Invest direct if you want a property gem to polish.

Posted On Tuesday, 29 July 2003 02:00 Published by
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Depending on what you do, you can make money by owning property directly, while the value of stock exchange investments are influenced by trends beyond your control. This was the message from Francois Viruly, a property economist.
By Greg Arde

Depending on what you do, you can make money by owning property directly, while the value of stock exchange investments are influenced by trends beyond your control. This was the message from Francois Viruly, a property economist, at a recent meeting of the NBS/Independent on Saturday Investors Club in Durban.

When you invest in property, carefully consider your ROE - and that is not return on ego.

For Francois Viruly, a property consultant with a master's degree in economics, the key to making money is the return on equity - the amount you have invested.

And, there is money to be made in property, either residential, commercial or industrial.

You can make a profit from direct property investment, or in property shares listed on the JSE Securities Exchange, Viruly says, but with a direct investment you may have a greater influence on the return.

However, you need to beware of the ego-driven or sentimental approach to direct property investments.

"The number of architectural awards a building wins is normally inversely proportionate to the money it loses. The trick for architects is to ensure that the winning of such prizes is not caused by the overcapitalisation of the property.

"Also, if you are toying with naming the building after yourself, you are likely to be blind to the money-making option of knocking the thing down and creating a profitable, cheap-to-run car park."

Viruly says the enticing thing about direct investment in property is that you can market your property, or come up with novel uses for the land.

There are gems in most of South Africa's cities that are waiting to be polished, he says.

"There are deals out there. Often they are as simple as changing the management of a property to make money."

Key to the business is watching local trends. For example, Viruly says, generally, across the world, the movement is to cluster residential developments within close proximity of schools, places of worship and other amenities.

"People are no longer prepared to travel far to work."

Publisher: Personal Finance
Source: Personal Finance

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