Dolf de Roos, professor of real estate studies at the University of North Texas and a best selling author, said anywhere there's been a downturn is a great place to invest. Because property is so cheap it will go back up again, it is just a matter of time.
'As there is this credit squeeze as interest rates go up, people get short of cash. They're going to first start putting their houses on the market at 10% below what they paid for them, then 20%. Ultimately they're going to pay you money to take the debt off their hands. You will be able to do what's called "short sales" from banks where you will buy properties for less than the banks have owing on them in the form of mortgage bonds. They are great opportunities,' said de Roos who puts his money where his mouth is and has an international property portfolio.
He is currently considering commercial real estate in Johannesburg and says this sector has better money making possibilities than residential. 'I invest in residential and commercial property but I prefer commercial property. The returns are great; the tenants pay all the outgoings such as council taxes, insurance, maintenance. The tenants want a long term lease, and they tend to earn their income there – so they have a vested interest in keeping the place looking good,' he said.
'Another way of looking at it is of all the ultra-wealthy people I know who made their money through real estate only one I know of has done it through residential property. The rest have done it through commercial real estate,' he added.
He is particularly keen on office space. 'I like commercial space that has a vacant component, or an opportunity to improve it. When it's vacant you can buy it for much less than it's tenanted value. A house is worth the same amount whether it's tenanted or empty. With commercial real estate if it's partially vacant or under-rented I can buy it cheaply – because its value is dependent on the rental income,' he claimed.
'Then by putting more tenants in and by improving it, by doing simple things I can massively increase its value.' So what kind of improvements might help? He recommends putting a cell phone tower on the roof!
