Follow in the footsteps of big corporates and build a solid property portfolio

Posted on November 3rd, 2014
Thought Leaders

Follow in the footsteps of big corporates and build a solid property portfoli


How you, like blue chip companies, can take advantage of South Africa’s resilient property market, writes Lesiba Mooka

Ever wondered where major corporate companies invest most of their (our) money when we take out policies with them? Moreover, ever wondered how the insurance money you save for years until retirement is invested?

Look no further, because big blue chip corporates such as SANLAM, Alexander Forbes, Liberty, Old Mutual and Investec, to name a few, have property portfolios worth billions of rand combined. These major companies choose amongst various investment options to invest billions of their (our) money on acquiring rental generating properties, mainly in the industrial, commercial and retail space.

The South African property market has been performing fairly well over the years and has been a top performer, second only to SA shares trading in overall excellent performance.

The constant growth over the years of the property portfolios of these large corporates indicates that property investment is seen as a good, stable long-term investment opportunity. Since the early 90’s most of these companies have begun including real estate investment as a viable option to stock trading.

With all that being the case, why should we not follow suit and invest in properties that will generate income for us?

Straight-forward steps to follow

A well-priced, well-placed and attractive property that will generate consistent passive income will make a sound investment. Hence, it is essential to follow these common property investment rules as applied by the major players in the property world:

Set clear objectives and goals

Before investing in property you need to identify the objectives, goals and constraints. You must also thoroughly identify and investigate any risks relevant to the investment.

“As an investor you will need to have a clear knowledge of the future cash flow of your investment”

Collect sufficient data

Collect all relevant information including the economic climate, as well as the business and legal factors that could affect the property investment. You will need to fully analyse the investment climate and understand the market conditions.

This step will also help you to identify any risks that might affect the investment and, where possible, how such risks can be mitigated.

Know and understand the numbers

As an investor you will need to have a clear knowledge of the future cash flow of your investment. That part of the preparation will be covered by having a detailed financial analysis that will depend more on the forecasting of rental incomes, vacancy, operating expenses and debt services that will be involved.

Do proper analysis

Once all the work is conducted and the information gathered, you as the investor will now have to analyse the data and come to a decision.

Keep your eye on the ball

Keep in mind the initial objectives and goals you set-out before you invested. Continually evaluate whether the investment is meeting your set goals or not.

By closely following these basic steps, as an investor you can make informed investment decisions, comparable to those of the big companies, thus building an impressive portfolio over time. A house is no longer simply a place to live in; it is now an excellent investment for the future.