There are probably very few forms of investment where you don't need money to make money. When you try borrowing money from your local bank to purchase shares in that bank you will most certainly be shown the door in a polite way! This will quicly prove to you that you will need your own money to attempt making money on the stock exchange! On the other hand, if you ask them for a sizable loan to purchase a property, they will probably do everything they can to make it possible for you to use their money to invest in your property... How can you get going to make money - using mostly the bank's money! - through property investment in South Africa? The first thing is to start a savings plan to build up a deposit if and when needed. Many developers do ask a deposit to ensure the buyer is serious. You do not want to be in a position of having a wonderful property investment opportunity and no cash deposit at hand! On the other hand, you should keep in mind that paying a deposit is not a legal requirement in South African property law. You may therefore want to try and avoid paying a deposit in a property investment transaction. Secondly you should look into increasing your buying power by joining forces with family or friends. The size of the bond is determined by the size of the repayment you can service. As a rule South African banks won't want you to use more than 30% of your income for that purpose. As an idividual you will therefore generally be limited. One way to overcome this limitation is to form an investment club with family members or friends. Your combined income will then be used by the bank in determining the loan. Structuring a close corporation or trust correctly can therefore empower you to invest in a much bigger way - while still using the bank's money! Then start doing your homework about what kind of property you want to invest in, what the purpose of the purchase would be and whether you will be able to achieve with it what you intend to. Are you buying to live in, to speculate or "flip" soon after buying, or to renovate and sell? In all instances you should carefully investigate the costs involved before getting into a deal, to ensure as best you can that you aren't overpaying and therefore undercutting your eventual profit or capital growth. Property investment is essentially a long term investment. Huge profits can be made in a short period, but massive fortunes are build up over decades. Opportunities will always be there; do not shortsell yourself by thinking you must build Rome in one year! For more information visit www.Property-Investment-South-Africa.com |
