PROPERTY INVESTMENTS USING ALTERNATIVE FINANCING INSTRUMENTS

I believe this idea will help more Africans to save in alternative assets which will improve their borrowing power and access to credit in the long run which in turn will lead to sustainable economic growth.

Passive income sure does not hurt! Well - especially now during these uncertain times of COVID19 – because you know, let’s face it – the majority of South Africans do not get paid if they do not work. I think I can testify to the fact that everyone would like to have their money work for them.

Like many millennials, the pressure that comes with having to get a decent job and secure a bright future whilst having to navigate a place in the corporate jungle – is the ultimate pits. The bottom. The ghetto.

Amidst this existential crisis – I enrolled to pursue my Master’s Degree at the Stellenbosch Business School with the aim to open my mind up to new business opportunities. Fast forward to one semester and a few journals later – I knew what I was passionate about…property investment using alternative financing instruments.

The African region is faced with high poverty and income inequality due to inadequate allocation of capital and credit caused by shallow capital markets and statistics show that 35.3% of South African households own a dwelling and only 5.4% own land mostly due to high upfront capital requirements. So faced with these stats I wanted to make this issue relatable to people like me – millennials who aspired to be multiple property owners and have their money work for them. But there was one problem – well for those of us born without a silver spoon – where would we get this large sum of capital needed as a deposit and how on earth can I afford the monthly instalment for a ZAR 2million property on my own?

As part of my contribution to the development agenda of my country, I registered a crowdfunding property company where I initially, I set up a meeting with about 10 of my friends and peers where I held a round table discussion to understand further what was holding back the youth from investing in property and pitched the idea of starting a crowd. I was encouraged to keep refining the business idea as the financial models were not properly reflecting the value proposition where I then had to go back to the drawing board. I have now solidified my model which will use crowdfunding for properties that are ring-fenced under a special purpose vehicle (SPV) where dividends are paid out to investors. I believe this idea will help more Africans to save in alternative assets which will improve their borrowing power and access to credit in the long run which in turn will lead to sustainable economic growth. I aim to diversify the platform services to include franchising, savings for education, health, transport, housing, retirement and insurance over the years.

Advantages of Property Crowdfunding:

• The pooling of funds to minimize initial cash flows

• You gain a fractional share of the property investment linked to your once-off lump sum investment

• Ability to diversify portfolio through buying fractional shares in different property baskets

• Earning of dividend payments generated from rental income

• Earning of capital gains through the appreciation of the property value

• Transfer of property management obligations
  

Benefits of Property Investments over Real Estate Investment Trusts (REITs):

• Property investments can generate higher returns than REITs as they can be leveraged (debt financed) at a higher rate

• REITs as they are publicly traded on the stock exchange and are therefore more volatile than property investments

• There is more transparency and the buyer has more control in the process of closing the deal in a property investment over a REIT investment. A REIT investment is subject to many factors including the portfolio managers trading decisions and the prudency of the broker that deal was closed with.

With that being said – I encourage you guys to continue thinking of new ways to invent new side hustles – now is the time for multiple income streams. I would also encourage you to complete the www.investasonke.co.za pre-launch survey and we will be in touch with more information on how the investment model works.

Sine Maphumulo

Founder and CEO - InvestaSonke

www.investasonke.co.za

maphumulosine@gmail.com

Twitter: @snaynay

Instagram: @snaybaybae