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Property stokvels, EasyProperties, should I buy an excavator or a house?
If you need to make sense of everything and avoid entanglement, this is for you [Thread]
If you need to make sense of everything and avoid entanglement, this is for you [Thread]
Fractionalisation is carving up an ownership into smaller pieces so you own a piece. Shares are a perfect example of fractional ownership.
The concept extends to basically anything. Today you can own a fraction of a Ferrari, rare sneakers, a Rolex & even a Picasso painting.
The concept extends to basically anything. Today you can own a fraction of a Ferrari, rare sneakers, a Rolex & even a Picasso painting.
Another way to enter the property investment game is through a REIT (Real Estate Investment Trust). These are listed companies with property portfolios across a combination of residential. commercial & industrial (sometimes all 3).
Think Growthpoint, Redefine, Hyprop, Resilient.
Think Growthpoint, Redefine, Hyprop, Resilient.
Before you pull the trigger on an EasyProperty investment, here's a few points to consider:
1. Diversification & managing risk
2. Liquidity & realizing value
3. Track record & experience
4. Access to capital, management & scale
5. Outlook on property
1. Diversification & managing risk
2. Liquidity & realizing value
3. Track record & experience
4. Access to capital, management & scale
5. Outlook on property
1. Diversification
If you're buying a fraction of one physical property - your risk is HEAVILY concentrated. You're not just betting on residential property but on this one specific residential property.
Benefit of buying into a REIT is having exposure to a vast portfolio.
If you're buying a fraction of one physical property - your risk is HEAVILY concentrated. You're not just betting on residential property but on this one specific residential property.
Benefit of buying into a REIT is having exposure to a vast portfolio.
2. Liquidity
With EasyProperties you can only sell the fraction you own once a quarter (when they hold an auction). If you need to realize cash quickly - you're stuck.
With a REIT, you can sell at any time during the trading day. You know EXACTLY what your share is worth daily.
With EasyProperties you can only sell the fraction you own once a quarter (when they hold an auction). If you need to realize cash quickly - you're stuck.
With a REIT, you can sell at any time during the trading day. You know EXACTLY what your share is worth daily.
3. Track record & experience
No matter how great the investment thesis sounds, you're always rolling the dice on a newly launched investment product. REITs have been around for a long, long time.
There's upside in waiting it out to see how the first wave of investors perform.
No matter how great the investment thesis sounds, you're always rolling the dice on a newly launched investment product. REITs have been around for a long, long time.
There's upside in waiting it out to see how the first wave of investors perform.
4. Access to capital, management & scale
Listed property hinges on optimum leverage, ability to source capital cheaply & manage interest rate exposure.
Having built hedging models for some of these guys, optimum capital structures are a priority. They also borrow very cheaply.
Listed property hinges on optimum leverage, ability to source capital cheaply & manage interest rate exposure.
Having built hedging models for some of these guys, optimum capital structures are a priority. They also borrow very cheaply.
5. Outlook on property
SA property outlook is grim
This will affect both fractional ownership & REITs. Every round of data is progressively worse & it could get much worse before it gets better. Decision to buy really depends on your investment horizon. https://twitter.com/iamkoshiek/status/1279357976172802048?s=20
SA property outlook is grim
This will affect both fractional ownership & REITs. Every round of data is progressively worse & it could get much worse before it gets better. Decision to buy really depends on your investment horizon. https://twitter.com/iamkoshiek/status/1279357976172802048?s=20
REITs have very attractive attributes relative to fractional ownership BUT the property market is challenging.
REITs are required to pay out at least 75% of earnings but they are also struggling & are pushing back on this. It really reflects the shocking state of the SA economy.
REITs are required to pay out at least 75% of earnings but they are also struggling & are pushing back on this. It really reflects the shocking state of the SA economy.
So you have a balanced argument & full set of facts. Here's the EasyEquities explainer as to why they see EasyProperties being better than a REIT.
It's important to have different perspectives (& not just the sales pitch) before deciding whether or not to invest.
It's important to have different perspectives (& not just the sales pitch) before deciding whether or not to invest.
EasyEquities (& RobinHood) have done a great job in democratizing investing which would previously only be available to a select few.
However, it's precisely why a higher degree of due diligence is an imperative - especially in the age of gamification of financial apps.
However, it's precisely why a higher degree of due diligence is an imperative - especially in the age of gamification of financial apps.
Here's a strong thread on property stokvels https://twitter.com/SlwaneToYou/status/1281629336810946560?s=20
Here's some really interesting reads:
1. https://www.bloomberg.com/news/articles/2020-02-07/you-can-own-a-fraction-of-a-warhol-but-should-you
2. https://support.easyproperties.co.za/support/solutions/articles/13000077194-what-are-some-of-the-difference-between-investing-through-easyproperties-or-investing-in-a-reit-
3. https://www.r3.com/blog/asset-fractionalisation%E2%80%8A-%E2%80%8Awhat-why-and-the-future/
4. https://www.dailymaverick.co.za/article/2020-06-16-reits-and-property-funds-crash-but-is-real-estate-all-bad/
5. https://www.moneyweb.co.za/news/companies-and-deals/growthpoint-warns-of-up-to-20-decline-in-sa-property-values/
1. https://www.bloomberg.com/news/articles/2020-02-07/you-can-own-a-fraction-of-a-warhol-but-should-you
2. https://support.easyproperties.co.za/support/solutions/articles/13000077194-what-are-some-of-the-difference-between-investing-through-easyproperties-or-investing-in-a-reit-
3. https://www.r3.com/blog/asset-fractionalisation%E2%80%8A-%E2%80%8Awhat-why-and-the-future/
4. https://www.dailymaverick.co.za/article/2020-06-16-reits-and-property-funds-crash-but-is-real-estate-all-bad/
5. https://www.moneyweb.co.za/news/companies-and-deals/growthpoint-warns-of-up-to-20-decline-in-sa-property-values/
Shout-out for making it to the end!
