Managing a property investment portfolio
The chairman of the Rawson Property Group, Bill Rawson, believes a property investment cannot be regarded as successful unless it gives a return at least equal to that of a reputable money fund - with the capital appreciation then being a bonus.
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"Achieving successful returns of this type can only come about if a continual policy of upgrading the property portfolio is accepted and adhered to year in, year out," added Rawson. As a corollary to this, it should be accepted that low performing properties, where possible, should be sold off to finance upgrades and better buys.
"I have on occasions been quoted as saying 'never sell' and in my experience many investors forget to take a longer term view, often missing out on a property that could become very profitable."
When to sell
"Nevertheless, it often makes good sense to sell one or more properties if the investor is aiming to decrease his monthly bond repayments on the remainder of his portfolio and thereby increasing his cash flow - or to move on to buying a property able to give better returns," he said.
This tactic has been adopted by many of South Africa's top listed property funds, e.g. Growth Point and Redefine, which have in the last ten years outperformed the JSE Stock Exchange averages.
One of Rawson's colleagues has a policy of buying two properties per annum, one of which he resells quickly and one which he regards as a long-term investment. The profits from the quick sale are almost always then used to reduce the gearing on other properties, to fund the purchase of a better earning prospect. It is noteworthy that after 12 years in property over 50% of the bond sums owed by this investor on his portfolio are now paid off and the upgrading and improvement of returns continues year by year.
"Another eight years from now this investor will in real terms, not allowing for inflation, have trebled the value of his portfolio and will be nearing the 80% paid off mark," said Rawson.
