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How I made R75,000 from property in a single morning using other people's money!

by , 21 November 2014

Whenever I speak to investors I hear “The property market is dead” or “Property is so expensive, there are no good deals out there”.

I recently read an article about a financial advisor who was telling investors they're looking at single digit yields if they invest in property. The article went on to tell them that the stock market is the ONLY place they should be investing.

That's outright bad advice if you ask me.

If you're not investing in property you're missing out on massive opportunities. Opportunities like the one that recently crossed my desk. Opportunities that could make you R75,000 in a single morning!

How a couple hours of work and a ‘skill’ you’d never thought of made me R75,000 in a single morning

It was a routine day. After finishing my work I had to meet with an estate agent. The agent in question manages my rental properties for me and we had to discuss the vetting of a new tenant for one of my apartments.

As the discussion got going I mentioned I was in the market for another good investment property.

And that’s where this story really starts.

The following morning at 09:00 the agent phones me and says he’s set up a meeting for us with a property developer.

I jumped in my car, and drove over to the construction site. It was a hustle and bustle of activity, with one block of apartments already built and about four blocks that were in various stages of completion…

I got to the meeting and the developers said they have a perfect investment in terms of what I’m looking for: One bedroom apartments, quite spacious and for a R395,000.

The price wasn’t right for me upfront. Some quick mental math showed me my yield would be below 10% and I expect more.

So I resorted to a quick negotiation… And luck was on my side!

As it turns out the developer was using bridging finance at a high interest rate to build these apartments.

At that stage he’d only sold four units – with about 24 in the pipeline for the coming year.

So we made a deal – I’d pay him, in cash for one apartment if he’d sell me two apartments at a R75,000 discounted price. The remainder of the money would be paid when the apartments were complete. The cash would reduce the high interest debt he'd need to take on. And it would give me a handsome discount on the properties.

I made sure to remind the developer I’d bought two properties from him in his previous development, and that he needed to look kindly on return business in the current ‘tough’ market.

I left the meeting, and hour later the developer contacted me and said my offer was approved and they’d sent the paperwork through.

And that’s where the real work started!

What really made this incredible deal a success

I knew I didn’t have the R357,500 in cash to pay the developer for the first of the two apartments.

So I picked up the phone and I ‘phoned a friend’. In fact I phoned a couple of friends.

The short and the long of it was that I offered them a share in the profits if they could supply the cash up front. Upon completion of the properties we would get a loan to pay for the properties.

A couple of calls, and probably thirty minutes later I had the cash lined up. I then registered a company in the name of the shareholders supplying the cash, and myself.

A week later I had the offer to purchase and the company certificates in my hands. And a solid property deal secured!

What you need to learn from this today if you want to make big property profits

Was it my big wallet that got me this deal? No, it was other people’s money.

Was it my great negotiation skills that got me this deal? No – in fact I could’ve possibly pushed for a larger discount…

So what was it?

It all comes down to networking, and knowing the right people.

Over three years I’ve built up a relationship with the estate agent that got me this deal, he trusts me, he knows he’ll get return business from me and he knows I follow through on good opportunities he presents.

My relationship with the developer in question has strengthened over the years, to both of our benefit. I bought a property from one of his first developments, then a year later I bought another property from him. During these times I made a point of it to talk to him personally. To meet with him regarding progress. We even shared a beer when the registration of my first property was finalised!

And lastly, remember I didn’t have the cash to close this deal on my own. But the network of people I know, and the people I’ve spoken to about investment opportunities in the past are what enabled me to close the deal.

What you need to realise today is that investing in property is about more than phoning up an estate agent after seeing a listing online.

It’s about networking. You need to know people. You need to put yourself out there and make it known to an estate agent that you’re a serious investor. You need to be prepared to ASK people you know whether they’ve got property deals for you. And you need to be prepared to ask people you know to invest by your side.

The fact is, many estate agents come across great deals like this. But they don’t advertise them. They share them with a couple of clients that are close to them. You need to ensure you become one of those clients!

Now this deal has me smiling all the way to the bank

A couple of months later and the apartments are now finished.

I have tenants in both properties, each generating me R4,000 rental income a month. My levies are R321 a month. So I’m looking at pocketing around R83,000 off a R715,000 investment this year. That’s a yield of 11.6% after costs.

And the sweetener to this deal? I paid R357,500 a property.

Since then the buyers have been streaming in, the developer has already sold out most of the units for the next year. And new buyers are now paying R443,500.

So, I might have made R37,500 on each property upfront – In a single morning’s negotiations.

Now, if I sold them, they would raise around R86,000 each - That's R172,000 in my pocket thanks to other people's investments.

That’s the kind of deal you should be making.

And you can.

Just put yourself out there. It will take time. It’s taken me three years to get in the inside of great deals like this. You just need to be patient. But as you can see, the payoff is big!

Here’s to unleashing real value

Francois Joubert

How I made R75,000 from property in a single morning using other people's money!
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