A new way to invest successfully

Investment Strategy for Passive Income

October 2018

In this article, our aim is to compare a buy-to-let strategy with alternatives which have the same fundamentals as well as the additional benefits that emerge from impact investing.

As part of their property investment goals, many investors are rightfully focused on earning returns but do not always take into consideration the lasting impact of their decisions. Especially towards those who paid the initial price to create the investment opportunity in the beginning.

With impact investing becoming the trend amongst property investors it is time to revisit the conventional investment philosophy.

Focussing on making an impact, whilst earning excellent returns.

Such examples include an investment into a distressed property with the intention to:

  • assist property owners in distress to recover;
  • minimize potential loss of property or proceeds; and
  • generate a measurable, beneficial social impact.

Basic fundamentals of recovery & buy-to-let property investment

Purchase price

The purchase price has the following attributes:

  • influences your returns
  • risk mitigation tool
  • determines the timing of your exit
  • determines the value of the underlying security.

Should you purchase a property at lower than market value, your returns will be secured. This can be achieved without taking advantage of others, but in a manner that is mutually beneficial.

Property management

It is essential to ensure that the correct tenant occupies the property, considering legal costs and processes for eviction, whilst maintaining the proper condition of the property and managing the income and expenses on a continual basis.

Alternative Property Investment Opportunities

Specialist asset originators such as Property Assist provides structured, wealth-creating alternative property investment opportunities to property clubs, institutional investors and private individuals.

The solutions are collaborative and aim to provide lasting results for property owners in distress.

Buy-to-Let and Recovery Comparison and Benefits

Current Market Buy To Let Recovery
Net residential rental yields Fluctuating subject to market forces. Contractually predetermined at prime plus 1.5%
Average house price growth Fluctuating subject to market forces. 2017 4,2% p.a. 2018 3,5% p.a. (FNB HPI September 2018) Contractually predetermined at no less than 6% p.a.
Forecast 3 to 5 years Buy To Let Recovery
Net residential rental yields Average of 5-7% p.a. National rental growth rate 6,7% (2017) dropped to 3,27% 2018 (Latest Payprop Report 2018) Contractually predetermined at prime plus 1.5% (Expected rise in prime rate in 2019 by.25 to.5%)
Average house price growth Fluctuating subject to market forces. 3 – 4% p.a. (FNB HPI September 2018) Below Inflation rate (E. RODE REIM Seminar September 2018) Contractually predetermined at no less than 6% p.a. Forecast drop in rate due to Institutional investors entering the market.
NEW ABSA OFFER to 3rd property purchasers Higher income = access to more gearing
Buy To Let Recovery
Tenant Occupation Owner occupation
Fluctuating returns and increases based on current rental market trends Fixed contractually secured returns (prime plus 1.5%)
Increases payable by investor:
- Increase in Interest rate
- Rates and taxes
- Maintenance expenses
Increases payable by tenant:
- Increase in Interest rate
- Rates and taxes
- Maintenance expenses
Capital growth subject to market swings Contractual and secured predetermined ROI
Turnover of tenants = cost No continual turnover of tenants
Your cost if tenant refuses to move and has no motivation to move Penalty profits, legal cost and rental recoverable with the on sale of the property
Potentially buy @ 90% to 105% of market value transfer cost inclusive Greater security in purchase value @ maximum 75% of market value all cost inclusive
Own time-consuming due diligence or expensive fees to utilize experienced professionals. Originated Opportunities - Co- due diligence & decision makers with skill and experience at no additional cost

Get in touch with us today and we can assist you on your journey

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