Return on Investment

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Fransw
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Re: Return on Investment

Unread post by Fransw » Tue Mar 12, 2019 5:45 pm

Yes, to buy a business is an option. But be very careful if you are not experienced in that industry. Maybe look at the option to buy a share in an existing successful business. As an equity parten.. A 5 bar equity partner in an existing successful business can earn about ±R1m net p.a.

Disclaimer: I am not a financial advisor and the above is only my own opinion...
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Re: Return on Investment

Unread post by cage » Tue Mar 12, 2019 6:04 pm

If making money was easy, everyone would do it.
Find something you have an interest in and some skill and try monetise that, it's better than being sold some oke's lame duck of a business at overinflated prices or paying huge fees and commissions for marginal returns.
Buy to let UK property isn't doing badly and keeping it offshore can provide some protection from local instability.
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Re: Return on Investment

Unread post by Fransw » Tue Mar 12, 2019 6:18 pm

cage wrote:
Tue Mar 12, 2019 6:04 pm
If making money was easy, everyone would do it.
Find something you have an interest in and some skill and try monetise that, it's better than being sold some oke's lame duck of a business at overinflated prices or paying huge fees and commissions for marginal returns.
Buy to let UK property isn't doing badly and keeping it offshore can provide some protection from local instability.
Yes, buy to let in UK is a stable option. But what is the average roi? 2-6%? ...or what. Very low!
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Re: Return on Investment

Unread post by Rotor kop » Tue Mar 12, 2019 6:42 pm

Join the ANC :idea:
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Re: Return on Investment

Unread post by cage » Tue Mar 12, 2019 7:23 pm

Fransw wrote:
Tue Mar 12, 2019 6:18 pm
Yes, buy to let in UK is a stable option. But what is the average roi? 2-6%? ...or what. Very low!
The real value is being savvy in where and what you buy.
If you can buy a small project and modernise, in the right areas, you can see a tremendous increase in the property value.
Being offshore it has its benefits as well.
A friend has done quite well doing this.
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Re: Return on Investment

Unread post by cage » Tue Mar 12, 2019 7:32 pm

Brand wrote:
Tue Mar 12, 2019 5:18 pm
Indeed - there are lots of obvious questions. And calculating ROI if one has those answers available is relatively easy.
And there are far too many answers, the right one has a great many variables.
I'm no expert so will leave it to those that are, but I will give you some advice on what not to do.

Everyone wants a business, pop cash in, print money on a monthly basis is the myth.
5 bar will buy you little.
Unless you have expertise in the business area, know someone you can trust that does, can turn it around, leverage potential, or have the inside track on something no one else does - just don't do it.
It's the fastest way to pour money down the drain.
No one sells or walks away from a business that is printing cash, just does not happen.
Big stories are just an upsell to extract maximum value at your expense, so unless you want to fund someone's retirement, holiday or emigration - avoid.
Ask an owner to put their money where their mouth is and warranty the returns - just watch them head for the hills.
It's like buying a house, you only find the damp when you move in.

Exercise caution, there are too many sharks out there happy to part people from their cash.
But then you are a smart, savvy guy (for a plank driver ;) ) so already know this.
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Re: Return on Investment

Unread post by pietern » Tue Mar 12, 2019 9:33 pm

Interesting question.
Assuming that you are looking at a passive investment:
Although property in the UK might have good yield, I will be careful going this route. If you die, the Queen will come knocking on your door, and she will take a big cut. You would also need 2 wills, South African and UK. Complicates matters a lot.
I would rather spread my bets and looking at getting a return from a growing economy. Something like a broad-based ETF. Fire and forget, low cost, you have full control and as good or better than any of the complicated financial products that is being sold.
Right now, the South African economy is risky, and very difficult to predict where it will be going. Personally, I’m not negative about prospects, and believe we can see strong growth if confidence returns. A clearer picture will only emerge after the elections. Good returns in the first quarter of this year, and I have good hope for the rest of this year, but it remains high risk and I would be careful to dump 5 bar in this economy right now.
This leaves the question: which economy would have a good chance of growing in the next couple of years? This is the one where you should put your money. I would avoid Europe – too socialistic. I don’t know enough of China, Japan or India to comment. My option would be the US. In this regard I agree with Warren Buffet, who said that it would have been a mistake to bet against America in the past 270 years, and it will be a mistake for the next 100 years. Their free market system is probably the best vehicle for continued growth. Thus, I would be looking at simple products such as ETF in S&P500 or some of the other US based index funds. This would mostly cover you from South African political risk, rand devaluation, stupidity, etc.
Nice thing nowadays is that you don’t need to take your money out of the country to invest in these shares. Also don’t need extra complicated and double tax planning and wills. Can do it all by yourself, without assistance from outside. As far as risk goes, if you cannot tolerate the risk of the general US economy in the medium term, then there is probably only a bank deposit left.
Just my opinion.
Disclaimer: As I am not a financial adviser, please don’t believe anything that I have said.
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Re: Return on Investment

Unread post by Falafel » Wed Mar 13, 2019 8:41 am

Fransw wrote:
Tue Mar 12, 2019 4:49 pm
Falafel wrote:
Tue Mar 12, 2019 4:13 pm
Brand wrote:
Tue Mar 12, 2019 3:50 pm
Since there are quite a few high nett-worth individuals frequenting Avcom - here is a questions to those who feel equipped to comment:

If you knew somebody who had, let's say R5 000 000 in cash handy, what would your best advice be on how to invest such a sum to maximize return on investment these days?
Is it in SA and does it have to stay in SA? Taxes all in order?

Firstly I would hide it :)
Tell us your plan Lalafel! :smt023
For me any one investment is a bad idea... need to spread it around a little...

I would certainly consider investing in a business... even a start up, something which may complement your current business perhaps, and key obviously is the person to run it, but I have seen many small businesses generate very good incomes...

Ideal would be to try and get as high a view as possible in all businesses / investments, where your role becomes overseeing rather than day to day operational... so in other words, have a few irons in fires, whereby your role is to monitor, and facilitate rather than operate, but dont allow it to get too diverse. You will build value, hopefully be able to take holidays if all goes well, and generate far better returns than passive investments...

Do not ignore the most basic... for instance... if you are in a cleaning business... the guy who supplies the cleaning products is probably making money so consider this as a first port of call... link the business into one another (supply chains)... try and gain value for your own business by moving into various supply chain aspects of what you do already... it doesnt take much "learning" and you can manage things a little from the top, you can also start to sell to your own competitors if all goes well...

If you are in farming, what about fertilizer supply, or logistics, or plant hire (where machinery might lie idle)...

We are currently in a very difficult environment and are starting to look at other revenue streams within our own industry... I am too old to learn new things but can learn a little so the above is my view and hopefully it works...
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Re: Return on Investment

Unread post by rainier » Wed Mar 13, 2019 10:23 am

Open an account with an investment company that charges low management rates and as close to zero for initial fees as possible and put in in a top 20 fund such as Coronation and leave it there.

Does quite well over the years, flexible enough to change portfolio quickly when needed and your money is available at short notice should you need it.
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Re: Return on Investment

Unread post by Fransw » Wed Mar 13, 2019 10:29 am

rainier wrote:
Wed Mar 13, 2019 10:23 am
Open an account with an investment company that charges low management rates and as close to zero for initial fees as possible and put in in a top 20 fund such as Coronation and leave it there.

Does quite well over the years, flexible enough to change portfolio quickly when needed and your money is available at short notice should you need it.
Agree on this. At the end of the day its the safest to give it to the professionals to manage. Don't mind paying their fee..
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Re: Return on Investment

Unread post by richard C » Wed Mar 13, 2019 1:01 pm

Does your friend have a business in this country ?

Tell him to use the money to buy his business premises in a new company. Have made many people stupidly rich with this simple deal.
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Re: Return on Investment

Unread post by Pheonix137 » Wed Mar 13, 2019 1:45 pm

rainier wrote:
Wed Mar 13, 2019 10:23 am
Open an account with an investment company that charges low management rates and as close to zero for initial fees as possible and put in in a top 20 fund such as Coronation and leave it there.

Does quite well over the years, flexible enough to change portfolio quickly when needed and your money is available at short notice should you need it.
*My opinion only*:

Yes, I agree. There are a number to consider, Satrix has some nice funds tracking international indices that do pretty well. If you are risk averse, then some funds have capital guarantee for lower returns.

Also dont discount local property, if properly managed, returns of 13-18% per annum are still possible. EWC is a question mark though - so you need to consider your risk appetite
Does your friend have a business in this country ?
Tell him to use the money to buy his business premises in a new company. Have made many people stupidly rich with this simple deal
Elaborate - Seems simple enough, but I dont quite get the "stupidly rich comment". Apart from property investment, and reducing the business's expenses (rental) what am I missing?
the sky is the limit.
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Re: Return on Investment

Unread post by richard C » Wed Mar 13, 2019 2:07 pm

Your business lease is a powerful tool. We have done over 70 commercial / industrial buildings over the years, and a lot of those were done by the owners of businesses or a group of directors who wanted to minimize the risk of leasing by owning their own premises. Within a short period of time those properties were worth far more than their original cost of development.

Commercial leases tend to be signed for a 5 year period, which tends to co-incide with the growth requirements and adjustments of most businesses. The smart guys would lease out their previous premesis, and then build a new one to suite their new requirements. A signed 5 year lease (or two in this case) generates a decent amount of lending leverage. It doesn't take long to realize that your property company can be more profitable than your original business ! And the wealth builder is inherent - your money is already invested, and in most cases you are the very reliable tenant. Minimal transfer costs (payable only on the land deal), lower commissions and agents costs - more of your money goes directly into the investment.

Win - win and, well, win.

The stupidly rich part is this - the kind of offers these guys were receiving from property investors within 3 years of doing their own deal. Whilst we battled to negotiate and be paid reasonable fees, it made me ill to see how much value we brought these guys. It was not unusual for them to be offered more than double what the development had cost them less than 24 months earlier (back in the day - the market is no doubt a lot tighter now).
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Re: Return on Investment

Unread post by Jack Welles » Wed Mar 13, 2019 2:15 pm

Pheonix137 wrote:
Wed Mar 13, 2019 1:45 pm
Does your friend have a business in this country ?
Tell him to use the money to buy his business premises in a new company. Have made many people stupidly rich with this simple deal
Elaborate - Seems simple enough, but I dont quite get the "stupidly rich comment". Apart from property investment, and reducing the business's expenses (rental) what am I missing?
IME can work well with certain caveats, here's just a few: 1) it's a long-term play 2) the business must be sound 3) a decent sized bond means that the rentals (deductible by the business as a tax expense) received are offset against interest costs, so minimal tax. Also the annual increase in the value of the property (over a decent time) is more than the interest paid on the bond so building monetary value on OPM 4) you can acquire the property for a decent price (money on property is made when you buy and not when you sell) 5) You control the rental flow and commercial property is valued in terms of the returns it can generate so bumping up the value post-purchase by bumping up the rental (if business can afford it) opens up the possibility of borrowing more against the property to invest elsewhere 6) it's a pretty safe investment because you control the tenant.

There is more with most deals being fairly unique but I'm sure you get the general idea from the above.

EDIT: I see Richard has given the "development" property scenario. Mine was existing buildings. Not as immediately profitable but then, for example, there's less lead time than on a new build and none of the normal build hassles and you don't have to pay the architects :wink: :lol: . Horses for courses.
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Re: Return on Investment

Unread post by richard C » Wed Mar 13, 2019 2:25 pm

Jack Welles wrote:
Wed Mar 13, 2019 2:15 pm
Pheonix137 wrote:
Wed Mar 13, 2019 1:45 pm
Does your friend have a business in this country ?
Tell him to use the money to buy his business premises in a new company. Have made many people stupidly rich with this simple deal
Elaborate - Seems simple enough, but I dont quite get the "stupidly rich comment". Apart from property investment, and reducing the business's expenses (rental) what am I missing?
IME can work well with certain caveats, here's just a few: 1) it's a long-term play 2) the business must be sound 3) a decent sized bond means that the rentals (deductible by the business as a tax expense) received are offset against interest costs, so minimal tax. Also the annual increase in the value of the property (over a decent time) is more than the interest paid on the bond so building value money on OPM 4) you can acquire the property for a decent price (money on property is made when you buy and not when you sell) 5) You control the rental flow and commercial property is valued in terms of the returns it can generate so bumping up the value post-purchase by bumping up the rental (if business can afford it) opens up the possibility of borrowing more against the property to invest elsewhere.

There is more with most deals being fairly unique but I'm sure you get the general idea from the above.

EDIT: I see Richard has given the "development" property scenario. Mine was existing buildings. Not as immediately profitable but then, for example, there's less lead time than on a new build and none of the normal build hassles. Horses for courses.
.....oh yeah, and what he said !!!

Investment is a long term game for sure. But I will always trust bricks and morter, that have an almost irreducable value, over paper any day. If your government goes rogue and removes title from property, well trust me, they have already looted the easy money sitting in financial institutions and policies on the way there.
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