Sun City – If you want to make easy money, avoid the property sector. That’s the message from delegates at the South African Property Owners Association’s (Sapoa’s) national conference in Sun City.

A panel of speakers, consisting of leaders of some of the country’s largest listed property groups, said the era of exuberant investment as it occurred a decade ago is over.

“When the upturn comes, it will be stronger than we are used to,” said Mike Flax, managing executive of listed property company Redefine. “But [the industry] will be more wary and more conservative.”

According to Flax, the recent recession has put paid to opportunities to make “easy money”, as was the case in the last couple of years.

The panel voiced its concerns over the possibility of stagflation as rental growth remains stagnant.

During the February and March reporting season, the biggest listed property companies – Growthpoint and Hyprop – reported distribution growth of 5% and 6.5% respectively.

According to Frank Berkeley of Nedbank Corporate Property Finance, these results will remain flat for the rest of 2010. “We’re close to the bottom, but not really on the upside yet.”

Norert Sasse, CEO of the R23bn strong Growthpoint Properties, said now is not the time to enter into any form of speculative developments.

“This spectre of stagflation is just against the fundamentals of putting a property development together,” said Sasse.

The economy lost 171 000 jobs in the first quarter of 2010, according to Statistics SA. This, combined with Greece’s debt troubles, is adding to industry fears of a double dip.

According to the panel, the sector’s fundamentals have weakened.  Sasse said he distrusts numbers coming from the retail industry. “Malls would rather keep their shops occupied, and are accepting less for monthly rentals.”

“You can’t find [tenants] for love or money, especially in shopping centres.”

During the February and March reporting season, Growthpoint, Redefine and Hyprop – all retail-focused and representing about R61bn of the R112bn property market – reported vacancy rates of 6%, 9% and 4.5%.

SA Corporate, with a portfolio consisting mainly of small community shopping centres, reported an 8.6% vacancy rate for the year ending December 2009.

The type of investor looking at the property sector should be at least 10 years from retirement, said Erwin Rode of Rode & Associates.

 - Fin24.com

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Turning your property investment into a huge success does not require much risk taking, or even much capital. By following the basic principles of property investments you can easily avoid the common mistakes, and quickly build up your portfolio.

Here are 3 ways to increase your property investment return

1# Renovate a rundown property
2# Buy a repo property
3# Choose the right locations

Renovating a rundown property is a hugely popular choice among many investors.
This option draws on every key aspect required to be a smart and successful property investor. The first step in this process is to find a cheap property that has potential to attract a high rental or reselling price.
To do this successfully you will need to do some very detailed research, and often you may need to know more about a property than the owners do. Recent sale prices, trends, future projections or planned community upgrades – these are just some of the things you would need to research.
Following that you would look to add value to the property. Aim to add an extra R3-R5 of value for every R1 you spend on the renovation.
and finally, work quickly to get the job done and work within a detailed budget.

Buying a repossessed property:
If you are not confident about you renovation skills, you should consider searching through the repossession lists.
Repo properties are often sold and a huge discount as the banks are keen to off load these properties and recover some of the outstanding debt.
South African Banks are even willing to sweeten the deal on these sales by offering full 100% bonds and discounts on the attorney costs.
Its not too difficult to pick a cheap repo property, that is able to attract a decent rental income.

Choose the right locations:
Everyone will tell you that property is all about location. I would agree, but the best locations may not be in the most popular areas, rather the best locations are in the areas that you are most familiar with. Stick to what you know. The more information you have about an area (or property) the likely you are the make a sound and profitable decision.

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