When investing in property on your own the classic approach is to buy a place and rent it out. You basically use the rental income to pay off the property over time leaving you with an appreciable asset. It sounds easier at the outset but there are many factors which affect the investment:
The price you pay
The rent you receive
The maintenance costs
The costs of buying and selling the property
The tax payable
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If you get it wrong you could be stuck with an investment which returns way below what you could have done with your money in a bank account. Add to it the hassle factor of running the project and the legalities which favour the tenant you could be in for a long rough ride.
There is an easier way to invest in the property market. A fund which invests in property companies which are listed on the stock exchange. You can choose either a Property Unit Trust (PUT) which will be managed by a fund manager or an Exchange Traded Fund (ETF) which tracks the property index on the JSE. The advantages going this route are:
Liquidity You can sell your investment at the market price on the day. Unlike a fixed property where you have to find a buyer to pay the price you are looking for. This could take months, and then even longer to process the transfer and registration of the new buyer before you get your hands on the cash.
Risk The Unit Trusts and ETF’s offer a spread of shares in property companies offering a diversification across commercial, residential and industrial properties. This significantly reduces your risk as your investment is spread across companies and sectors in the property market.
Easier to manage The investment is managed by a range of professional companies. They contend with the purchase issues, maintenance, rental agreements, legalities of running properties. Their business models are well run to the point that they can forecast their future growth and returns with
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This article first appeared on 702 : Take the hassle out of your property investment