PROPERTY INVESTMENT FAQ’s
234Property African with a technology platform that makes property rental, sale and investing seamless and affordable. Using crowdfunding we enable you to invest with confidence in the Real Estate sector by connecting you with lucrative opportunities.
Our real estate investment platform connects property owners with real estate investors. Our platform provides investors with access to a range of lucrative property investments across Africa and offshore.
Using equity crowdfunding and fractional ownership investors can partake in owning a property from as little as $200.
The platform also serves the property owner who is seeking to raise capital on their property or development in exchange for equity in that property.
Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. It is an alternative source of finance that allows individuals to invest what they can afford into opportunities that they find attractive.
Equity crowdfunding allows investors to invest collectively into a venture they find attractive in return for equity in that venture. In the case of 234Property, investors will contribute to real estate projects that will provide them with ownership in the form of shares (Equity) in that property in return for their funds. There is no debt involved.
Fractional Ownership refers to a method in which several unrelated parties can share in and mitigate the risk of ownership of a high-value tangible asset, such as real estate.
Becoming an investor with 234Property is simple and free. Get started by registering an account on our platform and follow the steps required to verify your identity. The process is fast and should not take longer than a few minutes.
Simply register a profile, verify yourself as a property owner and submit your property details to 234Property through our easy to use platform.
234Property will perform a comprehensive due diligence screening on your property and provide you with an outcome. If successful we will make your property available to our network of willing investors.
234Property will stand as a point of contact between yourself and the investors so that you as a property owner does not need to deal with a multitude of investors.
The following types of investors are eligible to invest:
- Any individual over the age of 18
- Any corporate entity/trust
In order to raise capital on your property, 234Property requires you to verify your account as a property owner and share certain information about yourself, your company and your property which can be based anywhere in South Africa or offshore.
Your property can be either a development or an existing property as 234Property caters for both. 234Property also caters for residential, commercial, industrial, and other types of property.
The structure 234Property has chosen to adopt is one that provides investors with complete transparency and ensures that their funds are safeguarded.
Each property is purchased and owned by a SPV (Special Purpose Vehicle) Investment Company. The sole purpose of this SPV is to house the property and Ring-Fence all incomes and expenses relating to that property as well as provide ownership to the shareholders of the SPV. Each investment property is housed in a separate SPV Investment Company for the purpose of ensuring that no one investment may negatively impact on another. The shares of one SPV company differs to the shares of any other to ensure ownership specific to a certain property investment.
This structure has been employed to safeguard investor funds and provide fractional ownership. The structure also provides significant tax benefits for the investor.
For Individuals:
- Certified ID Document or Valid Passport
- Certified proof of residence
- Income tax number (optional)
For Companies:
- Company Registration Documentation
- Company proof of residence
- Proof of tax number and VAT number (if registered for VAT)
- Certified Directors ID Documents
- Certified Directors Proof of Residence
In addition to the above requirements, property owners are required to provide the necessary information on their property that 234Property will use in the due diligence process to determine the viability of your property as an investment to be offered on our platform.
An SPV is simply a separate legal entity that is registered with CAC as a private company.
There is usually a limit to the number of owners a property can have. In order to accommodate a multitude of investors, 234Property has made use of a SPV structure to cater for as many investors required to invest in a specific property.
The SPV then makes an investment on behalf of its shareholders by purchasing the property. The title deed of the property is registered under the name of the SPV, however the shares that you will receive as an investor will entitle you to ownership in the SPV which in turn gives you ownership in the underlying property investment.
Each investor will own a proportionate share in a specific property. The returns earned on a property will be issued to you according to your proportion of ownership in the property. Returns are issued as dividends on the shares that you hold and therefore provides certain tax benefits.
The returns calculated are based on the rental incomes of the property less the property related costs. These costs include but are not limited to, utility and service charges, repairs and maintenance, management fees and SPV administration fees.
234Property aims to provide investors with a real world experience of owning property but does so in a manner that is passive. Like any investment there are real world risk factors that exist and we strive to minimise those risk factors as best as possible by actively managing the investment properties we offer.
234Property does not provide investment or financial advice. As part of our investment offering, we will provide you with the tools necessary in order to make an informed investment decision.
Property as an asset class is a medium to long term investment and the reason for this is so investors can benefit from both capital and rental appreciation.
Each investment listed on our platform will state an investment term. At the end of this period the property will be sold and the proceeds from this sale will be distributed according to your proportionate ownership as an investor.
During the investment term it is possible to sell your shares through 234Property auction for early exits. Investors can at this stage also find a willing buyer of their shares privately and 234Property will assist in the process of transferring ownership of said shares.
234Property will periodically provide independent valuations on each and every property that we offer on our platform. This will in turn allow investors to be able to determine whether their shares have appreciated in value or not over the course of their investment term.
234Property makes use of independent and certified property valuators to ensure that you as an investor receives an accurate and unbiased valuation of your property investment.
To ensure the safety of investors’ funds and attractiveness of investments offered on our platform, 234Property screens every property against our strict due diligence model before it is made available for investment on the platform.
This process consists of the following:
- Background checks on property owner and property
- Physical Evaluation
- Financial Evaluation
- Legal Evaluation
- Internal Evaluation
- Investment Feasibility and Structuring
234Property makes use of a team of external and independent experts in determining the viability of a property investment to ensure an unbiased and informed investment offering. The team consists of independent and experienced individuals such as valuators, estate agents, legal practitioners, and conveyancers etc.
The due diligence model ensures that only quality properties are made available for investors and it is important to note that from the large amount of properties screened only a small portion of viable property investments are successfully listed on the platform.
Each investment property is managed on an individual basis. As part of the holistic service offering that 234Property provides, it is our duty to ensure that each property is appropriately managed in an efficient and cost-effective manner.
234Property and its associates are responsible for appointing an experienced and capable property management company to ensure the smooth running of the property and its cash flows. In most cases this management company will consist of an independent third-party management company. In other instances, the management of the property will be done by the property owner, in the case where the property owner is capable of providing this service. As part of our due diligence process we will investigate the property owners’ ability to manage the property effectively to ensure the investment is not at risk.
Regardless of who is managing the property, 234Property will have contractual agreements in place between the SPV company and the managing agent outlining the scope and nature of the management service relating to the property. The management company will be paid from the rental income of the property and this information will be disclosed to you as an owner of the property.
Management services shall include but are not limited to, advertising, tenant management and acquisition, maintenance, and repairs, as well as collection of rentals etc.
234Property is a Social Enterprise by OEC Foundation and a registered public company and issues the public with shares in return for these funds.
Being a public company, we are required to disclose all financial information relating to your investment and in addition we are also required to be independently audited. All financial information is made available to you as an investor and Annual Financial Statements are made available on request from our offices.
We operate with complete transparency and are committed to ethical standards as outlined in the Companies Act and corporate governance.
During a fundraising campaign, before an investment can be fully funded and realised your funds are kept in trust with our banking partner in segregated accounts held in your own name. These funds are not utilised by 234Property in any way until such time the funding goal has been realised and we gain permission from you as an investor to proceed with the purchase of the property.
The Ring-Fenced structure we have adopted provides additional security in the sense that no risk from any other property investment can affect your property investment and vice versa. The structure also ensures that cash flows from one property cannot be mixed with that of another and no property can be used as security for another.
234Property has taken every step necessary to ensure that investors funds are well taken care of and secured. We pride ourselves on safety and security and provide you with peace of mind at every step of the way.
234Property does not negate any of the real-world risks involved in owning a property yourself by means of an outright purchase without a bond facility.
We do not guarantee any of the expected returns advertised due to a number of varying factors. Some of the risks involved in property investments can be found below:
Variable income:
Variable returns due to vacancy loss, negotiated lower rentals, tenant defaults, maintenance, and repairs. Due to these factors it is possible that rental incomes are lower than expected and investors will receive a lower return than stipulated.
Market Risk:
Property investments are speculative, and the property market can rise as well as decline. Rental income can change from time to time and valuations of properties can change as a result of macro and micro-economic factors. Real estate is cyclical as with many asset classes and can increase or decrease in value as a result.
Economic Risk:
A decline in property valuations can be as a result of various reasons such as the wider economy weakening or problems with the property that may require an injection from future cash flows.
Political Risk:
Legal, political, and economic factors can negatively impact on property values.
Non-tradable shares:
Investors will not own the property directly but rather by means of owning shares in an SPV investment Company that owns the property. These shares are not easily traded and are regarded as illiquid as they cannot be easily traded.
Liquidity Risk:
Since property is regarded as a medium to long term investment it is regarded as an illiquid investment. This means that at the end of the investment term it may not be possible to dispose of the property and collect the proceeds immediately. This may result in investors experiencing a delay in receiving their capital or the property being sold at a loss. This depends on being able to sell the property timeously and at an attractive price which may not be possible at that point in time.
Capital Risk:
If for any reason 234Property ceases to carry on its business, investors may lose funds, incur costs, or experience delays in their investment being wound up. To mitigate this type of risk, 234Property will only offer freehold properties on its platform. This means that the risk of a property being repossessed by a bank and put on auction is zero as there is no debt on the property investments. All investments are ring-fenced and therefore the failure of one investment cannot impact the performance of another investment. There will always be a free hold property backing your investment in the event of any unforeseen circumstances and the ring-fenced structure provides an extra layer of security as investment funds cannot be used to pay off 234Property debts.
Bearing this in mind, 234Property strives to mitigate these risks at every step of the way. We aim to minimise risk and downside as much as possible on behalf of the investors by selecting properties that are attractive. Our due diligence model addresses all these risks as much as possible to ensure that investor risk is minimised, and only quality properties are offered on our platform.
Investors can invest from as little as $200 unless a specific investment requires a larger minimum amount to invest.
The maximum investment amount will depend on the outstanding balance of a specific investment’s fundraising target.
An unsuccessful raise occurs when there are not enough funds raised by investors to fulfil a property purchase. If this happens, the investment will lapse, and all funds raised will be returned to the appropriate investors less any transaction fees.
The property owner will be notified of the unsuccessful funding campaign and the investment will not be offered on the platform. The property owner will not benefit from the campaign.
In this case 234Property will not earn any fees on funds raised as the capital raise was unsuccessful.
234Property specifically utilises equity crowdfunding and does not invest in debt or interest-bearing investments. All funded accounts held by investors with 234Property will not partake in any interest-related returns.
We only invest in free-hold investment properties. If there is a property that has a registered bond on it or is pledged as surety, we will ensure that the bond is settled in full and the property is free-hold. This ensures investors’ peace of mind and reduces risk on the investment as a whole.
234Property ensures that all investments offered on our platform are completely Shariah compliant.
PROPERTY RENTAL FAQ’s
Whether you are a first time tenant or seasoned landlord, we take a look at what you need to know about property rentals in South Africa with our regularly updated frequently asked questions section
A verbal agreement is as binding as a written lease, however a written lease is much more preferred in order to protect both tenant and landlord.
Your agreement should set out in writing the terms and conditions agreed upon. This will go a long way to preventing later disputes, and to avoid hearsay situations.
A lease should have all the following information
- Landlords name
- The tenant’s name
- Landlords postal address
- Tenant’s postal address
- The address of the property being leased
- The amount for which the landlord will rent it out
- The amount by which the rent will increase (for example, by 10 percent when renewing the lease)
- When the rent will increase (for example, if there is a rates increase)
- How often rent is to be paid, (for example, monthly)
- The amount of the deposit, if any
- The landlord’s and tenant’s obligations (for example, who is responsible for maintenance? Who will pay the water, electricity and rates bills? Usually, the tenant pays for charges related to consumption, such as water and electricity, and the landlord pays for charges related to the property, such as rates.)
- The conditions under which either you or your tenant can give notice to cancel the contract
- The House rules, signed by both parties, should be attached to the lease.
- A list of defects drawn up during a joint inspection when the tenant moves in. This should be signed by both the landlord and tenant and attached to the lease.
Yes, it’s a good idea to put it in the lease. Remember that the deposit must be put in an interest-bearing account for the duration of the lease and given back to your tenant, plus the interest it has earned, when the tenant moves out.
If, however, your tenant still owes you money on moving out, or if the property has been damaged beyond normal wear and tear, you can use the deposit to pay for repairs or to cover the money owed to you.
It is common for the landlord to require one month’s rent or a double deposit (2 month’s rent). The landlord could even require a triple deposit if the tenant’s credit report is considered risky.
However once the amount of the deposit has been agreed, the landlord cannot demand a bigger deposit during the term of the lease – unless the tenant agrees, or the lease agreement makes provision for a top-up when the rent increases
Practically, the landlord should not hand over the keys to the property until the agreed deposit and first month’s rent has been paid (and cleared in the case of a cheque).
In terms of the Rental Housing Act, if the landlord holds the deposit, he / she must invest the deposit in an interest bearing account with a minimum rate of interest applicable to a savings account. The landlord cannot contract out of this legal obligation.
Tenants are entitled to request written proof of the interest earned and if requested, the landlord is obliged to provide such proof.
If the deposit is held by the estate agent, this is regulated by the Estate Agents Affairs Act – read your lease agreement – some lease agreements provide that no interest is paid to the tenant and in this case, the estate agent does not need to refund the deposit with interest.
No, the lease or verbal agreement determines when, and by how much, your rent can be increased. If the agreement does not specify an amount or date for an increase, the landlord has to negotiate the increase with you. Neither you nor your landlord can make changes to your original agreement without checking with the other party first.
This is specific to the renewal terms of your agreement. If your agreement doesn’t specify a reasonable escalation, your landlord has to negotiate an acceptable rent with you.
It is your responsibility to make sure that your landlord receives the rent, so it will be up to you to provide proof of payment (for example, a bank deposit slip). If you can’t, your landlord will be able to give you notice in terms of your agreement and seek a court order for eviction.
It is your right, in terms of the Rental Housing Act (Act 50 of 1999), to insist on a receipt for all payments if your landlord does not automatically supply you with one. A receipt must contain the following information:
- The date of issue.
- The address of the property for which the payment is made.
- The reason for the payment (whether it’s rental, arrears or a deposit).
- The period of the payment (for example, the month for which the rent will be paid).
- If your landlord refuses to give you a receipt, lodge a complaint with the Rental Housing Tribunal.
He has to obtain a court order first. Then the Court will attach your property to the amount of the money you owe. If your landlord takes your possessions without a court order, it’s theft and you should contact the Police and lodge a complaint with the Rental Housing Tribunal.
You have a right to enter the property to perform routine inspections and so on, but only after arranging with your tenant to do so at a reasonable time, and with reasonable notice. Your tenant does not have the right to deny you reasonable access.
No. That would be an illegal eviction. If you change the locks, you have to give spare keys to the tenant.
If you asked for a deposit, you can use the money to repair damages attributed to the tenant beyond normal wear and tear when the tenant moves out. Be sure to follow these steps:
- When your tenant moves in, inspect the property together and list, in writing, any existing defects – both should sign this and it must be attached to the lease agreement.
- When your tenant moves out, inspect the property together again, ideally no earlier than three days before the tenant moves out.
- Compare the new list of defects with the list you made earlier.
- You may give the tenant a chance to do the repairs personally, or you can agree that you will do it. Hold on to receipts for repairs paid for out of the deposit. Your former tenant has a right to see them.
If repairs cost less than the deposit plus the interest accrued, you will have to reimburse your former tenant with the difference.
- Contact the Rental Housing Tribunal if you have problems.
Yes, it is recommended that landlords perform a credit report on all adults over the age of 18 applying for rent. The tenant must first give his / her consent before the landlord (estate agent) can access your credit report.
If you refuse to give consent for the landlord (estate agent) to perform your credit check – the landlord (estate agent) is entitled to decline your application for rent.
Yes, reasons for rejecting your application for rent might include your credit profile, affordability or suitability such as “no pets” allowed in the complex.
Your application may not be rejected due to discrimination on the grounds of race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, age, disability, religion, conscience, belief, culture, language and birth.
To what extent should a landlord maintain a property?
Common law states the landlord must hand over and maintain the property fit for the purpose for which it was let.
However many lease agreements deal with maintenance of the property differently. It is advisable to ensure you have read the “Maintenance” clause of the lease agreement carefully to ensure you are aware of your obligations and the landlord’s obligations.
Most lease agreements provide that the landlord is responsible to maintain the structure of the property and any electrical, plumbing or electrical apparatus which you have not damaged.
Generally the tenant is responsible to maintain the inside of the property “fair wear and tear” excluded. If the property has a garden or pool, it is common that the tenant is responsible to maintain the up keep of the garden or pool. Remember – it is important to refer to your written lease agreement.
The landlord does not have an obligation to fix every item the tenant deems necessary. Items which render the property unfit for the purpose for which they were let, such as no water / electricity, a burst geyser, non-working oven etc. would need to be attended to by the landlord. However the landlord would not be obligated to fix items such as missing internal keys, blown light bulbs and squeaky doors.
Again, it is important to point out that many lease agreements provide for different obligations pertaining to maintenance – read your specific lease agreement to confirm your responsibilities and the landlord’s.
The maintenance in question must be a material breach by the landlord such as no water / electricity, a burst geyser or non-working oven. A material breach does not include missing internal keys, blown light bulbs etc.
If the landlord fails to remedy a material breach you should cancel the lease and vacate the property or take legal action.
If you withhold rent, you yourself are committing a material breach and the landlord can take the necessary action to collect the rent – cancellation of the lease, court order eviction or blacklisting on credit bureaux.
The tenant is protected by the common law. If the property is sold, the new owner becomes the landlord and all the terms of the existing lease are enforceable.
The owner cannot cancel the lease, but must wait until the end of your existing lease period. The new owner is also responsible to refund your deposit less any claim for damage.
There are some exceptions:
- If the lease agreement makes provision for the landlord to cancel in certain circumstances like the sale of the property
- If the property sold on auction by the Court
It depends on the cancellation clause in your agreement. If there is no such clause, the only way you can end your lease early without being in breach of contract is if your landlord agrees to it or if your landlord is in material breach of the lease (for example, by failing to maintain the outside of the property, as agreed in the contract, and this makes it impossible for you to remain on the property. But you will have to prove this, though).
A complaint about unfair practice may be lodged by a tenant or a landlord of a property (for example, a house, room or flat), for example:
- Unacceptable living conditions, such as overcrowding or hygienic issues.
- Insufficient maintenance or repairs of a property.
- Not paying rent to the landlord.
- Asking an excessive amount of rent.
- Not refunding a deposit of the tenant.
- Damage to a property (for example, a door of the landlord or a table of the tenant).
- Eviction without a court order.
- Disconnection of services (such as electricity) without a court order.
- Non-compliance with the Rental Housing Act.
- Not issuing a receipt to a tenant in respect of payment made.
- Discrimination by a landlord on ground of race, sex and so on, of a tenant.
Your lease agreement is coming to an end and it’s time to decide whether to sign on for another year, to stay on a month-to-month basis, or to move on and terminate your lease agreement. Natasha Wright, of Pam Golding Properties’ rental division, explains the timeline of events when a lease agreement expires.
The Consumer Protection Act (CPA) requires the Landlord to give the Tenant written notice of not less than 40 days and not more than 80 days before the lease expires, to decide whether they are going to renew their lease agreement or not. Any new terms and/or material changes to the lease agreement such as the rental increase and extended lease period, must be included in the notice. There is usually also an administrative fee associated with the lease renewal and an increase in the deposit amount.
Most lease agreements will include a clause, specifying how much notice you are required to give if you are going to extend your lease, or terminate your contract. This is usually 30 days.
Exit inspections – last month of lease
Now is the time to do an exit inspection with your landlord or agent, to discuss any repairs or cleaning that needs to be done. Remember, it is mandatory for you and the landlord to inspect the property before occupation as well, to determine whether there are any defects or whether repairs are needed. This protects you, as the tenant, from being liable for any repairs that need to be done when you move out. They also give the landlord recourse if the property is not in the same condition as it was when you took occupation.
It gives you and the landlord an opportunity document any structural damage or defects during the ingoing inspection by taking photographs and including these with a written list of concerns which must be attached to the lease agreement. You can then refer to this list when you and the landlord conduct your outgoing inspection, usually within three days before the expiration of your lease.
If the inspection does reveal any damage, other than day-to-day wear and tear, you as the tenant are required to pay for these repairs, and the landlord is entitled to deduct the cost from your deposit and accrued interest. Your lease agreement stipulates that you are to return the property in an acceptable condition.
Two weeks after the lease has expired
If repairs are not needed, and there are no outstanding amounts owed to the landlord or agent, you should receive your full deposit and interest accrued during the lease period, within seven days.
Note that if there was no joint ingoing inspection, the landlord has no further claim against you if there is any damage when you move out.
If repair work needs to be done, the landlord will refund the balance of your deposit within 14 days. Your landlord must also provide receipts of all the repairs done, as proof of the costs incurred.
Disputes related to claims against your deposit, assuming that there was a joint ingoing and outgoing inspection, can be referred to your regional Rental Housing Tribunal.
While some tenants might dread the annual rental increase, they are a fact of life and a vital tool for landlords when it comes to covering expenses and protecting their investment. Often times having a conversation about rental increases are uncomfortable and getting both parties to agree on a reasonable escalation isn’t easy. However, a fair negotiation is in the best interest of every party involved.
The 10% increase myth
A lot of people are still under the impression that a 10% annual rental increase is standard, the reality, however, is that there are no legislated standard figures – increases are set on a case by case basis.
This doesn’t mean that landlords can simply pick a number and force a tenant to accept the increase.
All rental increases need to be reasonable, the Rental Housing Tribunal is very clear on this. Therefore, any escalation figure needs to be backed up with properly researched trends and figures.
Not just about the numbers
Good tenants, who look after your property, pay on time, and communicates well with you or your managing agent can be worth their weight in gold. This is even more true during periods of economic crunch and when tenants in good standing are few and far in between.
For tenants, paying on time is one way of ensuring a better footing when rental increases are being negotiated. Other things that you can do to help you become an exemplary tenant is by being proactive with day-to-day maintenance chores and minor fixes. If you call the landlord for every little thing that needs to be replaced they won’t be too sad to see you go.
How to determine reasonable increases
Even in traditionally strong markets, it is still very easy to lose a tenant due to unreasonable rental escalations. So how do you go about determining what is reasonable and what is not? And what’s the best way to weigh up the benefits of retaining an existing tenant against the disadvantages of reduced escalation?
This can be very hard to determine for someone that is a new landlord and we would suggest that you work with a rental agent to help you manage your property and that can give you advice on crucial matters like these. For more seasoned landlords we would suggest using services that specialises in the rental market. They usually have in-depth market reports that will allow you to see what the market is doing in terms of rental demand, increases or decreases in rental prices and what percentage of tenants are in good standing.
You will have to have a workable knowledge of the area that your property is located in and what rental prices in the area look like. Keep in mind that your tenant can do a property search and see the average price of rentals in an area and they will know if your escalation is extreme.
Have a conversation with your tenant and talk about the different options they have in a fair escalation. Look at their payment history and take it from there.
Remember to have all the information in the new contract and make sure to have it signed.