MORE TIPS FOR THE SMALL INVESTOR WITH LITTLE MONEY
By: Pierre van den Berg
A small miracle has happened since 2007 after I had given up my job [and small government salary] to continue a commitment in property investment. At that stage I was earning only a little bit of rental income, supported by some ad hoc pay-outs from contract work now and then. Despite not qualifying for any additional bonds, I have still been able to substantially enlarge my property portfolio.
How is this possible?
Contribute / “park” as much money [savings] as possible into your already existing “flexi reserve” bond account[s]. Besides property “gurus” advising this as a clever strategy if you yourself reside in the property purchased on this bond, it holds a HUGE advantage for the investor who is unsuccessful in qualifying for further financing. It provides you the alternative to again utilise these “access” funds at a later stage, and thereby keeping your options open towards “financing” and the ability to purchase more properties from this same bond. Chances are also good that your older existing bond account will boast a much lower interest rate than that which could be negotiated with a new (additional) bond from the bank.
By sourcing some of my own properties, I have saved up to 20% on the original listing price [including saving the estate agent’s commission]. Remember, “you make your money [profit] when you BUY a property”. Sourcing your own property is also a great way to become an expert on a specific market, and to develop a credit-worthy network with other investors, agents, developers, etc. Subsequently these people start to notice you and at a later stage might approach and involve you with special deals, thereby positively contributing towards your property sourcing.
Buying cash flow positive properties. Although property deals in which the rental income will cover all of the expenses (including the down payment on the bond) are becoming much more limited, these can still be found in certain niche markets. Some inner city flats are prime examples of this scenario. But be warned that in many cases the investment in cash flow positive flats is a “specialised” market, and that this strategy is not for all investors.
However, if you are prepared to do lots of research and “homework”, take higher risk, and spend more personal time and effort, this could be a sure way to expand your property portfolio and turn it highly profitable.
Become an expert on your chosen market: the type of property; price class; the areas where you choose to focus, and specialize in this. Although some diversity in your investments is always good, do not steer away completely from what has been working for you.
By joining property forums and groups, and networking with other investors (buying in the same area and type of property,) I have gained lots of knowledge and self confidence. This has probably also saved me from a number of costly mistakes. Without this support and guidance my investment progress would have been limited.