Frequently Asked Questions
Q: How do you measure the Return on Investment?
A: ROI is a performance measurement tool. It measures the return on a particular Investment, relative to the cost of that investment. The result is expressed as a percentage or a ratio. It is a versatile and a simplistic calculation.
ROI FORMULA: ROI= NET PROFIT/TOTAL INVESTMENT*100
The challenge however lies in predicting the future value of property. It is believed that the property market took its greatest fall over the last 9 years and looking at past trends it should now start to climb back up.
Q: What is the anticipated return on investing in such an estate?
A: Based on actual statistics in previous retirement estates which do offer full ownership, investors can expect to see potential returns on investments between 12% - 20% per annum. This outperforms the nominal growth of 4 - 6% one would experience, on average, in the residential property market. The fact is that there are only a few Full Ownership Sectional Title Retirement Estates for 50+, but which can be bought by persons 18 years + for Investment purposes.
Farhills Manor, prestigious development, is such an estate located in Beverly, Sandton adjoining Fourways, and Lonehill. One of the most sought-after suburbs in South Africa. Farhills Manor is an exclusive and unique boutique hotel-inspired ageless living lifestyle estate.
Q: What are the type of investing models?
A: Currently the two main purchase models for retirement estates in South Africa are Full Ownership sectional title properties or life rights.
A life rights type of Ownership means that you buy the right to occupy the property or unit for the rest of your life, but you never own it, nor can you bequeath it to anyone after you pass on. Essentially a life rights buyer signs an agreement to pay a contribution which gives them the right to live in a unit for as long as they are alive, but that is unfortunately where the value ends.” A Life right option can never be regarded as a property investment as there is no ownership, it does not get registered in the Deeds Office and the buyer cannot benefit financially from such a transaction. Property has always shown growth over time. Should you buy Life rights and live another 10 years or longer the growth on the property can be exponential. The Developer will reap the benefits.
With full ownership you own your property in the retirement development, as well as an undivided share in the common property, since it is in a sectional title scheme. You have the benefit of capital growth and it will form part of your Estate, meaning your loved ones can inherit the property one day, you can also bond or sell it at any time without restrictions
It increases the value of your personal assets. If you are buying for an investment, or to retire to later, you can let your property at a good rental to tenants over 50. The best paying tenants are aged 50 years and older. This is according to rental collection platform, PayProp, which controls the lion’s share of residential letting-related transactions in South Africa, processing monthly rental receipts and beneficiary settlements for more than 95,000 properties nationwide.
This, coupled with a very high demand and limited supply, makes full ownership retirement properties one of the best and least risky options for investors. But with only a few retirement developments allowing full ownership and investors of any age to buy into it, finding these investment gems are not always that easy. You are fortunate when you do find a retirement development which allows anyone from the age of 18 to buy a unit and let it to tenants aged 50 years and older.
You are buying at current prices, all costs are included in the Purchase Price, providing even more investment returns in the process.
Q: Can you explain when the best time is to buy into a new Development; off-plan, during construction or only after construction?
A: Buying off-plan is for early adopters and this is normally accompanied by financial incentives or discounts AND there is the opportunity that the purchaser will gain capital growth in a rising market, with a development cycle of typical 12-24 months. It further allows the purchaser to choose a specific location or set of features as choice many be limited once construction is well on the way.
Also taking in consideration that all costs relating to the transfer of the property and the bond is included, offering the Purchaser a great saving and adding to the ROI.
In the case of Farhills Manor off-plan property is highly attractive as there is already a high level of infrastructure in the development. The developer has to date put forward a 50 million cash injection in the development. The best analogy to use when looking at off-plan vs after construction is when one looks at a jockey and its horse. In this instance the jockey is a developer that’s been in the business for more than 27 years with an outstanding reputation with Nedbank Development Bank and various Professionals and contractors in the market place.