Property Investment blueprint


The ancient truth applies here. You hit what you aim at. The converse is true, aim at nothing and you are sure to hit nothing. The objective of this step is to equip
you to be able to draw up your own property investment blueprint.
If you have ever played Monopoly, you will know the basic formula:

 4 green houses = 1 red hotel

Location is everything, and you win the game if you own income producing properties in the best areas on the board. Developing your own property investment blueprint requires that you select the correct type of property and an ideal location for these properties. For example, you would need to investigate your local options with regards to capital growth potential, financing options and demands from tenants.

Every established city has nodes of property development–be they offices, industrial, retail or residential. Some nodes are developing and growing, while others may be suffering various degrees of urban decay due to many different circumstances.

Residential property offers the first time investor some very real benefits. The barriers to entry are low as banks are very willing to finance residential property and individual properties are often found in bite-sized chunks.

Commercial properties often involve far bigger numbers, and banks traditionally require larger percentage investor participation. That is, you need more cash to invest!

If your aim is to retire early or set up an education fund for your children’s education, it is imperative to develop your investment plan.

Traditional retirement planning calculators require that you guess the future inflation rate and your length of life to enable you to plan successfully for your retirement.

Clearly a more successful model is required.

Remember that   4 green houses = 1 red hotel

Property investment provides a unique method of designing an inflation-proof retirement plan. For example, people in affluent and aspiring suburbs tend to spend 25% of the household income on accommodation. A simple personal property investment blueprint plan to enable you to retire on the average household income of a specific suburb would require that you own 4 homes in that suburb.

The do’s of a retirement blueprint

Decide on your goal.

For example: I want to be able to retire with no debt and a monthly income of R 20 000 (in today’s money).  That might seem like a small amount but bear in mind that this is your goal income with no debt eating away at your income. Do the exercise on your own personal monthly budget. You will be surprised at how little you need once you have stripped out all your debt repayments, rental or bond repayment, car repayments, clothing accounts, the cost of educating your children and the like.

So your goal is R 20 000 per month to spend on food, clothing, lifestyle, holidays and insurance.

You can now establish your investment currency in today’s money. If your retirement goal is an income of R 20 000, then look at the income derived from townhouses in your desired area. Small townhouses in a good area like Fourways, will, once fully paid for, return you a monthly income of R 5000 (after payment of levies). So begin to think in “townhouses”. The question is no longer, how can I work out how much money I need to retire on. The question is how many investment townhouses do I need?

Working out your retirement blueprint is simple when you use this formula. Four of these little townhouses will provide a monthly retirement income of R 20 000. As mentioned above,
this income will then grow with inflation, or better that inflation, no matter what the inflation figure is, this formula will apply: people spend 25% of their income on rental.

Your retirement blueprint is therefore to own 4 small, fully paid off townhouses in Fourways, Sandton. But, it won’t do you any harm to build in a safety factor and aim at 6 townhouses for retirement.

This method can now be used to work out your children’s education blueprint, your around the world trip blueprint and so on.

The don’ts of a retirement blueprint

Don’t think you can save enough in 40 years of work to be able to provide for another 40 years of retirement.

Don’t assume that your pension will be sufficient to retire on.

Don’t think that paying 10 or 15 % of your monthly salary into a retirement fund for 40 years will be able to provide for 40 years of retirement.

Most retirement funds, retirement annuities offer to beat inflation slightly if all goes well. If the stock market crashes massively, as it is inclined to do from time to time, people lose their life savings in one foul swoop.

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