Everybody wants to be a millionaire. For some people, it’s because they’d like to retire early and comfortably. For others, it may be part of a plan to create generational wealth. With a plethora of competitive markets to participate in, it only makes sense to pursue one or more sources of income.
Most jobs don’t pay enough to turn the average South African into a millionaire, so you may have to try an alternative method such as entrepreneurship, investments or starting a side business. If you have a passion for property, then the real estate industry presents ample opportunities to achieve this, but where do you even begin?
Seeff explores three lucrative opportunities for increasing one’s wealth through real estate.
One – Purchase an investment property
If you’ve thought of buying a property and renting it out, you’re on the right track. However, due to the high property prices, you will need to plan well and set attainable goals. Below are a few strategies you could use to purchase an investment property.
1. Apply for a home loan: If you earn enough and have a good credit score, you could apply for a bond.
2. Invest as a group: You could partner with others that have the same dream and buy an investment property together (be sure to have a contract in place to prevent disputes in the future).
3. Save a down payment: Following this option will take a bit more patience than the above two options but is less risky than taking a 100% bond or partnering with others to buy a property.
Once you have purchased your investment property, use the rental income to pay the bond off as fast as possible. One way to do this is by contributing a little extra towards the bond whenever possible. If you are contributing an additional amount to your bond regularly or on an ad hoc basis, make sure to let your bank know about the additional contribution to make sure you are paying off the capital amount and not just the interest.
Two - Buy a fixer-upper in a good area for reselling purposes
People have been buying neglected properties, fixing and selling them for years; however, this is not a method to get rich quick. It is essential to take a long-term strategic approach to house flipping to make a success in this competitive industry. When deciding to enter the property flipping market, you’ll need expert support to identify the right property, complete a renovation at a reasonable cost and make a profitable sale.
Three - Short-term rentals for holidaymakers
Many property owners are transforming their own homes into holiday rentals on both a part- and full-time basis. Platforms such as Airbnb have made it easy to put up listings, find clients, and facilitate bookings in a safe and secure app. Which means you may be able to create an additional income channel by renting out your current property or subletting part of your existing property (with the landlord’s permission of course). Again, having short, medium and long-term strategic goals is the key to building wealth through the property industry.
If you decide to make use of short-term rental strategy, it is advisable to have a plan for your additional income such as saving for a deposit on another property or contributing to your bond.
Becoming a millionaire, no matter which industry you are in is about making smart financial decisions, diversifying your income streams and minimising your monthly expenses. The Real Estate industry is no different and if you plan on entering the market, you will not only have to invest your money but also your time. The results of your investment might not be immediate, but they will be significant if you make strategic moves.
If you’re not sure what the local property market looks like or how it can work for you, chat to one of our property experts for valuable insight.
Author: Seeff Head Office, 20 January 2020, Expert Insight