Investing in commercial property is an excellent option for investors – and you don’t need a substantial amount of cash or access to finance either. Listed property funds allow investors to benefit from the property market’s impressive performance without having to spend millions to acquire a property.
If you’re looking to diversity your investment portfolio, you should definitely give listed property a closer look.
The benefits – buying into the property market with any amount you like
Seasoned commercial property investors will tell you that two things are crucial for success: the timing of your investment, and having the capital you need to invest.
There’s nothing more frustrating than seeing an ideal property in an area that’s set to develop, only to find that you don’t have the cash to buy it – or have your bond application rejected. When buying property directly isn’t an option, listed property funds offer a good alternative.
- Listed property takes the frustration out of investing, allowing you to place anything from several thousand to several million rand in a fund.
- The responsibility for negotiating property purchases, finding tenants, and all the other decisions related to the property is with the property fund – all you do is invest your money.
- You can buy or sell your shares at any time with listed property funds which are freely traded on the JSE.
The two types of listed property funds – what’s the difference?
Capital focused funds and REITs (real estate investment trusts) are two types of listed property funds. Knowing the difference between these two types of funds (and how they invest) will help you determine which one may be right for you.
- Capital-focused funds – these funds aim to increase the value of their holdings by investing strategically and sometimes taking on higher risk.
- REITs – these funds invest with the goal of fixed income and have to pay a dividend twice annually. They tend to take fewer investment risks.
If you’re looking to grow the value of your investment, a capital-focused fund may be ideal for you.
The closer you get to retirement, the better the alternative of an REIT fund. This is definitely the route to go if you’d like a regular dividend from your investment. REIT funds are also exempt from CGT (capital gains tax), allowing you to enjoy the full value of your investment.
If funds allow, a direct property investment is always best
Listed property is an excellent way to grow your capital or invest smaller amounts in the property market. Once your capital allows you to buy a commercial property directly, you’ll probably make the best returns of all.
If you’d like to invest directly in Cape Town commercial property, contact us today.