One of Personal Financial Consultants most sought-after products is property syndication. This product is a low risk investment and one of the few that offers three of the most important pillars of a good investment: security, income and growth. This type of investment consistently beats inflation because it is linked to commercial property. It also retains its value in the medium to long term.

Personal Financial Consultants, together with attorneys, F.P van den Berg, manage the funds for a property syndication investment. The attorneys act on behalf of customers and Personal Financial Consultants by placing investment funds into a trust account. These funds are then utilised to purchase shares in a specific property syndication, registered as a limited company. Integritas Auditors appointed by Personal Financial Consultants provide independent reports on the prospective property syndications.

What is Property Syndication?

Property syndication involves a number of investors pooling their funds to buy a property and sharing in the returns according to the amount invested. With modest entry equity, investing in property will yield high returns.

The investor will enjoy a share in the investment profits and benefits of rental growth according to the size of original investment and capital growth over a period.

Income from the investments will be paid by the tenants occupying the property. The net rental growth fluctuates in terms of the operating costs of the property and rises in the gross rentals.

Investors are also liable for the running costs of the property. These may include rates and taxes, commissions payable to leasing brokers, tenant installation costs on re-letting, maintenance and the administration fee for managing the property for the investors.

Capital growth on a property investment is achieved by the increase in unit value and is realised on the sale of the property. As with any property investment, the real benefits are gained over time. <back to top>

Advantages of Property Syndication

Property investment enables any member of the public to become an investor in a commercial property. Through the purchase of a unit in the property, a buyer is given access to the financial advantages of a sizable and profitable investment.
In addition to this, there are the following advantages:

Inflation Protection
Purchasing property is a sound medium-to-long-term investment, offering returns in excess of inflation

Tax
The first R11 000 income earned from investments is tax free for tax payers under the age of 65 and R16 000 for tax payers aged 65 and over.

Low Risk
Property investments are a low-risk investment

Stable Income Growth
They offer an income that escalates annually as rentals escalate according to the lease. <back to top>

Advantages

You can invest in a property, which you would not ordinarily be able to afford. For instance, 1 000 investors can each invest R10 000 to buy a shopping centre worth R10 million. Formal syndications invest in commercial property, whereas informal syndications, made up of say a group of friends, invest in residential property.

The management company that puts together the syndication provides a professional management service, which alleviates you and other investors of the burden. If you are a member of a holiday-house syndication, you and the other members will generally manage the property yourselves.

You can receive income and capital growth from your investment. The income comes from the rental that is paid by the tenants that occupy the building you have bought. Rentals are paid out in the form of distributions on a regular basis, say every three months. In addition, a property can also increase in value on an annual basis, which means that the investor's initial capital contribution increases in value.

One of the benefits of investing in a property syndicate is that most are funded on the basis of non-recourse finance. This means the financiers/investors loan is secured by the property alone, and your liability under the finance arrangements is limited to your initial cash contribution. <back to top>

Investor Returns

1. Net income
Investors receive net income on the property investment. This is calculated by deducting all expenses from the net rental income.

2. Income yield
The income yield for an investor is calculated by dividing the net income received by the initial investment paid. This yield will differ from investor to investor as the amount paid differs.

3. Capital growth
Investors receive capital growth through an increase in the value of the property. This is influenced by the growth in the value of the property and the escalation of the annual net rental income.

4. Value of units
There are various ways to analyse a property investment but the final market price will always be determined by supply and demand and market conditions.

5. Resale of units
As every experienced investor knows, a property investment must be regarded as long-term. The recommended investment period is no less than five years. Should an investor wish to sell a portion or all of his investment, it will be done at a market-related commission on the investor’s behalf. If the Investor is able to sell privately, a nominal administration fee will be charged. <back to top>

Why invest?

Investment in property is one of the oldest and most secure investment opportunities. There are several reasons for considering property investments:

How do you get involved in property syndication?

Contact Personal Financial Consultants to find out which syndications are currently in the market for investors. The syndications represented by Personal Financial Consultants are good investments as the team will always select a property that will remain in demand and therefore has a bankable exit strategy. Personal Financial Consultants will also manage the entire investment process, which includes research, acquisition; management and disposal of the chosen property.

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Pty vs Trust

There are various ways of operating a syndication including selling shares in a company or through a public trading trust.

With a trust, investors become beneficiaries of the trust and have very little say. The onus rests on the investor to establish their rights under the trust and the powers of the trustees.

Using a public company to syndicate a building is a better option. With a company, investors in syndications become co-owners of a building and through the annual meetings of the syndication they can also get involved in the management of the property. This gives investors a say in how the investment should be managed.

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