Monday, 27/5/2024 | 15:50

No sin in taking a profit

There are a number of property advisors worldwide that promote the mindset that one should never sell property.

I certainly do not promote that mindset. Making Money out of Property means exactly that, being able to bank the cash profits that you make on selling properties. Don't get me wrong, my primary aim is to build up a substantial property portfolio that presents a strong balance sheet and income. But to do that requires a dual investment approach of buying and selling properties to get there.

There is no business in the world that can survive on only buying products. Every business makes money and builds the business by buying and selling products. In my view property is no different. If you set out on the "I will never sell my property track" I believe you are setting yourself up for investment disaster.

As far as I am concerned at the right price I am a seller of any property that I own. If you do not follow this approach you close the door to the opportunity of selling your property for an exceptional profit, and using the profits to leverage the purchase of two new properties when you only owned one before.

On a more practical note, if you bought a property for R800 000 and were getting a net-monthly rent of R5000 per month, this would equate to a yield of 7.5%. If over the next 12 months the value of the property increases to R950 000, the yield on the property now drops to 6.3%. Every year that the property increases in value and the rent does not increase proportionally, your yield is going down. To let a situation like this go on for year after year is not sound investing. The sensible play would be to sell this poor performing asset and purchase one or more properties in its place that offer a better yield.

There is no doubt that one can make money out of property by adopting a sit and wait approach, but if you want to make real money out of property and fast forward your financial freedom a more proactive approach will pay huge dividends in a shorter space of time.