Property Stokvels, my thoughts

Short answer:

A property stokvel is made up of a group of people that have decided to pool together money in order to acquire income generating property or land to develop and generate an income or sell.

The idea is that they make property ownership more accessible by allowing people to pool together money and acquire property, which they otherwise wouldn’t afford. The more the members, the more the available money to invest.

Traditional stokvels on the other hand are made up of a group of people (usually known to each other or introduced by people known to each other) who save money together and than share that money via lump sum ‘payouts’ to members on an agreed rotational basis.

Tradionally stokvels don’t take investment risk. Where the money isn’t immediately paid over to a member as it is contributed, it invested in a fixed deposit account for an agreed period than shared at the agreed time. No risk.

The familiarity of the members keeps them honest. ie if Sonto doesn’t pay Nonhlanhla, Thembi, Karabo and Anele can go knock on her door and demand payment. You don’t want to owe stokvel members money, the whole neighbourhood will know

Stokvels are only regulated by the constitution, which interestingly most don’t have as they are based more on a system of ‘trust’ and familiarity. Constitutions are required by banks when opening banks accounts so that there can be some form of order to the administration.

Here are the problems with property stokvels:
- these are usually started a person who invites others to join, by making contributions. These people are not familiar with each other as in a traditional stokvel
- apart from the constitution, they are completely unregulated

- it is not clear what exactly the members ‘interest’ is or how it is calculated
- the ability of the manager who will acquire the property and manage it is untested (as this is usually the role the person inviting others to join plays)

- it is in the interest of the person inviting others to join to manage the assets, this equals fees which will inevitably be exorbitant, leaving investors with little if anything to share

- investing in property is risky and you could loose your shirt, false teeth and weave
- stokvels are meant to safe risk free savings clubs; and

- members can be easily frustrated in trying to get recourse should they be duped, well because there is little to no regulation.

Anyone who invites you to be a part of any investment club (because these are actually not stokvels but investment clubs) where they make decisions without you, is probably taking you for a ride, especially in an ‘unregulated’ environment.

Don’t get me wrong a few (say one in every 1 million) of these may be legitimate and work but the majority
Incase you missed it the first time:

Who actually even owns the property? Whose name is it registered in? I want my name on the title deed!