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For those people who are considering investing in property in South Africa it would be useful to know the following options that are available to choose from.

• Property Syndication

Property Syndication is an unlisted investment scheme, which gives the opportunity for a group of investors to purchase property and become part owners in both ways, directly of indirectly. These schemes can be structured in different ways with a number of cost layers attached to them. The reason it is beneficial is that you pay lower individual entry cost as it is spread amongst a group of investors, but it should be pointed out, it can involve very high maintenance costs. Except the fact that there is no formal market there is also scope to manipulate property values. As concerning the disadvantage of Property Syndication, the biggest one is probably that it is hard to exit this type of investment with the liquidity constraints that it offers.

• Direct Property Ownership

Direct Property Ownership investment includes purchasing your own property with the main idea of renting it out. The full control over the property is the biggest advantage while the disadvantage is that it lacks liquidity and demands a high entry cost and, in addition, you need to actively manage your investment.

• Exchange Traded Funds (ETF)

Talking about ETF, it should be mentioned that this type of investment is established as a collective investment scheme much like a unit trust. The aim here is to replicate the price and yield performance of a specified Index as far as possible. These units or shares are generally listed on a financial exchange like the JSE. You should also know that benefits include a low entry cost and easy access as well as flexibility and it is rather liquid and transparent in terms of the investment and interest and offers a well-regulated market. As concerning the disadvantage it is that you can’t manage your portfolio actively.

• Joint Venture or Partnership

Joint Venture or Partnership allows you buy into an investment with the help of other parties. That you gain access to higher value properties without paying it on your own and that is the advantage of this type of investment. A very important fact to mention is that except lacking liquidity there is also little or no diversification of assets. The other disadvantage is that it offers low-income yield and the odd chance and it means that you might have some disagreements with your partners.

• Listed Property

First of all it should be pointed out that this is Property Unit Trusts (PUT’s) and Property Loan Stock (PLS’s), which is effectively REIT’s. High liquidity and professional management is the biggest of this type of investment. This investment offers costs that leaves nothing to implications and protects the investors with a highly regulated market. Of course, there is also a disadvantage and it is that you can’t control which properties are bought but it is available for you to sell in a very liquid market in the case that you do not like the strategy of the PUT or PLS.

• Collective Investment Schemes

Collective Investment Schemes evolves a unitized fund set up under a trust deed and this makes the participation of investors in a larger pool of property assets available. It is very important that this investment is highly liquid and managed by professionals and it offers explicit costs and a considerable diversification of assets both geographically and across. Steep management fees are considered to be the biggest disadvantage.

• Offshore Property

Offshore Property as a type of investment can be made in any of the previously mentioned options. Though there is also the additional dimension of offshore investment diversification. You can spread your risks across different geographical regions and that is the reason why this diversification is a great benefit. The fact that you might not understand the foreign market and purchase into low-quality properties and the exchange rate risk are those disadvantages that you should be aware of.

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