good. "Ski in, ski out" means you can ski straight from your property, without having to trudge through snow or take a bus. Ski lockers for stowing wet equipment are a big plus. And extra facilities on hand such as heated pools, Jacuzzis and spas are increasingly a feature of upmarket developments. Finally, find out if there is much to do in summer, and if the area attracts many visitors. A 'four seasons' resort 52
December 2012 SA Real Estate Investor
is a much more attractive proposition in every sense than one where the beds are 'cold' for most of the year. Most people opt for an apartment in a purpose-built development in a ski resort. Ski apartments are notoriously compact, as the idea is to keep the costs down and maximize your time on the slopes. So a studio typically sleeps two, a one-bed sleeps four, and so on. Aparthotels are a particularly good option, as there is strong lettings management on-site. Don't expect a big kitchen or a garden. You can pick up a ski apartment (refurbished developments are a good option) for well under €100,000 outside the more fashionable resorts. At the other end of the scale, a fully-fledged chalet somewhere such as Courchevel or Meribel could cost you a few million pounds. Some options In Flaine in the "Grand Massif " area - and within sight of the Mont-Blanc-peak, which is the fourth largest winter sports region of the French Alps - Les Neiges d’Orion is one of the best value-for-money ski developments in France. Here prices start from €158 000 for a one bedroom apartment with rental returns of 4.1 percent. This brand new development, which will blend traditional architecture with modern, high quality fixtures and fittings, also includes an indoor swimming pool and a spa. The development is scheduled for completion towards the end of 2014. In Chatel, alongside Avoriaz 1800 in the "Porte du Soleil" area - the world's largest internationally connected skiing region (with 650km of slopes) which connects the skiing regions of France and Switzerland, Grand Hermitage offers 33 luxury one, two and three bedroom apartments. This development is located only one hour’s drive from Geneva and 600m from the heart of the village. Priced from €220 000 the development offers rental income returns of 3.7 percent. This development will also be completed in the last quarter of 2014.
In Tignes, one of the ski resorts of Espace Killy, with 300km of pistes (ski runs) shared with Val d’Isère, Village Kalinga offers sound value with prices starting from €208 000. Comprising a total of 250 one to five bedroom units, to date 78 units have been launched into the market. The units are priced up to €631 000 and phase one of the development, including the swimming pool, reception and other common facilities, is due for completion at the end of 2013. Says Orengo de Lamazière: “Village Kalinga is an entire new super village which is rapidly taking shape, and which will consist of luxury residences, restaurants and shops. In regard to the residential units, the developer offers a guaranteed rental yield for 11 years in this appealing four star resort, which has extended ski lifts and pistes.” In Méribel, acknowledged by the Daily Telegraph as one of the best ski resorts in France, which forms part of the renowned 3 Valleys - with 600km of pistes and popular after-ski entertainment activities, Balcons de la Chapelle is the only new development in the heart of this year-round resort. Here six apartments (with two, three or four bedrooms) and two chalets (three and four bedrooms) are currently marketed with bespoke interior design and fittings to the highest standards. Priced from to €594 000, this development is situated in close proximity to a 5000sqm water sports arena, 18 hole golf course – the highest in Europe, endurance trail and numerous other leisure activities and service facilities. Wherever you decide to invest, do your due diligence first, ensuring you will love the property as much as prospective tenants will.
RESOURCES Pam Golding Properties www.pamgolding.co.za
www.reimag.co.za
Restaurants
Theatre
Five Hundred offers a fine dining menu that is a creative combination of the latest gastronomic trends and Executive Chef David Higgs’ entrenched food philosophy of simplicity, zero compromise on flavour and use of only the freshest and highest quality ingredients. Physical address: 36 Sa xon Road, Sandhurst, Sandton Cuisine: Contemporary Ambience: Classic Elegance Dinner: 6:30am - 10pm, Tuesday to Saturday Contact: 011 292 6000
Relive the music, rhythm and romance as the 17-year-old `Baby` slips into womanhood during an eye-opening vacation at `Kellermans` lodge in the Catskills on a family vacation during the summer of 1963, as she falls in love with `Johnny Castle`, the suave, charismatic working class dance instructor, who introduces her to the excitement of Dirty Dancing. Venue: Artscape Opera House, Cape Town. The show runs until the 10th Febuary 2013.
End of the World
inside
lifestyle
Luxury Properties Office Party Time Opel Astra GTC Festive Season Favourites
54 56 58 62
On Cinema Won't Back Down Release date: Friday 7th Dcecember Cast: Maggie Gyllenhaal and Holly Hunter, Viola Davis Two determined mothers with children who are failing in an inner city school in Pittsburgh join forces to take back the school, and turn it into a place of learning. But before they can change the school for the better, they must first battle the parents, the school board, and the teachers union. Because this is for their children, they won't back down from this enormous challenge. Maggie Gyllenhaal is a huge drawcard and if her previous performances and roles are anything to go by this film should more than meet its promise.
With December upon us, it's time to see if the Mayans really did just run out of rock, or if the world will end as so many people have predicted. With end of the world parties planned, the 22nd of December will be a night to remember one way or another. So what do NASA have to say about the end of the world? "Nothing bad will happen to the Earth in 2012. Our planet has been getting along just fine for more than 4 billion years, and credible scientists worldwide know of no threat associated with 2012." This statement was on the NASA website, so it looks like the world will wake up just fine, mildly hungover, on the 23rd of December.
www.reimag.co.za
December 2012 SA Real Estate INVESTOR
53
LUXURY PROPERTIES
BY ANGIE REDMOND
Homes Of The Rich And Fabulous Where do the wealthy call home?
S
outh Africa has a lot to offer when it comes to property because of the country’s beautiful locations. Each place offers unique scenery and visual appeal, which can skyrocket the cost of sought-after properties, but all seem worth the price tag. So where do the wealthy live? We have compiled
the most expensive areas in South Africa, including the most expensive property in South Africa and the world. Cape Town is famous for its ideal location between the mountain and the ocean, and its unique weather patterns and awe-inspiring coastlines. Areas like Clifton, Bantry Bay
and Chapman’s Peak are ranked high as some of the most expensive suburbs. The V& A Waterfront is South Africa’s most expensive residential resort, where land is valued at between R2.5 million and R11 million.
Most expensive property in South Africa iPads controlling all the functions throughout the property, an 80m 2 3D cinema, and an extensive selection of artwork from paintings and photographs, to sculptures and statues. The décor surpasses 7-star quality and is an eclectic mix of Classic, French, Asian, Georgian Colonial, and Moroccan influences, with luxury fitted into every detail. Taking inspiration from the Louis XIV period and Hotel Costes in Paris, the interior features were chosen for their beauty and opulence, with no expense spared and include bespoke, imported wall fabrics, curtains, rugs, and antique fittings and finishes.
The most expensive, luxurious property to come on to the residential market is a 7130m 2 palatial residence, known as Enigma Mansion, situated in the most prestigious and prime residential area of Cape Town, between Clifton and Camps Bay and comes with a price tag of R300 million (€30 million/$36,5 million). The property is in the most sought after area of Camps Bay, The Glen, best known for being a luxurious, peaceful haven, sheltered from Cape Town’s well-known, ferocious wind. Just 50 meters from the base of Table Mountain Park and adjoining a nature reserve on two of its other boundaries, Enigma has 6000m 2 of outdoor space including parks and gardens with attractive waterways and ponds. The main residence has three f loors and 54
December 2012 SA Real Estate Investor
stretches over 1586m2, with a 627m2 basement level, ground floor totaling 638m 2 , and first f loor covering 321m 2 . A studio at the west bottom of the property has its own separate street access with living space of 264m 2 spread over the ground and first floors, and there is a separate guesthouse on site with private street access comprising 250m 2. The residence also offers an atelier, winter garden, sauna, gym, teahouse, massage temple, staff quarters, herb and vegetable garden as well as many terraces, with the highlight being an artistically-designed Olympic-sized swimming pool with marble inlays. Enigma houses every possible luxury, from its state-of-the-art technology system with
The property benefits from 24 hour armed response and 36 cameras monitoring the grounds at all times. There are electronic safes in each bedroom, as well as panic buttons, and a ‘panic room’ in the master suite. For extra peace of mind, there are 16 security guards that patrol the premises 24 hours a day. With a glamorous history, Enigma Mansion has previously acted as accommodation for A-list celebrities, artists, CEOs of big corporations, royalty and other high net worth individuals, and has been used for photo shoots and as a movie location. It took seven years to plan and build this dream property, with the aim of achieving the most unique collaboration of style and luxury in to a stunning setting that boasts unrivalled beauty.
www.reimag.co.za
JOHANNESBURG
Most expensive house in the world
The second most expensive city for property is Johannesburg, where there are 10 suburbs with an average property sale price of more than R4 million. From top-down, the most expensive areas include Sandhurst, Chiselhurston, Dunkeld West, Bryanston and Sandown. Recently, a property in Bryanston was listed for sale at R45 million, which is a great testament to the value of properties in Johannesburg.
American architects, Perkins & Will, using principles of Vaastu Shastra to maximize "positive energy" designed the structure. Every floor plan is unique, and the materials used in each level vary widely. Features of the home include: n 400,000 square feet (37,000 m 2) of living space, (in comparison the Palace of Versailles occupies 721,206 square feet of floor space) n Parking space for 168 cars. n A one-floor vehicle maintenance facility. n Nine elevators in the lobby. n Three helipads and an air traffic control facility. n Health spa, yoga studio, small theatre with a seating capacity for 50 on the eighth floor, there is a swimming pool, three floors of hanging gardens, and a ballroom. n An ice room infused with man-made snow flurries. n Custom hand carved rare marble pillars and stonework. n World’s largest collection of antique sewing machines.
KZN KwaZulu-Natal is known for its warm, Indian Ocean waves – the eastern coastline of South Africa has a number of draw cards for people willing to spend a bit of money on property. Ballito Bay and Gillits are two examples of many soughtafter coastal spots where holidaymakers wish they could spend all year round.
Antilia is a 27-floor personal home in South Mumbai belonging to businessman Mukesh Ambani, chairman of Reliance Industries and seventh richest man in the world. A fulltime staff of 600 maintains the residence, reportedly the most expensive home in the world. With a 2 billion dollar price tag, the 27-storey skyscraper is the world’s largest and most expensive house in the world. www.reimag.co.za
December 2012 SA Real Estate INVESTOR
55
YOUR BUSINESS
e've all heard about the person who got so drunk at the office p a r t y t h at t h e y g r o p e d a co-worker, told off the boss, and passed out under the buffet table. On Monday morning, the person can't remember what happened, but he or she still has to face the colleague who witnessed the spectacle. You may have seen it happen. You may even have been the unfortunate person who did it. Either way, you probably know what happened to that person. They were either fired outright or shut out until they resigned. Very few companies tolerate that kind of behaviour. Your attempt at being the "life of the party" may cost you your job. remember that although office parties are intended as social events to reward employees and raise morale, they remain strictly business events. act as though your behaviour is being observed every minute (because it probably is). pass up the invitation to an office party; not attending could hurt your reputation. And when you attend, do spend at least 30 minutes at the party for appearances. But don't overstay your welcome by partying until the wee hours.
bring the party lampshade, gag gifts for the boss, or do any other crazy stuff you might do at a personal holiday party. enjoy yourself at the party. Employers spend the big bucks to reward their employees, so be sure to enjoy the only holiday gift you may be getting from the company. pull the nightclub attire from your closet for the event - and do ask whether the attire for the party is formal or casual. The party is still a business function, so conservative party clothes are a good choice. So, do remember to skip anything too revealing or too flashy. Keep your reputation for good taste intact. keep your hands to yourself. Don't flirt, and do avoid any other inappropriate behaviour. The office party is not the time to end your career with the company by doing something inappropriate or illegal. spend all evening talking business. You'll forever have the label as the office bore. keep all conversations positive and upbeat.
conduct yourself professionally at all times.
spend the evening complaining, bragging, correcting, whining, or ridiculing. And do avoid controversial subjects (such as religion, politics, etc.) and off-color-jokes.
use the office party as an excuse to blow off steam. It's still a company function, so proper etiquette and decorum matter.
monopolize conversations - and, especially, don't talk about yourself or your accomplishments all night.
56
December 2012 SA Real Estate Investor
BY ANGIE REDMOND
show interest in others. be gracious and thank coworkers and team members for all their help and hard work during the past year. And don't even think about gossiping about others. keep one hand free during the night so that you can offer handshakes to people as they come by. And do keep your drink in your left hand, so you are not offering people a cold, wet handshake all evening. feel you need to drink excessively just because it's an open bar. And don't pig-out at the food buffet either. Moderation is key. You can always eat and drink more after the party. be sure you know exactly who is invited to the party. Spouses or significant others are not always on the guest list for office parties. And if guests are permitted, don't bring an inappropriate person as your guest. forget to thank the person responsible for the planning and coordinating of the party. And do consider sending a thank you note to top management for hosting the party. inquire about office policies on providing car or cab service for employees attending the holiday party. And do appoint a designated driver or do hire a cab yourself if the company is not willing to provide the rides home. drink and drive.
www.reimag.co.za
CARS
BY RUSSELL BENNETT
Just Warming Up Opel Astra GTC 1.6T Sport
Specs
I
f you aren’t interested in an actual hot hatchback, but nevertheless want a hot 3-door bod, there are fewer options available to you. A fact which VW quickly recognised and moved to address with the Scirocco 1.4 TSI. Volvo also offer the C30 D2 which is a good car but an actual focus completely at odds with its sexy coupe-hatch styling. It was a similar problem I experienced with the first Opel Astra GTC 1.4T I roadtested some months back now. Looked the business, but just couldn’t quite cut even the rather mundane levels of mustard my notions had garnished it with. In fact, it would struggle to cut microwaved butter, so blunt and gawky a driving tool it was. The only other option in the GTC range is this, the somewhat better-endowed 1.6 T Sport. Although its 132kW and 230Nm of torque aren’t going to be troubling Cooper S drivers in any conditions, at least it’s significantly meatier than the 103kW/200Nm on offer from the 1.4T. The benchmark sprint, claims the company, should take 8.3s, with a top speed up to 220km/h. Now, the average 2.0-litre sedan will run in the 9 – 10s mark depending on tune of course, and these days properly sporting pretensions are only distributed at bang-on the 7s mark. A performance car being defined by pulling out a 0-100km/h result of under 8s is a notion about 2 58
December 2012 SA Real Estate Investor
decades old now, so the Astra GTC has missed this one by about twenty years. The fact of the matter is that these times aren’t just thumbsucked from thin air, they’re a reflection of how our internal gyrometers measure and rate the forces associated with gathering speed. Any car doing between 8.5s and 10s will feel broadly similar to its direct performance competition. Only when you go below 8s does the first really tangible performance increment rear its head – you can feel in your gut that there’s at least something worth noting in a sub-8s machine. The net result, is that the GTC 1.6T just doesn’t make this crucial step from humdrum, overdressed 3-door hatch to sporting hatchbased tar-burner. Yes, there’s definitely more punch in its gut than the drab 1.4T offers, but it just manages to take the GTC from “oldperson-slow” to “absolutely middle of the road”. There is still just nothing special about the performance of this car, but at least it isn’t frustratingly flat. At least the GTC delivers its power to those front wheels through a conventional six-speed manual ‘box, which is slick and quick even if it isn’t the last word in delectable, tangible precision. There’s still a distinct degree of rubber in each shift, but nevertheless the charms of a three-pedal car and the added
Key facts: Opel Astra GTC 1.6 T Sport. Pricing: R304 900 Engine: 1596cc turbocharged petrol. Power: 132kW @ 5500rpm Torque: 230Nm @ 2200-5400rpm 0-100km/h: 8.3s Top Speed: 220km/h (Limited) Transmission: 6-speed manual Consumpt. (Claimed): 6.8 l/100km (combined) Consumpt. (Tested): 9.6 l/100km (combined)
level of control and cohesion this brings are a welcome component of an otherwise fairly uninspiring package. It’s comfortable inside as well, with all the assorted addenda you’re likely to expect from the top of an Opel range, and more. Satellite controls on the wheel, heated leather seats at the front, automatic lights and wipers, climate control, cruise control, rear parking assist, OBC and keyless-go. There are even six airbags in the compact cabin to complement the other active safety electronics like ABS. As middle-of-the-range as the Astra GTC 1.6T Sport ends up being, it’s still a pretty decent car. The 3-door looks are eye-catching and definitely get noticed, and the mechanical bits are entertaining enough that even a petrolhead like me didn’t really get tired of the car. Even the fuel consumption is decent, our test unit managing an average of 9.6l/100km during our week with the car (against a claim of 6.8). www.reimag.co.za
SUBSCRIBE NOW & RECEIVE 25% DISCOUNT ON ANY SUBSCRIPTION
+ LIMITED STOCK
FREE DIGIMAG
+
RealEstate Media Bag & Pen
Canterbury Golf T-shirt
AUTOMATIC ENTRY TO WIN A PAIR OF DAVID GREEN EYEWEAR * OFFER WHILE STOCKS LAST * EXPIRES 31 DECEMBER 2012
4 ways to subscribe CALL
0861 228 669
FAX
086 627 2400
Please complete the form below and fax or email to juanita@reimag.co.za Name & Surname: Postal Address: Postal Code: Cell no:
Email:
Payment method: CREDIT CARD Credit card
CVC:
VISIT
Payment method: EFT (ABSA Banking Details) Account name: Real Estate Media I Account number: 406 8440244 Branch: Claremont I Branch code: 421109
juanita@reimag.co.za
www.reimag.co.za
Signature
Exp date: Date:
LESSONS
BY ANGIE REDMOND
New Year, New You Resolutions that work
I
t’s that time of the year again; where everyone begins writing the list of things they will change about themselves as soon as the clock hits midnight on the 31st of December. Every year thousands of New Year's resolutions are made and promptly broken by the tenth of the New Year, the day when most New Year's resolutions fail. Are your New Year's resolutions going in one year and out the other?
Start by finding classes you want to do, dance or yoga, and the committing yourself to those classes and maybe one or two gym sessions a week. Once you start to enjoy going to the gym and it becomes part of your routine, you are twice as more likely to stick to it. The same with your diet, start small, swap bad carbs for good carbs, eat more fruit, have a grocery list and stick to it but allow yourself some treats.
While most people are doomed to fail, one of the biggest reasons for the failure of your resolutions is the scope of them: you may resolve to quit smoking, lose twenty kg’s, gym every day and learn a new skill, but the chances of you accomplishing them are slim. By making unrealistic resolutions you set yourself up for failure before you start.
Save money
So what should you do? The best thing to do is set realistic goals, which you can achieve. And if you fail then start again, everyone falls off the horse a few times, so accept the setback and then try and do better the next day.
Exercise Don’t promise yourself you will eat nothing but celery and lettuce and attend the gym every day. 60
December 2012 SA Real Estate Investor
We would all love to be able to save loads of money and give up spending when you really don’t need to, it’s just not as easy as it seems. Start with a simple budget and keep track of where you spend money, once you can look over everything you buy and spend money on in a month, you should be able to see where you can save. For example don’t buy coffee every morning, make your own, the same holds true with lunch, an average lunch cost per day is R30 when bought, but if you take your own lunch to work it cost you half of that. Cut your account cards up, if you don’t have the cash for it you shouldn’t be buying it. When it comes to big ticket items, save for them, put money aside each month, and watch your spending go down and your savings go up.
Drink less We all know that alcohol is bad for your health, bad for your wallet and probably your reputation. So why do we keep doing it every weekend? On January the first it’s very easy to swear off drinking for the year, but a few days after the hangover fades so does your resolution. Rather focus on moderation than cutting it out completely, after all, not for nothing did the Greeks proclaim, “In vino veritas” – “In Wine (and other spirits), there is truth”, wise people the Greeks.
Make crazy resolutions Maybe the best way to start the New Year is by doing the unknown, taking a chance and making some crazy New Year's resolutions. Spend a week saying yes to everything you get offered, tell the truth all the time no matter the consequences, jump on a plane and travel somewhere with just a backpack, take up the craziest hobby you can find, like joining a debate team or taking up philosophy or doing stunts. The New Year is a time to wipe the slate clean, as a fresh New Year and start begins, so no matter what you decide to do this New Year, make it count and enjoy every second of it. As for me, I’m off to say yes to everything for a week. www.reimag.co.za
Invest in Yourself First Books
CDs/DVDs
Software
Games
Web
Design
GADGETS
BY RUSSEL BENNETT
Festive Season Favourites
Xmas Apple Love ‘em or hate ‘em, whenever Apple announces a new gadget everyone sits up and takes note. The same phenomenon applies to the latest device reveals from the company from Cupertino – specifically the updated iPad 4 details and the relatively unexpected iPad Mini. The latest generation of the full-blown 9.7” iPad now gets the graphics processing capability to take full advantage of the gorgeous retina display. Although typically Apple themselves are fairly coy about the new GPU, but the tech review sites on the Web confirm that it’s a new-generation PowerVR component called the SGX554MP4, packing significant improvements to theoretical throughput as well as geometric calculations. Testing puts it at between 1.2X and 2X the performance of the PowerVR GPU in the iPad 3. The iPad Mini, meanwhile, hits retail shelves with essentially a more compact case, more affordable price, and the same A5 core hardware as found in the iPad 2. The Mini is a response to customers wanting an even more mobile iPad, which it achieves thanks primarily to a smaller (7.9”) screen and reduced weight. If it hits our retail shelves in time, this little beauty could make the perfect stocking-stuffer. 62
December 2012 SA Real Estate Investor
Trashing that traffic
If you’re sitting on a spare R1-mill or so to blow on possibly the coolest Christmas present ever, a company called Martin will sell you your very own personal Jetpack! This baby will hit 100km/h and 8000ft altitude, and has a range of around 50kms. Of course, you might need to do some serious training before hand, as this unit weighs in at over 110kgs. And if you weigh in at over 127kgs, you also need not apply. The thrust is provided by a Martin Aircraft 2.0-litre V4 2-stroke, apparently good for 150kW at 6000rpm, and the limited range is entirely due to a compact fuel tank holding just 5 litres.
Will Smith - Housecleaner Well, not exactly, but if you can’t actually get the megastar to come clean up your mess, surely the next best thing is this iRobot Roomba 790? Essentially an automatic vacuum cleaner, the Roomba includes a wireless control centre which allows you to schedule when and where the robot should clean. And when it runs out of power, there’s no complaining or requiring a soothing warm drink, your little robot helper simply automatically returns to home base for an electricity recharge. www.reimag.co.za
An old foe resurfaces...
The tablet/smartphone space was already a high-energy, competitive arena with just iOS and Android fighting for the top spot, but with the release of Windows 8, Microsoft has just entered the battleground with a bang, with Windows Surface tablet products. With the weight of most of the largest-volume tech manufacturers behind them already, this Microsoft assault is going to be the most serious challenge in this sector to date. Of course the success or failure of individual products will still be linked to the hardware it packages, but the Surface offers a whole new tablet experience at a competitive price and is sure to turn many a head of potential iPad or Android-powered tab buyers.
Ecological arthropods Looking for something which is both idle fun and makes an ecological statement for a special someone this Christmas? Then you simply have to take a look at this Scorpion 3-in-1 Solar Robot, available from www.mantality.co.za now for R279. The fun begins when you have to assemble the device from the 70 pieces it ships broken down into. Once built, the robot can be either a robot, tank, or scorpion, and requires nothing more than some UV light (preferably from the sun’s rays, but a light bulb will also do) to start walking around randomly. Good fun, and educational to boot!
Going with the flow For those TV addicts in your life, the Vulkano F low Mobile Dev ice cou ld wel l be an invaluable addition to their repertoire. A bit like a PVR on steroids, this unit can record and replace TV signals onto PCs or Macs, pause and rewind live TV, and stream video output to any connected device in your home. What’s more the unit can be controlled from anywhere using either WiFi or 3G connectivity, so wherever you may be you retain full control over your TV content. Other models available include the ability to record TV at a future date and time, and/or to stream HD signals. www.reimag.co.za
December 2012 SA Real Estate INVESTOR
63
SOCIAL EVENTS
Not sure where to go for New Years? Take your pick of our New Year Line up
Eastern Cape Bethesda Arts Centre’s Festival of Lights Why? This festival sees the coming together of people from all walks of life in a celebration of light. Make your own lantern at one of the workshops and join the parade through the starlit streets of charming Nieu Bethesda. When: 31 December Where: Bethesda Arts Centre, Muller Street, Nieu Bethesda Cost: R150 a person The Ruins, 5FM New Year's Eve Concert Why? 5fm gets behind SA’s premier new year’s eve concert this year with Goldf ish as the headline act. When: 31 December Where: The Ruins, St Francis Drive, St Francis Bay Cost: tba
Western Cape Kirstenbosch Amarula New Year's Concert Why? Picnic under the stars while listening to the jazzy tunes from the legendary Hugh Masekela, supported by Hot Water. When: 31 December Where: Kirstenbosch Botanical Gardens Cost: R270 V&A Waterfront New Year’s Eve Bash Why? There’s tons to do for the whole family including music, shows and the best fireworks show in the country. When: 31 December Where: V & A Waterfront Cost: free Nederberg New Year’s Eve Spectacular Why? This concert will bring you into the new year in a relaxed style. Featuring Cape Philha rmonic Orchestra w ith celebrit y conductor Richard Cock, the sensational jazz cross over singer Melanie Scholtz, classical trained tenor Derrick Ellis, classical cross over Selim Kagee and Heavenly Quartez from Khayelitsha. When: 31 December Where: Nederburg Wine Estate, Paarl Cost: R200 a person Marc Lottering New Year’s Eve performance Why? Start 2013 laughing with a special edition of Marc Lottering’s I don’t work on Sundays comedy show. When: 31 December Where: Baxter Theatre Centre, Rondebosch Cost: R150 a person
64
December 2012 SA Real Estate Investor
Gauteng Cantare Supper Club New Year’s Eve Masked Ball Why? A classy way to bring in the new year with live entertainment and a five course meal. When: 31 December W here: Ca nt a r e D i n ne r a nd D a nc e , Montecasino Cost: R850 a person Alex Jay’s flashback Why? Alex Jay will be playing the best music of the 80s, 90s and “naughties”. When: 31 December Where: The Venue, Melrose Arch Cost: R500 a person New Year’s Eve dinner dance at the Country Club, Johannesburg Why? Dine and dance your way into the new year in the company of Joburg’s social elite. When: 31 December Where: Country Club, Johannesburg Cost: tba Midnight in Paris at the Brooklyn Theatre Why? Fleur du Cap winner and three time nominee, Godfrey Johnson and SAMA award nominee and multiple award winner Emile Minnie will be performing a special New Year’s Eve show. When: 31 December Where: Brooklyn Theatre, Pretoria Cost: R600 a person
www.reimag.co.za
You are invited...
To End the Year in Style With the year drawing to a close, why not treat your clients or employees to a memorable year end Christmas lunch or dinner function on South Africa’s iconic moving five-star hotel, The Blue Train?
WHERE: On board the most lavish train on the planet. WHEN: At your earliest convenience.* WHO: Tailored for corporates who value their clients and staff. Come and experience all of this opulence on a journey into a timeless world of grace and elegance where enduring memories are made.
To exclusively book your company on this memorable experience, please contact our corporate office.
Contact: Kaya Nyati or Julian Sibeko | Tel: +27 (0) 12 315 2471/2212 | Email: kaya.nyati@bluetrain.co.za or julian.sibeko@bluetrain.co.za | For more information, visit www.bluetrain.co.za
* Subject to availability
INSPIRATION
BY ANGIE REDMOND
The Self-Made Millionaire From lemonade to Wall Street, meet Dr Farrah Grey
T
he National Urban League’s Urban Influence Magazine named Dr. Farrah Gray as one of the most inf luential Black men in America. Ebony Magazine recognized him as an entrepreneurial icon, business mogul and best-selling author. Raised in the impoverished South side of Chicago, Dr. Gray defied the odds and became a selfmade millionaire by the age of 14. At the age of 21, he received an Honorary Doctorate deg ree of Humane Let ters from A l len University. This was in recognition of his ingenious economic mind and distinguished commitment to the development of values such as leadership, integrity and scholarship. In his rise from poverty to national and international prominence as an entrepreneurial icon and preeminent power speaker, Dr. Gray has inspired millions around the world Dr. Gray began his entrepreneurial, personal and civic development as a stellar young citizen at six years old, selling homemade body lotion and his own hand-painted rocks as bookends door-to-door. At age seven, he was carrying business cards reading “21st Century CEO.” At eight, Gray became co-founder of Urban Neighborhood Enterprise Economic Club (U.N.E.E.C.) on Chicago’s South side. U.N.E.E.C. was the forerunner of New Early Entrepreneur Wonders (NE2W), the flagship organization he opened on Wall Street. NE2W enlisted, educated and engaged “at-risk” youth by creating and developing legal ways for them to acquire additional income. Gray is the youngest person to have an office on Wall Street. Between the ages of 12 and 16 years old, Dr. Gray founded and operated business ventures 66
December 2012 SA Real Estate Investor
that included KIDZTEL pre-paid phone cards, the One Stop Mail Boxes & More franchise and The Teenscope “Youth AM/FM” interactive teen talk show. Gray was also Executive Producer of a comedy show on the Las Vegas Strip and owner of Farr-Out Foods, “Way-Out Food with a Twist,” aimed at young people with the company’s first Strawberry-Vanilla syrup product. Farr-Out Foods generated orders exceeding $1.5 million. Dr. Gray’s sense of social responsibility motivated him to create the non-prof it organization, The Farrah Gray Foundation. Gray says,” Becoming successful involves action, consistency, persistence, and inner strength. These are very powerful tools if you want to fulfill your dreams. You need to take action in order to obtain results. You need consistency so that opportunities do not pass you by. You need persistence when experiencing setbacks and the emotional strength to deal with them. Dr. Gray’s work did not remain under the radar-screen for long. He soon became the youngest member of the Board of Advisors for the Las Vegas Chamber of Commerce. He was also given a three-year term on the Board of Directors of United Way of Southern Nevada at the age of 15. Dr. Gray continued his philanthropic work signing on as the spokesman for the National Coalition for the Homeless and the National Marrow Donor Program. As a private consultant he has gone in to work with the likes of JP Morgan Chase and the U.S. Department of Commerce Minority Development Agency. At the age of 20, Farrah published his first book, “Reallionaire: Nine Steps to Becoming Rich Inside and Out”, where
he noted down all his experiences and journey to becoming the man he is today. His prominence progressed from national to international and Farrah became an entrepreneurial icon among the youths of America and other parts of the world. When asked what’s the secret to success, Farrah Gray replied, “In life we don’t get what we want, we get in life what we are. If we want more we have to be able to be more, in order to be more you have to face rejection.” Tips for success from Farrah “ A good idea is nothing without the will to make it happen.” “You don’t have to hit a home run the first time, but you’ll never hit a home run if you don’t learn to swing.” “Success creates confidence, which creates more success. Remember that the first step is always the hardest. Once you’ve taken it, don’t start walking -start running. Momentum is a valuable asset in life. “When things are at there worst I am at my strongest”
RESOURCES The Farrah Grey Website www.drfarrahgrey.com
www.reimag.co.za
6 PAGE EDUCATION SECTION
www.reimag.co.za
December 2012 SA Real Estate INVESTOR
67
Reap The Benefits Of Property Education We show you how
T
he business env i ronment a nd in particular the property industry is everchanging, not only globally, but also in a developing country like South Africa. The growth in the number of players and size of the listed property sector is testimony to the increasing importance that investors are placing on property or real estate as an asset and investment class. This increase in the size of the institutional property sector and the general interest that individuals now have in property as an investment have also seen a growing need for education and training in this area. "There are few universities in South Africa that offer specialised degree programmes in the area of Property Studies" says Graeme Jay, MD of CPMD (The College of People Management and Development) and Lecturer in Property Studies at WITS (The University of the Witwatersrand). According to Jay, university education is generally knowledge based as opposed to focussing on the skills required to perform particular job functions. Jay believes that over time the curricula of various degree programmes will change to incorporate the skills that people need to work as professionals in the property industry. Jay also says that the need for people to learn skills relating to the operational, investment and management aspects of property, which are critical for the majorit y of propert y professionals, can be addressed by smaller colleges who are accredited training providers with Services Seta and the Estate Agents Affairs Board (EAAB), such as CPMD. A further gap that is filled by colleges are the compliance prerequisites for agents to be able to operate legally, such as providing the necessary tuition and Recognition of Prior Learning (RPL) that all transacting agents are required to hold. Only once property agents, brokers, managers have met the requirements
68
December 2012 SA Real Estate Investor
of the FETC (Fur ther Education and Training Certificate) in Real Estate, are they able to apply to the EAAB for a fidelity fund certificate. “It has become imperative in South Africa for the property industry to become more professional as we compete with global markets. In addition, many African countries are opening up to foreign investors and we need to attract investment to South Africa and retain qualified and skilled professionals in our country,” explains Jay. The qualifications that estate agents and property brokers now require is part of transforming property from an industry to a profession. Estate agents and brokers now have to complete formal SETA accredited programmes. Certain agents and brokers will have the opportunity to go through a process of Recognition of Prior Learning (RPL) and not be required to complete the full qualification, but the window period for those who are able to undertake the RPL process is only open until the end of 2013. This means agents, brokers and property managers only have about 3 months to start taking up RPL opportunities. In this last-minute rush, it has become apparent that some agents are actually still burying their heads in the sand hoping that they will not have to comply with the new educational requirements. A more worrying factor is that some agents and brokers are still operating illegally, that is without Fidelity Fund Certificates. In the past, people entering the property field would not necessarily have any training or qualification, but would learn on the job. It is clear that training and compliance have become a prerequisite as opposed to a ‘niceto-have’ for property professionals. Members operating within different sectors of the property industry need to be suitably trained and qualified according to the job function they are performing.
In order to keep up with the changes in the environment and the demands made by industry, it is necessary especially for short courses to remain relevant and to provide for the property industry of the future. Not only will learners need to be workplace ready on completion of their studies but they will also have to continue to learn during the course of their careers. The job market of the future will require people to learn, unlearn and re-learn new knowledge and skills. There are a number of very good short courses today that people can choose to do which would assist in learning current knowledge and skills required by the property industry. Individual property investors also need skills before investing in property. One of the negative consequences of a property boom like we experienced in South Africa during 2003 to 2007, is that people were just about guaranteed that whatever property they bought would go up in value. “It was not uncommon for people to go and do their monthly grocery shopping on a Sunday morning and on the way home stop off and buy a unit off plan at the new development just down the road from their house”, says Jay. Many private investors like the idea of owning property for investment purposes, but do not necessarily have the knowledge and skills to do so. Property investment, according to Jay, should not be done on a whim and a prayer; it is far more scientific than that. One has to have a good and keen eye for the market, but one also requires knowledge and skills, not only to make the purchasing decision, but also to manage the property and further investments thereafter, in order to ensure profitability. Investing in property is not a gamble, but it does involve some risk. Therefore, before one invests, one should complete a critical analysis of the proposed property investment. A good strategy and understanding the numbers are crucial for investors to have in order for them to reap the benefits of the investment.
www.reimag.co.za
South Africans Qualifications
Short Learning Programmes
Further Education and Training Certificate: Wealth Management
Entrepreneurship for Small Business Development
LAST DATE FOR ENROLMENT: 2013-06-30 Purpose: The FETC: Wealth Management is a generic Qualification in the management and creation of wealth that builds the introductory knowledge, skills attitudes and values required for learners to operate ethically and responsibly as Intermediaries and Administrators, and to respond to the challenges of the economic environment and the changing nature of the highly regulated Financial Services Industry. It is designed to meet the needs of learners in a variety of positions including Trustees and Principal Officers of retirement funds and medical schemes and Trainee Financial Planners. The FETC: Wealth Management covers structured, low risk, cash backed investment or guaranteed products for conservative portfolios including life, disability, health events (dread disease and personal accident) and funeral cover. It provides a holistic introduction to Wealth Management and Wealth Creation and is a building block for the National Certificate: Wealth Management: Level 5. It should develop individuals who have a basic understanding of economics, asset management, investment principles, financial markets, risk (personal and financial) and the need to provide for financially for retirement. It should add value to the qualifying learner in terms of enrichment of the person, status, licensing and recognition. The Qualification is structured in such a way that it exposes learners to generic competencies required in the management and creation of wealth including LongTerm Insurance (Life, Medical Scheme Administration, and Retirement Funds), Short-Term Insurance and Collective Investments and allows for specialisation to meet the needs of different work roles. The electives make provision for different streams of specialisation. It provides a balanced learning experience and an opportunity for learners to apply academic skills in relation to the workplace.
Further Education and Training Certificate: Real Estate LAST DATE FOR ENROLMENT: 2013-06-30 Purpose: This Qualification is for any individual who is, or wishes to be, involved in the property and real estate industry. It serves to support and advance the functioning of individuals in this industry. The attainment of the Qualification represents the prerequisite for admission to the professional examination for estate agents, to be conducted by the Estate Agency Affairs Board, the successful completion of which will entitle the candidate to be registered as a non-principal estate agent by the Estate Agency Affairs Board. A learner will be able to complete the Qualification with a specialisation in Real Estate or Valuation. The core unit standards are relevant to each area of specialisation. www.reimag.co.za
Introduction Whether you own a small business or franchise, or intend opening a new business, the ability to explore creative and innovative new opportunities whilst applying sound management skills is critical for wealth creation. This short learning programme examines the link between successful small business development and entrepreneurship. Running a small business requires careful planning and an understanding of the business environment while innovation in seeking out new opportunities provides the ideal platform for growth and sustainability. Programme Outline • Entrepreneurship for business and the national economy. • Creativity and innovation, including the concept of ‘intrapreneurship’. • Investigating business opportunities and the establishment of a new venture. • The advantages and disadvantages of owning a franchise. • The value of strategic planning. • Leadership and motivation in an entrepreneurial environment. • Formulation and implementation of the business plan. • Financial planning and the budgeting process. • Compile the marketing plan and use research and forecasting within your market. • Develop an operational plan that addresses the company’s strategy. • Understand the legal aspects of new business development. • Identify and manage key growth areas, including the life-cycle of high-growth ventures. Who Should Attend • Small business owners • Franchise owners/managers • Entrepreneurs • Those wanting to open their own businesses
December 2012 SA Real Estate INVESTOR
69
UCT (Law@Work) Sectional Title Scheme Management course • Presented in conjunction with the University of Cape Town • Complied by Prof Graham Paddock and convened by Anton Kelly • Part-time distance-learning online course • One-day workshop and two-hour exam the next day – held in Cape Town, Durban and Johannesburg • Upon successful completion, receive a certificate from the University of Cape Town • Registrations close: 23 November 2012 (Late registration accepted till late January 2013) • Course starts: 3 December 2012 • Course duration: 6 months part-time online • Course fee: R9,400 (excl. VAT) | R10,716 (incl. VAT) • Following course starts: June 2013
Requirements for admission: Students must have a current email account, must have access to a computer, and must be able to read documents in Adobe PDF format, create documents in Microsoft Word and access the Internet. A matric certificate is recommended, but is not required. Description: Managing schemes under the Sectional Titles Act, 1986, (“the Act”) is an increasingly complex task, requiring detailed knowledge of the Act and the prescribed rules and an overall understanding of the South African legal system as well as scheme management practices. The law applicable to scheme management is under constant review. Failing to know and apply the legal requirements for scheme governance may have serious consequences, particularly for professional managing agents.
Home Owners’ Association Management | Certificate course • Complied by Prof Graham Paddock and convened by Anton Kelly • Assignment-based part-time distancelearning online course • Upon successful completion, receive a certificate from Paddocks • Registrations close: 1 February 2013 • Course starts: 11 February 2013 • Course duration: 10 weeks part-time online • Course fee: R7,800 (excl. VAT) | R8,892 (incl. VAT) • Following course starts: August 2013
Requirements for admission: Students must have a current email account, must have access to a computer, and must be able to read documents in Adobe PDF format, create documents in Microsoft Word and access the Internet. A matric certificate is recommended, but is not required. Description: The management of home owners’ associations (HOAs), whether they are established as non-profit companies or common law associations, is a complex task that requires an overall understanding of the South African legal system, the role of HOAs generally, an understanding of the applicable governance documents and, in most cases, a knowledge of the applicable provisions of the Companies Act. A failure to know and apply the legal requirements for scheme governance may have serious consequences, particularly for professional managing agents, estate managers, directors and trustees.
Real Estate Programmes 2013 Programme
Who Should Attend
Dates
Total Contact Time
Price (Incl. VAT)
FETC: Real Estate – Full Qualification (1 Year)
New and Intern Estate Agents (Residential)
March -September
15 days
R18 500
FETC: Real Estate - RPL – Level 4 (6 Months)
Existing Estate Agents
February - March - April
4 Sessions
R4 900
NC: Real Estate - RPL – Level 5 (6 Months)
Existing Principle Agents
January - February
6 Sessions
R6 200
Principles of Advanced Property Practice
Estate agents, Commercial brokers, principles
April - July
9 Days
R9 300
Principles of Property Development
Developers, Investors, Project & Finance Managers
April - October
15 Days
R17 900
Principles of Property and Facilities Management
Building Managers, Commercial and Retail Property owners, Managers and Brokers
April - August
10 Days
R11 000
Effective Use of Financial Calculator
All Property Professionals and Investors
June
1 Day
R750
Advanced Property Practice Power Update
Estate agents, Commercial brokers, Principles
November
2 Days
R1 600
Principles of Sectional Title
Managing Agents, Estate Agents, Trustees and Investors
May - July
6 Days
R6 600
Principles of Business Brokerage
All Real Estate Agents
July
4 Days
R4 400
Existing Commercial Estate Agents and Residential converting to Commercial
October
4 Days
R4 400
Principles of Commercial and Industrial Brokerage Commercial Property Finance and Investment
Commercial Brokers, Bankers, Commercial Investors and Managers
November
4 Days
R4 400
Property Investors Programme
Developers, Agents, Investors (private or (corporate)
October
2 Days
R2 400
Fundamentals of Leasing and Legislation
Residential Letting Agents, Managing Agents and Investors
May & November
2 Days
R2 400
CPD
CPMD is in the process of applying for some of its programmes above to be registered for CPD points in 2013.
70
December 2012 SA Real Estate Investor
www.reimag.co.za
Knowledge is Money
www.realemedia.co.za
Property Educators Jason Lee – Author
Best advice given to you "You never make a loss by taking a profit". If there is a sizeable profit on the table on a property deal then take it because the profit from one deal can serve as a down payment on two or more deals. Worst advice given to you "Never sell property". Although this flies in the face of traditional property advice tough recessionary times have shown that those that did not sell in time and continued to buy, buy, buy came horribly short How did this impact your life? It became the basis of my two-pronged strategy to property investing. This involves buying two properties per year, one to keep for long
term investment purposes and one to add value to and sell in as short a period of time as possible. Profits from the buy and sell deal are then invested in the long-term hold to reduce gearing and improve cash flow on the deal. How important is education to you? Important but not everything. In my view some of the most impressive skyscrapers ever built were developed long before any property courses were ever on offer and also long before anyone even knew what an Excel spread sheet was. That being said, forewarned is forearmed in the property game so knowing something before you take the plunge is never a bad thing. Hands on experience is and always will be the best teacher.
The five most important lessons you ever learnt and implemented in your life, • Be consistent. Like a postage stamp you need to stick to the task until it is complete • "If you are going through hell, keep going" Winston Churchill • It is never too late to start - Taikichiro Mori started his property career at 55 and by the age of 80 was the 1991 Forbes wealthiest man on earth • "Most people overestimate what they can achieve in one year, and underestimate what the can achieve in 10 years" - Bill Gates • Best time to invest was 20 years ago. Second best time is tomorrow morning
Pieter Louw
Best advice given to you Do not accept that your financial position is too bad to start with property investment. Take the plunge and make that first offer to purchase. I said to myself I have nothing to lose and made multiple offers on a number of properties. I was astonished about the fact that ordinary people like myself could obtain several bonds. Worst advice given to you Refinance your investment properties regularly in order to make maximum money out of property. I fortunately smelled a rat here and
only ref inanced properties to expand my portfolio, not for lifestyle. This proved to be a wise decision, having witnessed such a lot of misery amongst investors who followed the bad refinancing advice. How important is education to you? Property education is so important to me that I have made it my business. The P3 Investment Club is an educational institution where we teach people how to become successful property investors.
The five most important lessons you ever learnt and implemented in your life • Don't try to go it alone. I rely on God, my wife, my children, my colleagues and anyone whose wisdom I can tap. • Don't wait for things to happen, make them happen! • Action cures fear. • Only those who do nothing never make mistakes, but be willing to apologise. • If you really want to make a difference, you will have to step out of your comfort zone.
Gordon Mackay
The best property advice I was given: When I was in my t wenties and buying properties in Umhlanga Rocks, I knew a man called Doug Jutronic and he gave me very good advice when he told me “What’s expensive today will be cheap tomorrow”. This statement I have proved over and over to be true. Worst property advice you were ever given: It was from an advert in a local newspaper. I bought a piece of land. This was a big mistake as I had to make a payment every month and was getting no return on my investment. After four years I stopped the payments and 72
December 2012 SA Real Estate Investor
lost the property. Many years ago I attended a seminar on how to do property development. Fortunately I realized the high risk involved so I learnt a great lesson on what not to do! How important is education to you? The right property investment education is extremely important. People must be aware and make sure they are being given the right information by the right people. Always question everything and make sure you totally understand the information and consequences.
The five most important lessons I have learnt in my life: • Take responsibility for your own money and life. • Be honest in all your dealings • Never base your life decisions on advice from people who don’t have to deal with the results. • Your choices today create your tomorrow. • Live within your means
www.reimag.co.za
Where investment and excellence meet STANLIB Direct Property Investments STANLIB Direct Property Investments manages the Liberty Property Portfolio which owns the Eastgate Shopping Centre and is the majority shareholder of Sandton City. We are in the process of registering and launching the STANLIB African Direct Property Fund which aims to invest in retail-led real estate developments with a focus on opportunities in Nigeria and Kenya.
www.stanlib.com