Become a Real Estate Millionaire

 Why buy-to-let property is a low risk investment producing exceptional returns.

Conventional knowledge dictates that high risk investments will produce high returns, and similarly, low risk investments will yield low returns. Dr Koos du Toit, CEO of P3 Investment Group explains why this adage does not hold true when it comes to buy-to-let property, a low risk investment producing exceptional returns. While it is certainly true that no investment is without risk, some investments are less risky than others. For example, an investment in equities is riskier than an investment in bonds. Traditionally, higher risk investments are associated with higher returns, while lower risk investments generally produce lower returns. The reason for this is simple: No one will invest in a high risk investment vehicle - with a significant possibility that you might lose your money - unless a promise of a high return is attached to it - a possibility that you could make a lot of money. Unfortunately, high risk does not guarantee a high return - it only provides a possibility that you could make a lot of money, with far less emphasis on the fact that you might not… and that you might actually lose your money. There is another issue that few investors understand: low returns are a significant risk! "The so-called 'low risk' investments should actually be called "low return" investments, because they do not pose a low risk. In fact, low returns a pose a massive risk for investors: the risk that the investment returns will not at least keep up with inflation - eroding their capital," comments Dr Koos du Toit, CEO of P3 Investment Group.

"If you are not at the very least beating inflation, what is the point of investing? You may as well stash your hard-earned money under your mattress, where it is at least safe from volatile markets, inept asset managers and high asset management and advisor fees." But there is one investment - buy-to-let property - that is truly low risk, and yet produces high returns, if done properly. Dr du Toit provides the following facts to support P3 Investment Group's assertion that buy-to-let property is a low risk investment. Why buy-to-let property is a low risk investment

 * The investor's personal out-of-pocket investment is much less than in the case of traditional investments. A R500 000 investment in shares would cost R500 000 out-of-pocket. But because a bank will provide a loan to buy the property, and the tenant's rental will subsidise the bond repayments, an investor can buy a R500 000 property for as little as R100 000 out-of-pocket investment - this would include a deposit and other fees related to buying the property, as well as the monthly shortfall between the rental and the bond repayments and other monthly property expenses, spread over a number of years - not required upfront.

 * If the property is bought in a good area and at a good price, it is highly unlikely that an investor would be unable to recover the investment by selling the property, since capital appreciation will ensure the value of the property rises steadily over time. Of course, the property could be destroyed by fire or earthquake, but insurance against these risks are compulsory to obtain a bond.

* Tenants may default on the rental, or damage the property, but both rental insurance and property damage insurance, as well as rental management and property management services, are widely and affordably available.

 * Annual rental escalations are standard in the industry and included in all rental agreements, which provides a built-in hedge against inflation.

* An investor might make a poor buying or management decisions, but property investment experts, such as P3 Investment Group, provides not only pre-screened and pre-selected properties to mitigate this risk, but also training, a proven selection system with state-of-the-art software, access to management experts and even a personal mentor to guide investors. But does buy-to-let property offer high returns? "If the return on investment calculation is done correctly, the returns produced by buy-to-let property is nothing short of spectacular," says Dr du Toit. "The returns are often erroneously calculated on the value of the property. But, unlike a R500 000 out-of-pocket investment in shares, the investment in a buy-to-let property worth R500 000 is not R500 000 out-of-pocket, but can be as little as R100 000, as explained above. If the returns are correctly calculated on the actual out-of-pocket investment R100 000 over a number of years, a good buy-to-let property investment can yield returns of as high as 70% per annum, and this return grows exponentially the longer the property is held by the investor. In fact, buy-to-let property can produce infinite returns if it is bought in the right structure, which will allow it to continue producing an inflation-linked income for generations beyond the investor's lifetime." "Given the high risk presented by both high risk and 'low risk' traditional investment vehicles in a volatile market, buy-to-let property as an investment alternative is certainly worth investigating," concludes Dr du Toit. "The P3 Investment Group has already helped thousand of ordinary South Africans to protect their hard-earned money by educating them about property investment as low risk alternative and empowering them to take control of their own investments with an investment vehicle that can produce not just high - but infinite returns - without the risk." * This article was prepared by P3 Investment Group. The views expressed above are their own. If you wish to contribute to Moneyweb's blog email: copy@moneyweb.co.za