by Kevin Croft 
The 6 Point Check
List For Profitable Property Investments
This is How Elite Property Investors
Make A Killing in Property Investments (and how you can do the same
A GUIDE BY Kingdom
#1 Why should you invest in property?
Why invest in property?
Glad you asked! Let’s explore it together.
Firstly, let’s familiarise ourselves with what it means when you invest in buy-to-let property.
Buy To Let is when you buy a property for the purpose of leasing or renting it to a tenant.
Now, why do people do this?
Well, because when you invest in buy to let property, both your rental income and property value
increases every year which in turn grows your overall wealth.
If, for example, you wanted to invest in a
three-bedroom house that’s in a secure estate,
And it’s selling for R500 000 with a monthly rental of
R5 500 and regular expenses of R300 per month.
Let’s say that growth in the area is 10% a year.
1. Since you’re earning around R5 500 a month from rentals,
Let’s say that growth in the area is 10% a year.
Since you’re earning around R5 500 a month from rentals,
And your total expenses are only about R5 200, you
can save up to R300 per month after all expenses have been paid by the tenant.
In that case, your rental growth after year one will be around R6 050 per month,
R6 665 after year 2, R7 320 after year 3, R8 052 after year 4,
And R8 857 after year 5.
Thanks to a 10% annual capital growth, that same property will be worth over R805 000 after five years,
This means that your investment will have increased by R305 000!
You can then choose to sell it, or continue increasing your monthly rentals until you’ve paid off the home loan.
With that increase in the value of your home, you can refinance the property and purchase a second or third piece of real estate.
And if you repeat the process every two to three years, you can build a solid property portfolio and achieve financial freedom on your own terms.
#2 How To Invest In Property:
How much can you afford to invest?
As a rule of thumb, usually, you would qualify for a home loan that has a bond repayment that is a third of your income.
Then based on what that number is, you can work out the total value of the property that you can afford to invest in by dividing it by 0.01 since your monthly
bond repayment is usually around 1% of the total property value.
So let’s say, for example, you and your spouse earn a combined salary of R30,000 per month.
That means that you would then qualify for and afford an R10,000 monthly bond repayment.
So, that’s R10,000 per month that you can pay on your home loan.
And if that’s the case, then it means you can afford to buy a property worth 1 million Rand.
For the example of this exercise, let’s say you want to buy a property that gives you a high yield on rental income…
#2.2 How to find the right deal:
How can you find the best property investment deals that work for you and are not against you?
Next, let’s talk about choosing the right asset for you to invest in.
You’ll always have options when investing in property, it’s up to you to choose a property that allows you to make passive income on your own terms.
Let’s look at two options and which would be the best choice.
Option 1:
You find a three-bedroom house that’s in a secured estate,
It’s selling for R500 000 with a monthly rental of R5
500 and regular expenses of R300 per month which includes your tax and levy.
Furthermore, your bond repayment on this home is
R4900 per month.
And growth in this area is 10% a year.
Option 2:
You find a two-bedroom apartment that’s also in a secured estate and is selling for R500 000
But your monthly rent is only R4 500 per month.
And your regular expenses are R300 per month which includes your tax and levy.
Your bond repayment on this home is R4900 per month.
And growth in this area is also 10% a year.
So, which option will you
choose?
Option 1, right?
Since you’re earning R5 500 a month from rental income.
And your total expenses are only R5 200, which is the combination of your bond repayment of R4900 plus your expenses on tax and levy of R300, you’ll be able to enjoy a monthly cash flow of R300!
Whereas with option two, since your rental income is only R4500 and your expenses are R5 200, you’ll be paying an additional R700 each month into paying off your bond.
Now that you’ve chosen the right deal, here’s what you can expect for your rental growth over the next 5 years.
Your rental growth after year one will be around R6050 per month,
R6 665 after year 2, R7 320 after year 3, R8 052 after year 4, And R8 857 after year 5.
Thanks to a 10% annual capital growth, that same property will be worth over R805 000 after five years,
This means that your investment would have increased by R305 000!
You can then choose to sell it, or continue increasing your monthly rentals until you’ve paid off the home loan.
With that increase in the value of your home, you can refinance the property and purchase a second or third property.
And if you repeat the process every two to three years, you can build a solid property portfolio and achieve financial freedom on your own terms.
#3 Captial Growth Vs Rental Yield
When it comes to investing in property, there are two strategies that you can deploy.
#1, you can invest in a property that has high capital growth, Or #2, you can invest in a property that has a high rental yield.
So what’s the difference?
Capital growth refers to the overall growth your property will experience on a yearly basis depending on that property’s location.
So for example, if you’re investing in a property valued at R1 000 000 in an area with 10% capital growth, this means that each year your property’s value will go up by R100 000.
In this case, the quicker you pay off your bond the sooner you can reap the rewards of your capital growth.
Rental yield refers to how much income your property will generate you on rent.
If you’re looking for a property that has a high rental yield, you’re ultimately looking for a property that’s going to give you profit every month on your rental income after expenses are paid.
It’s important to know this because most of the time when a property has a high capital growth, the rental yield is lower. And vice versa.
So you need to ask yourself, why are you investing in property?
Is it for the long-run return on investment? Because then, in that case, you want to invest in a property with high capital growth.
Or are you investing in property to achieve more disposable income? Because then, in that case, you want to invest in a property with a high rental yield.
#4 Why is capital growth important?
Many of us know that property investing is one of the most sustainable wealth building activities on the planet.
What many people don’t know, however, is how property investing actually works.
In a nutshell, when investing in property, you stand to gain in 2 ways: through rental yield, and through capital growth.
These two approaches are mutually exclusive; a smart investor should consider both at various times of their property investing journey.
Purchasing a property, which requires you to put in a few hundred Rands each month to cover all the expenses related to the property, may put some strain on your cash flow, but you will be well rewarded in
due course.
Let’s say you buy a property with a 100% bond (or a zero deposit bond) to the value of R1-million and we assume a 10% yearly increase in value.
In this case, you’d stand to make a return of R100,000 per year just from the capital growth.
When comparing this to a property which has a cash surplus of R1 000 per month over a twelve month period, you would have only made a return of R12 000 rand in that same year.
Capital growth on property value can be as much as ten times more than your gains from rental income.
This capital growth will be created tax free until you decide to cash out, and even then, there are legal ways to roll over your investment and reduce — or completely eliminate — all the taxes due.
Five years down the line, you’ll be sitting with R500,000 in equity, not even taking the compounding effect into consideration.
You now have the opportunity to roll over your investment, and with a large deposit, you may break even on two high capital growth properties, compounding Your Growth in the Years To Come.
Focusing your property investments on capital gains could supercharge your investments and give you peace of mind when considering your financial future and your retirement
Ten Years from starting your property investment journey, depending on your end goals, you could easily have at least four properties in areas of high capital growth,
And be breaking even while compounding your wealth at break-neck speeds.
This strategy has the potential to radically change the wellbeing of your life and that of your family for generations to come.
#5 Investing in a group:
Property investment is still the best way to grow your wealth and build a sustainable legacy for your family.
However, not everyone fits all the criteria of investing. Did you know that investing in a group is the perfect
solution?
Whether it be with friends, partners or like minded investors, you can reap the benefits of investing in property even when you do it with other people.
Not everyone has the required income, but in a group, capital multiplies.
By combining your income with like-minded people, Investing together makes it easier to get financially approved thanks to your multiplied capital.
With enough capital and good credit scores, managing the investment alone may be challenging.
Investing as a group allows everyone to focus on their own strengths. Investing together also grows your investment knowledge much quicker — since 2 heads are always better than 1.
With more experience, you can save time and money while ensuring financial freedom for you and your investor partners.
#6 How to get a home loan:
Do you want to invest in property but don’t know if you qualify for a home loan?
With PropInvest, this can be an issue of the past. We can get you multiple quotes to compare so you
know you’re getting the best deal possible, all without
impacting your credit score.
And the best part?.. It all comes at no charge to you, the buyer. Our inhouse home loans specialist will examine your credit record, income and expenses to establish what you can afford in real time, just like a bank would.
We will spare you the hassle and inconvenience by prepping your application and applying for you.
If you’ve read this far, then it only means one thing: you’re one click of a button away from being an elite Property Investor.
And the best part?…
You don’t even need that much experience as an investor to make a killing from your properties this year.
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We can’t wait to see you on the other side
